5 Ways To Manage Invoices In Construction Companies

5 Ways To Manage Invoices In Construction Companies

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Finding the best ways to manage invoices coming from multiple vendors and suppliers can impose a major challenge to construction business owners. Although there are multiple ways for effectively managing the invoices, they vary according to their deployment cost, installation time, features, facilities and maintenance. 

While small scale businesses might find manual invoicing convenient and cost-effective, large construction companies can prefer automated invoice processing because managing large volumes of invoices manually can be next to impossible. In this article, we will discuss five ways for managing invoices in the construction industry along with their pros and cons.

5 Ways To Manage Invoices In Construction Companies 

Below are some common ways of handling invoices 

1. Manual Invoicing 

Manual invoicing isn’t completely extinct. It is still an option for many startups and small-scale businesses that have just started and don’t receive too many invoices. If your company receives less than 50 invoices per month, then manual invoicing is the most cost-effective solution. Also, investing in invoice automation software is not a very good idea in these circumstances. However, as your business grows and you start to receive a large number of invoices, then manual invoicing can become inefficient. It can be time-consuming, error-prone and costly as well. So, ultimately you need to turn towards invoice processing automation or other ways of digital invoice management.

2. Optical Character Recognition (OCR) Scanning 

OCR is one of the oldest phenomena that was introduced around the twentieth century. It is an electronic conversion of images of handwritten or typed text. Once the handwritten or typed invoice is scanned through an OCR system, the details from it are transferred and then interpreted means of technology. OCR is a good option for those who are on a tight budget and can’t afford digital invoice processing. However, there are major pitfalls of OCR systems. To begin with, it lacks accuracy, which can be very negative for invoice management. The lack of accuracy usually comes from poor scan quality. When the scanned image is unclear, they need to be corrected manually, which makes no sense as it is time-consuming and adds further complications.

With the technological advancements and arrival of Artificial Intelligence, OCR has become really outdated. It is likely to diminish in the coming few years. 

3. XML or EDI Invoicing

EDI or XML invoicing is another common way of invoice management across a variety of supply chains and industries. In these methods, companies receive invoices in the form of an EDI and XML file. These files directly send the invoice details from the supplier’s invoice system to your finance system, eliminating the need for manual interference. While EDI has many amazing benefits like the reduction of labor costs and fewer manual errors, it still has some of its pitfalls. 

When a buyer receives invoices in these files, the supplier needs to make sure that the format is compatible with the buyer’s AP system. This means suppliers need to make changes to the infrastructure and billing details. And when this happens, the invoicing process becomes complicated and costly. Despite its advantages and efficiency, this invoicing method seems off-putting to most businesses due to its complicated management and high operational cost. 

4. Invoice Portals 

An invoice portal or a PO flip is an invoicing system suitable only for small businesses with no proper accounting system. But for the suppliers who are handling a good volume of invoices on a regular basis, then an invoice portal is not a feasible solution. The main drawback of using an invoice portal for PO automation is the lack of accuracy and reliability. When a supplier has their billing information in their systems, Invoice Portals makes it compulsory to duplicate that data into the portal. 

For a majority of suppliers, portals significantly increase the effort and operational cost. They might save some processing time, but they are still very inefficient. What’s more, portals need manual data input which increases the chances of errors. 

5. Invoice Processing Software 

Last but definitely not least, digital invoice processing is far one of the most efficient and fool-proof methods of invoice processing in all industries and supply chains. A digital invoice solution such as Bautomate’s invoice automation software allows you to completely automate your invoice management without relying on human efforts. It is easy to use, easy to Integrate and most importantly, error-free. Whether you’re a growing business or a well-established enterprise, Invoice processing automation will suffice all your needs. The cost of automated invoice processing might look a bit overwhelming, but in the long run, it offers amazing returns on investments. So, it is definitely a good idea to purchase invoice processing software.

These are the 5 ways to manage invoices in the construction industry. We have discussed every method along with its benefits and drawbacks. As you can see, Invoice automation is the best solution of all. So, make your final decision accordingly.