While FTX managed to raise $2 billion with their finances on messy Excel spreadsheets, their lackadaisical approach to proper financial management was one of the main factors leading to their lightning fast descent into bankruptcy. Spreadsheets are a terrible way to handle your accounts and invoices, even if they seem simple to set up.
But what if you don’t need an expensive, all-in-one accounting solution? Or perhaps you operate in a specific industry that has complex requirements to truly automate your financial processes? What if you’re a small staffing business just looking to pay your contractors? The exact combination of fancy bells and whistles matters, but you shouldn’t pay for an abundance of features that you’re never going to use.
That’s why in this post we’re going to dive into the world of invoice management software. Whether you’re a total beginner who’s trying to figure out whether you need this software at all or you’re trying to find recommendations after the last tool you used turned out to be a dud, read on to solve all your problems.
This post will cover:
- What invoice management software is
- Why you need invoice management software
- What to look for in invoice management software
- 3 approaches to invoice management software
- Unique challenges of managing public cloud invoices
Let’s get started.
What invoice management software is
Invoice management software is the name given to software that helps users to carry out and automate tasks relating to processing and paying their invoices. While there is often overlap between these tools and others, such as customer billing, procurement, and more general accounting software, invoice management software is primarily concerned with vendor invoices after a purchase has been made or a service has been delivered.
This generally includes (but is not limited to) everything that you need to do in order to process an invoice, including:
- Gathering invoices into a central location
- Matching invoices with purchases, sales orders, and payment records
- Reviewing and approving invoices when they are submitted
- Paying invoices
We’ll cover the specifics of all of the features that you should look for when trying to find the perfect invoice management software for you, but for now, just know that there are many variations on this list and that two tools which have the same features on paper may have vastly different functionalities and limitations in practice.
So, what’s the big deal? You’ve handled invoicing before, and while it’s not ideal, manually gathering your invoices, checking them against your company accounts and making sure that they’re all paid on time and in full is part of your financial team’s job description. They can handle it, so why fix what isn’t broken?
Well, there are a couple of massive benefits that you stand to gain by using invoice management software…
Why you need invoice management software
Broadly speaking, the benefits of using invoice management software can be divided into four categories:
While having a financial team going through everything manually might work in the short term, it’s unquestionable that having software to automatically collate and store all of your invoices is more reliably accurate. No matter how thorough and professional your team is, human error makes fools of us all sooner or later, but with invoice management software automating those tasks you completely cut that risk out of your operations.
You’ll be reliably able to see all of your business’ vendor invoices in one centralized location (the software), and they can often even be automatically verified against payments and purchase records. In other words, there’s a far lower chance of an invoice being incorrect and a much lower chance of an invoice not being submitted at all.
Speaking of which, the speed at which your software works is inevitably faster than any human could handle the same tasks. It’s almost instantaneous with the invoice’s creation and submission into the system - you can immediately schedule payment to make sure that no bills are outstanding by the date they are due.
In other words, invoice management software makes paying your vendors a simple process.
Speaking of costs, they will also be reduced by utilizing software instead of having your financial team spend hours upon hours manually gathering, consolidating, and verifying all of your invoices. Even if your financial department doesn’t shrink as a result of the duties that are now being automatically taken care of, your team will be able to spend all of that time on other activities which will go towards optimizing your operations and other tasks that can’t be so easily automated.
While it will cost you a little to use invoice management software, what you gain in time saved will more than make up for that.
Finally, having software to rely on when it comes to your invoices will make all of your dealings much more secure. None of the companies behind these tools want (or are legally able) to operate without having rock-solid checks and measures in place to prevent unauthorized access to your finances or invoices. This makes it a much safer way to conduct your operations than, say, tracking your invoices via a Gmail account or filing them in person.
You have a built-in record of everything. Nothing can be lost or accidentally accessed by unauthorized parties unless someone lets them in, and at that point the breach is due to human error or a bad actor rather than the software itself.
What to look for in invoice management software
Enough about the benefits. You’re already sold on why you need to use invoice management software. Now comes the difficult part - learning how to choose the best software for you.
To do that, you need to keep in mind the core challenges that your company faces when processing invoices. What does your team spend the most time on? Depending on the current systems you have, some of the examples below may be more or less important.
Consider first your method of storing and organizing all invoices. Are you able to visualize the total amounts due in the next 30, 60 or 90 days easily? Is it ever a requirement to pick out historical invoices in the event of a payment dispute? Can you see the status of payment for invoices at a glance? All of these are extremely helpful features in letting you see the status of any upcoming required payments.
Speaking of payments, how much time does your finance team spend scheduling payments or cutting checks? How much time would an automated tool save you? This method should be suitable for your specific needs, which may include being able to natively convert currency to your native bank account’s, draw funds on a line of credit, or scheduling payment for the exact due date.
Having the ability to create and automatically link vendor records to specific invoices could also be a massive bonus. This will allow you to build a history of transactions with your vendors, giving you the confidence that you’re not paying for the same item twice, and giving you insight into the consistency of your vendor’s pricing and your rate of purchasing from that vendor over time.
Speaking of vendors, it’s important to calculate the time and effort required from your finance team to verify the validity of each invoice with the appropriate purchaser within your organization. For example, you may already have a robust invoice payment module in your accounting system, but there’s no approval process baked in and your finance team is tracking approvals via Gmail on a monthly basis.
This can be a massive problem, as any invoice management system that doesn’t have some kind of tracking and approval process baked in will inevitably leave your team open to paying more than you owe, and potentially even fraudulent invoices.
Finally, it’s imperative to understand the business impact of a poor invoice management process. For example, a vendor’s invoice may be so confusing that the finance team can never get a clear answer on how to categorize its line items. What would happen if an operational expense were misclassified as a Cost of Goods Sold? Perhaps your corporate valuation would take a hit.
3 approaches to invoice management software
To round things out, let’s dive into three best approaches to automating your invoice management concerns. Generally, we break it down into these categories:
- Comprehensive procure-to-pay systems
- Payment automation tools
- Industry-specific add-ons
Comprehensive procure-to-pay systems
Procure-to-pay, or P2P, is the term used to describe the full purchasing lifecycle for larger businesses. Using an advanced P2P system, such as Emburse Certify AP, an employee can gain approval to purchase items from a preferred vendor, buy these items using custom negotiated rates, track receipt of the physical goods and deliver all documentation to the finance team to automatically reconcile against an invoice in advance of invoice payment.
If your business has reached a scale of product purchasing where negotiated rates, pre-approvals, and product receipt are all areas requiring tracking, a P2P system will be perfect for you.
Payment automation tools
On the other hand, if your company makes much more isolated purchases, and these purchases span both goods and services, it might be helpful to focus in on automating the payment portion of your invoice processing workflow.
A great payment automation tool, such as BILL, will streamline the process of getting any invoice approved and paid quickly, plus it will manage the check or online payment logistics for you.
As we mentioned early on, selecting an invoice management tool is a process that requires analyzing your business and the primary areas of concern that you have, usually unique to your industry. You may choose to go all-in on an enterprise resource planning system built for your industry, which encompasses general accounting, invoice management and much, much more. Or, you may identify one or two add-ons that eliminate the pain and friction you feel while not switching away from the core systems you’re familiar with.
This can be a great way to avoid having to get to grips with a completely unfamiliar system, albeit sometimes at the cost of more comprehensive features, seeing as you’re using addons and not software that’s entirely focused on invoice management.
The unique challenges of managing public cloud invoices
If you’re one of the millions of businesses that operate in the cloud, you’ll receive invoices from your cloud providers that include line items that make no sense to financial experts. Compute? Data transfer? Reserved Instances?
Even AWS’s own documentation is awful at describing everything in accessible terms, and trying to get your engineering team to explain it all is a recipe for stress and wasted time. The actual job of accounting for each invoice, and categorizing its subcomponents by the products, departments, customers, GL accounts, and other dimensions meaningful to running your business is so complicated that many companies just skip it altogether.
But for a SaaS business, this could be dangerous. An improperly categorized AWS invoice could spell disaster for calculating your unit economics, optimizing your pricing, and tracking your Costs of Goods Sold by product or customer.
Aimably’s AWS Invoice Management Software
We here at Aimably are dedicated to simplifying your AWS accounting and finances. After all, it’s bad enough that AWS is hard to understand for even engineers if they don’t already have experience with it, let alone your financial team. That’s where our AWS Invoice Management Software comes in.
Want to get your engineering and financial team on the same page? We’ve got you covered. Need to easily spot discrepancies between invoices and actual usage? No problem. Trying to attribute AWS spending to business purposes for clarity? Already done.
Forget the mess of AWS financial management and let our AWS Invoice Management Software do the heavy lifting for you.