Vendor invoicing can be a painstaking process on either side of the table. And the more vendors you’re managing, the more important and challenging it can be to stay organized. But managing your vendors and paying them on time doesn’t have to feel like complete chaos each month. With the right vendor management systems in place, you can handle your vendors proactively, without the invoice processing headache. In this article, we’ll take you through vendor management best practices and ways to reduce your invoice processing time.
A vendor invoice is a document issued by a vendor requesting payment for goods or services provided. Vendor invoices can be representative of an ongoing business relationship or can be a one-time deal.
Vendor invoice management is the process of managing supplier or vendor invoices. Vendor invoice management is an accounts payable function that includes receiving, approving, and auditing invoices. Companies can save time and money by eliminating manual invoice management processes and replacing them with automated workflows.
Typically, vendor invoice management falls squarely onto Finance. The problem is that even the most well-oiled Finance teams are left in a bind when it’s time to pay an invoice. Most of them rely on manual tracking to manage vendor information, renewal dates, and other critical vendor data.
The end result is a disorganized vendor invoice process. All too often, invoices just arrive on Finance’s desk without any context or heads up—and even more frequently, Finance discovers that they either need to be paid urgently or are already late.
Every vendor invoice you process will have these five key parts. Each component can help improve the functionality of your vendor invoice management and payment process.
Every invoice issued will include a unique invoice number or purchase order number to help maintain tax and accounting records. Ideally, if you’re consistently using the same providers, they’ll implement a sequential numbering system to help everyone stay organized, i.e., increase the number by one every time they issue a new invoice.
This may seem like an obvious line item, but likely there will be multiple dates on a vendor invoice. In this case, the date refers to the official transaction date and is typically the same date a vendor bills a customer. Vendor invoices also will include a payment due date, which is generally 30 days from the creation of the invoice, but can change depending on the transaction.
While processing vendor invoices, it’s important to know who, what and where you need to send payment. Both parties will need to be able to contact one another to make sure there aren’t any issues. Generally, both the buyer and seller information will be listed and include:
When a vendor submits an invoice, they’ll include a line item for every product or service included in the order. The order lines will include the price per unit and the total number of units ordered. At the bottom of the vendor invoice, there will be a subtotal for the goods or services followed by any taxes or additional fees.
Before the vendor billing stage, a company will usually provide a quote or estimate for their goods or services, which allows the client to compare prices with the competition. As the buyer, it’s important to negotiate with vendors before making a commitment to a particular vendor or their payment terms.
Vendors may offer a line of credit to give their clients the option to pay for goods or services over time, rather than in a lump sum, typically with a monthly or quarterly bill. But either way, you’ll likely run into these common invoice terms:
As a buyer, you’ll need to inform vendors of your accounts payable process and negotiate as needed, for which you’ll likely need to:
Whether you’re a small business or a Fortune 500 company, having an accounts payable procedure is crucial to avoiding mishaps. Even if you’re on the small side, you’ll likely want to have more than one person handling the process to avoid errors and fraud. Ideally, you’d have one person receive the invoice and check it against any other information, like a purchase order, and another person approves and schedules the payment.
But the best way to streamline this process is to get automated. Accounting software can help you stay organized and further eliminate human error. Features like AI-powered invoice processing, multi-level approvals, and one-touch payments can all help you save time and avoid costly errors.
Just like your personal credit score, your business credit score can take a hit if you don’t pay your bills on time. You can avoid late or missed payments by capitalizing on early payment discounts, keeping your invoice processing system up to date, and making sure you have adequate cash flow at all times. Using a corporate card wherever possible can help you stay up-to-date with what you owe. And using vendor-specific virtual cards for business can further help you track and control spend.
Ramp, the only finance automation system designed to save you both time and money, is a critical tool for streamlining vendor invoice management. With a software-first, card-second mentality, Ramp automatically tracks and predicts upcoming payments for your company’s subscriptions and vendors. With our accounting automation software, you’ll be able to streamline your payments and cut back on hours wasted with automatic bill payments, bill creation, approvals, and accounting.
Ramp Vendor Management is your single source of truth of all vendor data. Vendor Management gives you a holistic view of your vendor spend and contracts, which allows you to answer critical questions about your vendors quickly—and ultimately make more confident buying decisions.
Duplicate invoice spend accounts for roughly 1% of annual disbursements, even among top-performing companies. With Ramp Vendor Management, you’ll never pay for the same service twice as the system works to create actionable ways to cut back on wasted spending by detecting duplicate subscriptions and redundant vendors.