How to Solve Invoice Approval Delays With Billing Software
Traditional invoice approval poses numerous challenges to both the contractor and the suppliers. The most obvious (and often most frustrating) challenge is invoice approval delays. Paper-based invoices slow the overall process down and result in late payments. Over time, this can adversely affect the contractor's relationship with both suppliers and subcontractors.
In the long run, that could mean you lose your ability to negotiate better terms with suppliers and end up with a dented reputation.
The good news is that you can plug the holes in your invoice approval process. You can make it more efficient and be more cost-effective, all while requiring less human intervention.
5 Challenges With Traditional Invoice Approval Process
If you're still using a traditional invoice approval process, you are familiar with some challenges associated with this approach.
1. Slower Processes
Traditional invoice approval relies heavily on paper-based invoices, which are harder to handle and require more time to peruse through. It takes time to manually go through the respective invoices and process them for approval. As a result, you might tie up your cash flow.
The time taken to review the invoices means the accounts department falls behind in deadlines and starts struggling to manage the project's cash flow.
Ultimately, suppliers are not paid on time and materials are not delivered on time. The entire project can come to a complete stop unless the invoices are expedited.
2. Losing Track of Invoices
Losing important papers is not a new problem. It has been there and will continue to be as long as papers are in use. What's puzzling is that it always seems like the most important documents are the ones getting lost. It's not uncommon to lose out on invoices in the entire invoice approval system. Alternatively, the documents might not make it to the right person for approval.
3. Increased Risk
Manual processes expose the company to fraudulent activities, like individuals submitting false invoices for payment. The risk of such payments being made and not being discovered is very high.
The manual workflow also encourages users to exploit the approved purchasing policies. Individuals buy even items without accounts payable in the loop. This can create inaccurate data that can impact auditing and financial reporting for the project manager.
4. Duplicate Payments
Duplicate payments are quite common when using manual invoice processing. Such payments can result from several causes, including delays caused by inefficient data entry, routing errors, and slow approval workflows. Without an automated system and heaps of paperwork to deal with, it's easy to pay some suppliers more than once (it's also very expensive).
5. High Staff Overhead
If you want to keep your manual operation functional, then you need a hefty infrastructure. This includes a team (which will be slow and expensive), office spaces, stationery, and other overhead to process each invoice. That's not always practical.
In 2017, Ardent Partners released an ideal set of targets for an efficient invoice approval process.
According to the report:
- Top performers should have an average cost of $2.74 to process a single invoice.
- It should require an average of 5-12 days to process one invoice.
- There should be a 5% invoice exception rate.
- There should be at least a 71% rate of accurately linking invoices to the purchase order, among other key metrics.
It's almost impossible to achieve these figures while using manual processes. Contractors need to consider making a switch to electronic systems as a way to reduce delays in invoice approvals. It’s crucial for construction project management.
4 Benefits of Construction Billing Software
Investing in software to help manage the invoice approval process is the best way to improve efficiency and effectiveness. An invoice billing software comes with numerous benefits for a construction company. The list includes:
1. Improved Productivity and Process Efficiency
With billing software, you can handle more transactions in less time. You also spend less time and human resources on clarification or sourcing background information. The system sends notifications and keeps tabs on open tasks to minimize invoice approval delays.
2. Full Control and Visibility
Manual processes may keep the finance department out of the loop. But all financial tasks have a clear approval status with software. You don't have to refer to emails to check on the status of approval.
3. Compliance and Easier Audits
The billing software is configured per the regulations of the construction industry. It captures the approval history, computes the data, and stores it in audit-ready form for internal and external audits.
4. Better Security
Manual processes increase the risk of documents falling into the wrong hands. Sharing sensitive information with unapproved parties can also result in fines, reputation losses, and lost jobs. With billing software, you can set up authorization levels to minimize access. This ensures that approvals are only handled by individuals with the right level of clearance.
How Software Can Reduce Invoice Approval Delays
To enhance productivity and eliminate invoice approval delays, billing software uses a series of features. Each one carefully crafted to handle the rigorous demands associated with the construction industries.
While there are workflow applications that can help expedite invoice approvals, they're generally partial solutions. But billing software like Flashtract is a more comprehensive and desirable solution for project managers in the construction scene. They offer more features and can handle various processes and requirements, including payments.
Some features that you will find resourceful in helping to expedite invoice approvals and other financial aspects include:
Most invoice approval processes require several approval decisions in different levels of management and authority. This is one of the key factors in why a manual process takes time.
By automating the process, these workflows will run on their own. The approvals are routed to the designated approvers without any necessary human intervention. This saves time by delivering the approvals to the right person in the shortest time possible.
With advanced billing software, you can set multiple internal and external approvers. Then you can have the invoices automatically routed to the necessary approvers within the platform.
With billing software, you don't have to worry about chasing approvers and sending follow-ups. The system will ensure approvers are notified on time and will also remind them of requests that need their attention.
The workflow application will chase the approvers. Also, it will keep track of the approval schedule to ensure everything is done on time.
Built-In Exception Handling
Exceptions are a norm, especially in construction. Unusual invoices may require a different approver other than the designated ones. With a built-in exception-handling feature, you can delegate the approval decision to the relevant authority.
You also have the option of directing the approval to another person if the designated approver is not available. This will ensure that no approval goes unattended for too long.
If you're the application administrator, then you need to be aware of the progress status for every open invoice. You can use the information to identify possible bottlenecks and then resolve delays.
With the built-in reporting feature, you have access to a detailed history for internal review and annual audits. This is also a vital tool in assessing employee and approver performance to ensure all approvals are completed on time.
Built-In Audit Logs
There's no need to reconstruct the approval flow history when preparing for an audit. The software often has a feature that details:
- All the approval activities
- The name of the approver
- The date of approval
- Other vital data in an audit-ready log.
Additional Features of Flashtract Billing Software
The Flashtract billing software is more than a workflow management application. It has multiple critical features that will help solve invoice approval delays and other challenges that project managers might face. This list includes:
Approvers are not the only ones that need reminders. With the subcontractor reminder feature, you can select important items and then choose the type of reminder you send. This doesn't directly impact invoice approval. But it streamlines communications and improves cash flow management.
Automate Payment Approvals
Using this feature, you can set multiple internal and external approvers. Once they've been identified in the system, then all invoices and pay approvals will automatically route to them. Ultimately, this will improve invoice approvals and payments all on the same platform.
E-signatures allow general contractors, owners, subcontractors, and lenders to electronically sign documents quickly. You can do away with printing, signing, and then scanning and sending. It saves time, controls access to project documents, and simplifies approvals. It also gives people the flexibility they need, whether they're remote, on-site, or in the office.
Updates to Your Construction Accounting Software Data
With most cloud-based applications, you can only access the work on the app. If you're using Flashtract, then you can export all the approved work from the software to your accounting software. This is a vital feature that allows you to synchronize data. You can also practically eliminate manual data entry pain.
The Bottom Line
Technology has been a solution to many of the construction industry's problems. Once again, it's the way to go in painlessly expediting invoice approvals. Billing software helps you do more while saving you time and effort. It also helps make everyone around you more productive and time-conscious.
Do you want to know more about how Flashtract billing software can help in construction project management? Then don't hesitate to contact us. We can help you streamline your invoicing processes from start to finish.