Businesses have been leveraging technology to improve their processes for some time, and even more so in the current economic climate where much of the B2B world is going digital. So why, then, are so many still using paper invoices? What was once conventional is now laborious, inviting wasted time and effort.
Invoicing is Critical for Cash Flow
The COVID-19 pandemic changed the face of business in many ways. It accelerated the need for digital payments solutions, and highlighted how crucial it is for supply chains to remain strong when health and economic conditions are less than ideal.
Businesses in all industries need to get paid for their products or services, and for B2B transactions, it’s actually unusual for payment to be made up front. Generally, the amount owed is billed via invoice, which includes the amount that’s due, when it’s due, and any payment instructions.
For many businesses, the process is still a manual one, or is at least manual in parts. While much can be done to improve an invoicing system, it still often means creating and collecting paper invoices.
Even before the pandemic, invoicing was a critical business process. Mistakes, omissions, or any less-than-optimum way of invoicing can impact a business’s cash flow. And with 48% of small businesses only one missed payment away from bankruptcy, anything that helps avoid missed payments at all—like smart invoice management—can make a real difference.
The Problem with Manual Invoicing
As with most manual processes, there are some major challenges that come with manual invoicing.
Time and Heavy Lifting
The most obvious challenge is the time that has to go into preparing, printing, sorting, and sending hard copy invoices. If invoices are printed, someone, somewhere within your business is responsible for sending them.
Bigger businesses have dedicated Accounts Receivables (AR) teams, but smaller businesses often have only one person responsible for AR—or even one person responsible for a few business functions including AR. The effort and personnel required to manage an entire invoicing process on a monthly basis will definitely have an impact on productivity. This is only assuming monthly invoicing, your business might produce invoices even more frequently!
‘Lost in the Mail’
Though invoices really can get lost in transit, it’s also a good excuse for late payment. After all, you can’t prove otherwise.
Invoices not received can hold up your payments even further because you won’t even know that you need to re-send an invoice until it’s overdue. And even then, when your AR contacts their Accounts Payable (AP), the investigation process may take some time (depending on the size of their business) .
If your process includes scanning and emailing invoices to try to avoid mail going astray, this can be time-consuming, and there’s still the chance of human error leading to invoices not being received.
Invoices Getting Lost Once Received
Even if they do arrive in the mail, you’re then relying on your customers to process and pay them properly. Filing errors, mail getting misplaced, can (and do) happen. Typically the step-by-step process at your customers’ end will be:
- Invoice received in the mail
- Invoice goes to AP
- Invoice goes to whoever needs to approve it (either manually or electronically)
- Invoice approved and ready to start their payment process
As you can imagine, there are plenty of opportunities for the invoice to get misplaced.
Cost
When you’re thinking about the cost of manual invoice processing, you have to account for paper, toner, and ink, the electricity used to print hard copy invoices, and postage costs themselves. Plus, your employees’ time is money, so the time it takes for an employee/employees to go through the invoicing process once a month (or more frequently.) It’s estimated that printing costs are about $725 per employee, per year.
How Smarter Invoicing Technology Solves These Issues
The global e-invoicing market is expected to grow by an incredible 80% from 2018 to 2027—from $4.6 billion to $24.7 billion. Those figures aren’t exactly surprising when you think about the benefits of smarter invoicing.
E-invoices make everything easier for both sides of the transaction. You can see the current status of outstanding invoices at a glance, with easy access to all the information you need. This means invoice queries can be dealt with more effectively and approval is faster.
Digital invoice processing alone means a much faster process. Plus, you can set up digital reminders to take even more of the pressure off your AR team in terms of chasing payments. The process is streamlined and more efficient, leaving less room for human error and a higher chance of accuracy.
While it’s hard to estimate the exact cost of a manual invoicing process compared to a smarter invoicing process, research estimates that just one digital invoice costs, on average, 81% less than one paper invoice, and the processing time is 77% faster.
More Efficient and Faster Invoicing
All of this leads to one thing for your business—getting paid faster.
And, ultimately, faster invoice payments mean a healthier cash flow and more success in your industry, whatever that may be. PayFrame currently services over a thousand businesses in a wide variety of industries, helping them get paid faster thanks to smarter invoicing.
To find out how we can help you do the same, get in touch with one of our specialists to start the conversation.
