The importance of invoice processing
Raising an invoice is perhaps one of the most critical processes or actions in a business. In many ways, it is the moment, or set of moments, that a business has been created for. It is in many ways the validation of the existence of a business; it means that the goods or services offered by the company are of value for someone or some other company for which they are willing to pay a price. It is a step that enables a company to generate revenue, which is what it was probably created for. If no revenue to be generated, no need for a business to be created, as simple as that.
All this that we have talked about above is the process of invoice generation, or raising an invoice.
Who raises an invoice?
The company or individual or party that is providing a service or product that has been purchased by an entity outside of the company raises an invoice.
What does raising an invoice signify?
The raising of an invoice signifies that the monetary value, to the extent indicated in the invoice, has become due on account of certain goods or services having been sold by the party raising the invoice to the party purchasing the same goods or services and to whom the invoice has been sent.
While the actual money may only be received later, as per the agreed terms and conditions, the raising of an invoice is the culmination of the business process of the company. The process of realizing the money and accounting for it is usually treated as a financial process.
oWorkers is deeply embedded in business-critical processes of our clients around the world, such as invoicing. Having chosen to focus on our core strengths, we are already recognized as one of the top three players in the world in back office BPO services, no mean achievement considering that we have been in business for just over 8 years.
Is this invoice processing?
The invoice raising process that we have discussed so far is, in a way, also a processing of the invoice. After all, there is a business process that is triggered to generate an invoice.
However, the phrase ‘invoice processing’ has come to be associated with the flip side of the process, which receives the invoice raised by a supplier, and makes arrangements to eventually settle it.
To clarify, an invoice raised by someone is also received by someone. The invoice flow follows the direction of the goods or services. If A has sold certain goods to B, then A will also generate an invoice and send it to B. However, the money flow will be in the opposite direction. If the invoice has gone from A to B, the money will flow from B to A.
While your company may be receiving invoices generated by your suppliers for products and services that they have sold to you, the invoices you are generating are being received by your clients/ purchasers/ buyers. They will be doing the processing of your invoice while you will be doing the same for the invoices generated by your vendors/ suppliers/ partners.
Raising an invoice, on the other hand, is generally considered to be the tail end of an operational or sales process of the company and not a distinct one. The one major processing activity that does result from the raising of an invoice is that of tracking through till the receipt of funds and ensuring your books are reconciled.
Whether raising an invoice or paying it, people remain critical in the BPO industry. oWorkers has ensured that it has access to the best through its relationship with the communities it operates in. It gives us access to a perennial supply of fresh talent, enabling us to choose the best while reducing the cost of attracting talent through advertising.
What does invoice processing entail?
Receiving an invoice is the beginning of a process that will culminate in the payment of money. Money is a common resource running through the business and one that is well guarded, as it is prone to being misused. It is usually a part of the ‘Accounts Payable’ set of processes in a company.
As a result, though it may look simple and straightforward, the processing of a supplier’s invoice results in a sequence of steps, primarily to ensure that the company’s money is being spent well and in the rightful places.
Verification – ensuring it has been rightly received
Well begun is half done, they say.
Companies raising invoices are often dealing with multiple clients and selling multiple products and services. Even though the process of raising an invoice is generally automated, it does not mean that errors cannot happen. Data entry errors can take place in any system.
You might end up receiving an invoice not meant for you or for a product that has not been purchased by you, or with terms different from what was agreed at the time of the contract.
As a standard process, any claim on your resources, and this is a claim of money, needs to be scrutinized to ensure that it is valid and that your company does become liable for that amount. It is also a measure of respect between partners that if the invoice is invalid for whatever reason, you say that up front and not a month later as in the latter case the supplier would have lost a month before the invoice is sent to the correct party.
The verification of the invoice will entail checking all details mentioned on it, not just the values and calculations, as they could have implications elsewhere.
Large companies usually have a PO, or Purchase Order system in place, which is issued to a supplier as an authorization of agreement for buying the goods and/ or services stated therein. In such cases, the received invoice, if it bears a reference to the PO, would be tallied against the requirements stated in the PO.
Businesses experience cyclicality in volumes. Clients of oWorkers are not immune to these business cycles, neither is invoice processing. With most partners, to handle spikes, clients may need to retain a bench that would be unproductive during normal volumes. With oWorkers, the need for an unproductive, expensive bench falls away. oWorkers is able to hire for peaks and troughs. With a 48-hour prior notice, we can hire almost a hundred additional resources.
Creating an entry in the system
After an invoice has been received, the buying company, assuming they use a software for this activity, would first create an identity for it on that system, so that further processing follows their standard, digital method. This part is manual in most cases as the invoice generated by a supplier is from their own processing system. Being B2B interfaces, even if the two parties use the same software, chances are that they have been set up differently, making it difficult for one to talk to the other. This is the reason why the first step is usually manual at the buyer’s end.
A related process is that of filing or record keeping, for reference in future should a need arise. If a paper invoice is received, while it will be stored, usually a scanned image of the received hard copy will also be stored in the digital archives making for easier referencing and retrieval.
With its deep links with technology companies, nurtured over many years, oWorkers can access the latest technologies, even for the processing of client transactions like invoice processing.
A payment for an invoice being for goods and/ or services received, it needs to be ascertained that that indeed is the case, whether or not the invoice references a PO. There could be a number of different departments making purchases, hence it is essential to tie the invoice back to the requisitioning department for a closure of the loop.
This is then followed by the payment authorization process. There are different ways different companies handle payments. In some, a limited set of people have to authorize all payments. In other, typically larger companies, the approach is more distributed, with budgets of the department driving delegation of authority for payments and other actions on behalf of the company.
Though traditionally a paper authorization process was followed by most companies, with the authorizer affixing his/ her signature on the document as evidence of approval, increasingly it has given way to a digital authorization process where a workflow delivers the request to the authorizer and then back to the person requesting it once authorized.
A half-way process of seeking and providing authorization on emails is used by some companies. It is neither here nor there and perhaps should be seen as an interim step before the company adopts a process based on workflow.
Delivery centers of oWorkers are equipped to operate on a 24×7 schedule when required. This mirrors digital systems that have the capability of being ‘always on.’ Whether it is for making a payment or for invoice processing, our teams will be available when you need them.
Finally, the payment needs to be made. This is what the vendor is most interested in, not the internal processes of the client in getting it to him.
Traditional payment processes may have been time consuming but with the advent of digital banking, issuing a payment and having it delivered into the account of the vendor is a seamless process, if there are no other factors, like exchange control, that need to be handled.
Again, in a workflow-based system, most of the work is done upfront. The system will usually have a mechanism for signaling to users when a particular payment needs to be made, in the best interest of the company. This is usually the last permissible time for making the payment without incurring a penalty. By delaying the payment as much as possible, the buyer, if it operates with overdraft limits and advances, is ensuring that its interest cost is minimized.
Traditional payment systems created an additional layer of management, that of managing ‘floats’ or account balances to ensure that there was enough when the issued cheques hit the account and were realized by the presenting bank. In digital payments, that layer of management is not needed as the money is first debited to the account and then delivered to the raiser of the invoice.
For the security of your data as well as to ensure financial transactions are executed safely, oWorkers operates from super secure facilities & protocols with ISO certifications (27001:2013 & 9001:2015). We are also GDPR compliant.
Outsourcing invoice processing
On account of invoicing activity being unconnected with the rhythms of the business, many companies find it convenient to outsource it to vendors who specialize in it. By doing so, they get all the benefits of an outsourcing arrangement along with some that are specific to invoicing.
They are able to get the technical expertise of a provider who specializes in the area and does it for a living. Otherwise, invoicing is an activity that is normally far removed from their core business. Meanwhile, their own resources can focus on their own business.
Along with expertise, outsourcers are also able to often get the benefit of digitized processing that a provider, who does it for several clients, is able to invest in.
Often, not only does it deliver better output, it also works out cheaper, what with the higher volumes processed and the provider’s ability to seek suitable resources at price points that are significantly lower.
Most clients of oWorkers note savings of almost 80% when they outsource work. This is particularly true for clients from Western Europe and North America. They also love the pricing choice they get from oWorkers, pay on the basis of input material or pay on the basis of output.
oWorkers counts a number of technology companies and unicorn marketplaces amongst its clients. The list is growing all the time, driven by a leadership team that comes with over 20 years of hands-on experience in the industry.
Our choice of working with employees, and not freelancers and contractors as some of our competitors started with, is now validated as we see more and more companies opting for this model. It has given our workforce stability and allowed the creation of a supervisory layer, inhouse grown, that has added teeth to our delivery capability.
We serve in 22 languages through our delivery centers that are registered as local companies and pay social and local taxes. We are rated at 4.6 and better, on a scale of 5, on independent platforms such as Glassdoor.