What Is Invoice Management?

Read time: 11 mins
invoice management

“Invoice management” isn’t likely to be at the top of many “business trends to watch” lists, but invoices are a core part of daily operations: they’re how vendors and suppliers get paid and part of how the lights stay on. But for such a critical business process, many organizations struggle to achieve an efficient and accurate means of processing the hundreds — or thousands — of invoices that come through every month.

Poor invoice management isn’t something most companies can endure for long. It can lead to business friction, late payments to suppliers, penalties, and negative impacts on a company’s bottom line.

But with effective invoice management processes and technology in place, AP teams can process large amounts of invoices and unlock a clear and complete view of their organization’s overall financial picture. AI-driven invoicing solutions can also provide critical insights that empower AP teams to make smarter decisions, optimize budgets, and manage costs more proactively.

Table of contents:

What is invoice management?

Invoice management refers to the process by which a business or organization receives, approves, and pays invoices. It encompasses the workstreams, protocols, technology, and teams involved in this process.

Invoice management is part of any company’s broader financial operations and significantly impacts its bottom line.

Many companies that haven’t optimized their invoice management have to focus on manually crunching through invoices. They lack visibility into liabilities, inevitably encounter more errors, and open themselves up to the risk of fraud or inaccuracies compared to companies that have adopted e-invoicing.

Invoice management software helps teams more easily and efficiently manage invoices and make better use of limited resources so teams can focus on more strategic, value-adding activities — things like finding opportunities to negotiate contracts, taking advantage of early pay discounts, and building stronger relationships with suppliers.

The evolution of invoice management

Many companies have made the decision to move onto e-invoicing either to solve specific invoice management challenges or as part of a larger digital transformation. Some organizations are motivated by a desire to achieve greater efficiency. Others, though, are being driven by regulatory mandates.

The introduction of invoice management software made it possible to automate invoices at scale — saving companies a good amount of money — and introduced the need for new, more efficient workflows like exception handling.

Some companies, though, still deal with thousands of paper-based invoices and have to manage different workflows. Automated data extraction technologies like InvoiceSmash can help speed up processing by pulling data from PDF invoices and converting it to digital formats.

AI has been upending the realms of technology and business — and invoice management is no exception. To learn more about how AI is impacting invoice management, jump to The Future of Invoice Management.

The importance of effective invoice management

Effective invoice management is a cornerstone of any business's financial health and operational efficiency — and streamlining your invoice management has implications far beyond easing administrative tasks. It can help you gain a clear and comprehensive view of your company's financial landscape, ensure good cash flow, and uphold compliance with global B2B mandates.

Cash flow management

Proper invoice management involves not only generating invoices but also meticulously tracking payments. Late payments or delayed tracking can disrupt cash flow and give an inaccurate picture of your company’s true cash position. Fast, efficient processes and clear visibility empower AP teams to make more strategic decisions when it comes to financial planning and resource allocation across your entire organization.

Compliance and archiving

Laws governing how companies send, receive, and document invoices (and all financial information) differ from country to country. Keeping up with different laws and regulations can be a major challenge for companies that operate globally. Effective invoice management includes maintaining accurate records and audit trails to facilitate compliance and financial reporting. Unique to Coupa, Compliance as a Service (CaaS) is embedded in the Coupa platform to take the burden of compliance off AP teams and give them peace of mind.

Common challenges in invoice management

While every organization operates differently, there are several common challenges that many face when it comes to invoice management.

Graphic showing common challenges in invoice management

Manual processing and errors

Manually processing invoices not only consumes valuable time and resources but also increases the likelihood of mistakes. These errors can lead to delays in payments, disputes with vendors, and ultimately impact the organization's bottom line. Transitioning to automated invoicing systems can significantly reduce these errors, streamline the entire invoicing process, and allow AP teams to focus on strategic activities.

Vendor and supplier management difficulties

Suppliers have different invoicing formats, payment terms, and conditions, making it a challenge to maintain consistency and accuracy in invoice processing. Using software to automate invoice intake, invoice matching, and payments — will free your teams to look for opportunities to negotiate better contracts and build stronger relationships with suppliers.

Late payments

Late payments aren’t good for anyone. They won’t make your suppliers — or your leadership — happy. They might even result in fees or other consequences for your company. Automated invoice management streamlines the entire process, enabling AP teams to handle even large amounts of invoices. Invoice management software will also flag errors early — such as a discrepancy in invoice matching — and manage robust approval chains so that teams can make timely and informed decisions to minimize the risk of late payments.

Modern solutions to invoice management

E-invoicing, or “electronic invoicing,” refers to the process of sending and receiving invoices in a digital format instead of a traditional paper-based format. E-invoicing aims to streamline the invoicing process and enhance working capital management. E-invoicing systems are often integrated with accounting or enterprise resource planning (ERP) software to automate the invoicing workflow and facilitate faster and more accurate financial transactions between suppliers.

E-invoicing can offer several benefits, including cost savings, removal of supplier bottlenecks, faster payment processing, reduced fraudulent activity, improved visibility, and compliance with regulatory requirements.

Features of modern invoice management systems

Graphic showing features of modern invoice management systems

Modern invoice management systems are equipped with features to help organizations streamline invoice management, including:

  1. Invoice processing automation: Modern systems automate tasks like invoice matching and payment processing, replacing manual processes and reducing risk for errors.
  2. Integration with other financial systems: Seamless integration with accounting and ERP systems ensures data consistency and accuracy across platforms.
  3. Real-time tracking, monitoring, and analytics: AP teams gain real-time visibility into invoices, payment statuses, and key performance indicators via configurable dashboards.
  4. Compliance: Built-in compliance features ensure adherence to government regulations and B2B mandates, in addition to supporting accurate archiving and visibility during audits. Coupa offers built-in Compliance as a Service (CaaS) to give procurement teams peace of mind that they are meeting rapidly changing regulatory requirements and mandates across all geographies.
  5. S2P (source to pay): End-to-end procurement functionality integrates invoicing as part of a complete, unified process — giving organizations greater control and visibility into their spend.
  6. AI (artificial intelligence): AI-driven capabilities automate data extraction, detect potential fraudulent activity, and provide insights to help organizations maximize their operational efficiency.

Case study: How Coupa helped Saga find procurement harmony

Headquartered in Kent in the United Kingdom, Saga offers a range of products and services exclusively to the 50+ crowd, including insurance, holidays, money, and the U.K.'s best-selling monthly magazine.

With so many business models under one roof, Saga’s procurement and AP operations were complex and challenging. The company was using multiple platforms and paper-based processes, which resulted in consistent late payments, too many errors like signatures not matching the correct bills, and a strained relationship with suppliers and internal teams. Saga knew it needed to simplify its operations and fast.

Ultimately, the company chose Coupa’s user-friendly and comprehensive platform to develop a unified approach to its procurement and AP strategy. Fully automating and digitizing invoicing and approvals has brought harmony to procurement practices across the board.

Now, with nearly 90% of overhead and marketing invoices running through Coupa, Saga’s invoice cycle times are down 70% and payment run approvals are around 98% faster.

Check out the full case study.

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Implementing an invoice management system

Assessing business needs

To start, assess your business's specific invoice management challenges, whether they involve manual errors or late payments. By pinpointing these challenges, you can tailor the solution to address them effectively, taking into account the scale and complexity of your organization's invoicing processes.

Choosing the right solution

When selecting a system, prioritize key features like automation, integration, real-time tracking, and compliance. The right solution will seamlessly integrate with your organization's existing systems, minimizing disruptions and ensuring data consistency. You should also assess the scalability of the system to ensure it can accommodate your business's growth and evolving needs over time.

The future of invoice management

AI in invoice processing

The buzz around AI is undeniable, but there's still a gap between perception and reality when it comes to how organizations are embracing and using AI today. To most people, “AI” refers to generative AI tools like ChatGPT. While generative AI will continue to evolve in ways that streamline workflows and add value for business, collaborative AI has the potential to immediately elevate business processes like invoice management.

Community.ai from Coupa, for example, aggregates and anonymizes customer spending data, then provides data-backed benchmarks and industry standards for customers. It can reveal areas to improve, uncover new opportunities, and find cost savings.

The importance of cloud-based solutions

Cloud-based solutions have revolutionized invoice management by offering accessibility from anywhere and providing scalable, cost-effective alternatives to traditional systems. They enable real-time collaboration, streamline workflows, and facilitate seamless integration with other business applications, driving efficiency and agility in invoice processing.

ERPs are good at what they do. By their nature, though, they are focused on internal users and processes and tend to fall short when trying to connect with external users, such as suppliers and vendors. Cloud-based invoice management solutions from Coupa won’t replace your ERP. They will extend what your ERP can do with a unique set of capabilities while encouraging high adoption, providing broad access, and offering easy implementation.

Predictions for the future of invoice management

AI is already shaking things up in the world of invoice management. Coupa Community.ai can analyze a company’s invoice management processes and data and offer suggestions for improvement. For example, it might recommend an opportunity to take advantage of an early payment discount or a business shift from two-way to three-way invoice matching to increase accuracy.

As it stands, many teams are still bogged down with manual processes. With automation and AI, these teams will be free to focus on larger, more impactful tasks. There may even be a future where AI runs the entire AP process! These teams will be able to focus solely on things like strategic decision-making and maximizing their organization’s operational efficiency.

When it comes to bringing AI into your invoice game plan, ask yourself: What role does AI play for my business or team? What are we aiming to achieve with it? By using AI to gain deeper insights into spending, businesses can get ahead of the curve and start making strategic moves rather than just chasing savings.

How Coupa can help

From maintaining clear financial visibility to ensuring compliance and managing cash flow, effective invoice management plays a crucial role in driving operational efficiency for any business.

In today's rapidly evolving business landscape, embracing modern invoice management solutions is not just a choice but a necessity. Automation and AI can help businesses streamline their invoicing processes at scale, reduce errors or potential fraudulent activity, and stay compliant. Embracing these solutions isn't just about keeping up; it's about empowering your organization for better financial health and maximum operational efficiency both now and in the long run.

Learn more about how Coupa’s platform can streamline your invoice management.

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