What is a Recurring Invoice?Some payables are created and sent after regular intervals by businesses. For this purpose, accounts payable departments often create recurring entries, and use that to generate payables after specific intervals. Show
A recurring invoice is simply an invoice that is sent to customers after regular intervals, and usually contains the same details. Recurring invoices can be created daily, monthly, weekly, or a schedule can be worked out with the buyer. Accounts payable departments receive recurring invoices from the company’s creditors, and update their accounts after each period. There’s no change to the order information, customer information, product or service ordered on the invoice itself. In most cases, businesses can also use accounting programs to set up recurring invoices. These invoices can be matched with the amounts specified in the contract. For example, if your company buys the same eight units of a product monthly, the creditors may send a recurring invoice each month to the AP department. This simplifies the process considerably and ensures that invoices aren’t missed. Why are Recurring Invoices Easier to Handle for AP Departments?Recurring invoices are much easier to process and handle for AP departments as they are received on a specific date each month, with no change to the order information or the products ordered. However, like conventional invoices, all recurring invoices are also 3-way matched before payments are released. Can you Automate Recurring Invoices?Many of the tedious and repetitive tasks in the AP department can be automated, allowing AP professionals to focus more on strategic decision-making and thoughtful work. AP departments receive several recurring invoices each month, many of which relate to administrative costs and other expenditures such as rent, janitorial services, or others. Automation is simple as these invoices can be matched to a specified template or a contract that’s stored in AP automation software. In case of a discrepancy between the invoice and the template or the specific amount, it’ll automatically get flagged. Human approval will still be required, though only for the original contracts. The first invoice for the recurring payments is also generally approved manually. Human input plays an important role in the approval process of the first template that will be followed for all subsequent recurring invoices. What Are the Advantages and Disadvantages of Recurring Invoices?Here are some of the main advantages and drawbacks of recurring invoices: AdvantagesThe biggest advantage for AP departments receiving recurring invoices is the fact that matching is more convenient. The records are stored in the original contract or a template is stored in the file. The AP software automatically matches the invoice and there’s no need for matching with independent purchase orders. DisadvantagesCorrecting errors in recurring invoices is a bit tedious, and may cause delays in payments. Companies that do not use AP automation software may find the entire process cumbersome, as they have to manually go back and forth until a revised invoice is received. For businesses that don’t use AP automation software, each recurring invoice has to be manually verified with the initial template and then released by the AP department, which is a tedious and time consuming process. Manage Your Invoices Better With AP Automation SoftwareAP departments can take advantage of AP automation software to manage records, track invoices, and gain greater transparency throughout the invoice lifecycle, ranging from capturing and matching to receiving approvals and disbursing payments. By using our website, you consent to the use of cookies in accordance with the SoftCo cookie policyOK The list of problems that can be addressed with automated bill payments is extensive. You may be tired of writing paper checks every month to vendors. Or you may find it’s getting repetitive and time-consuming to keep track of which vendor you owe money to on the first day of the month, 15th of the month or the end of the month? And remembering how much to pay each vendor – all sorts of different amounts – has become more detail than you would rather keep track of. Or maybe you’re just in the mood for change. This is where automated bill payments can help. In this blog we’ll describe what these are, how you can use them, when they’re most useful (and not as useful) and whether they’re safe. What is bill payment automation?Bill payment automation occurs when a finance pro sets up special arrangements with your bank for recurring electronic financial transfers. You instruct your bank, for example, to automatically pay your bills to your vendors on a pre-determined recurring date, usually each month, for a specific amount. For example, if your business rents an office building from Company X and the month rental fees is $1,000, you could instruct your bank to pay Company X that amount out of your checking account on the last day of every month. Or in another scenario, Company X automatically contacts your bank on the last day of each month requesting the $1,000 payment. You would authorize Company X and your bank to complete this transaction. Or, you could set up a process with your bank to send a freelance consultant, whose services your business uses every month, a payment of $1,000 on the first day of each month. “Set it and forget it” systemsYou can think of all these as “set it and forget it” systems. You set up the arrangements then forget about the problem of paying your bills. Payments are sent automatically without writing paper checks month after month or getting involved in executing the online transactions. ACH is another popular methodThere’s another way bill payment automation can occur called Automated Clearing House (ACH). When your company automatically deposits paychecks into employees’ bank accounts, that’s usually an ACH transaction. It’s a bank account-to-bank account funds transfer. You can also use bill payment automation to pay corporate bills such as utility, cell phone, credit card and auto loans. How do you automate bill payments?You automate bill payments by setting up arrangements with your bank. For example, you may ask your bank to pay Employee X $1,000 on the 15th and last day of every month out of your checking account using the ACH method. The bank then transfers those funds from your account to the employee’s account on those dates. Use of credit card to make automated bill paymentsYou could also use your corporate credit card to automate bill payments. If your company has a $100/month subscription to a business news TV station for employees, you could set up an automatic payment. Each month $100 will be withdrawn from your credit card account and paid to the business news company. You could also choose to pay the subscription bill directly to that company. You would give the company your bank account information including the routing and account numbers. This way the business, your vendor, could withdraw the funds automatically on the due date each month. You can set up these arrangements by calling your bank, visiting a teller in person, or doing it online. Once you set up this plan, the online payment solutions will be made automatically without the need for you to intervene. A word of caution: You want to make sure the automatic payments are being made on time and for the correct amounts. Check on this regularly on your online or paper bank statements.
Here are five reasons why automated bill payments are a good idea:
Be careful of “out of sight out of mind” situationYou should be aware there may be some circumstances in which you may want to be careful about using automated bill payments. One prime example is the concept of “out of sight, out of mind.” “If you stop being hands-on with your payments you may forget precisely what you’re being billed for. It’s easy enough to do,” Gocardless.com notes. “So if you have a habit of changing your services and memberships on a regular basis, automatic payment may just end up being overly complicated.” The report describes a scenario in which you notice an attractive deal on a new gym membership. You sign up immediately and tell yourself to cancel your current gym membership, which is on an automatic bill paying schedule. But you never get around to canceling it. You keeping paying for the membership you no longer want. Are automated bill payments safe?Automated bill payments are, in the vast majority of cases, safe. Much safer than using paper checks and paper invoices. Fraudsters are skilled at stealing sensitive information off of paper checks and invoices. They use those skills to steal money and information from companies. This is far less likely using online payment solutions. Unlike paper checks, electronic payments such as ACH get routed digitally from one bank account to another through payment systems. Most use automated fraud monitoring tools such as Positive Pay to flag suspicious activity and avoid duplicate payments and invoices. Using accounts payable (AP) automation software, payments are controlled from start to finish, and risk is mitigated. What software automates bill payments?There are many different types of software that automate bill payments. They tend to have this in common: customized capabilities for accelerating and simplifying bill payments. But the highest performing software contains smart rules and conditions that specify how bill payments are supposed to be made. For instance, the software may have a condition that requires the CEO has to approve any invoice over $1,000. The software automatically identifies invoices of $1,000 or more and routes them directly to the CEO. The best software for automating bill payments should eliminate manual effort and reduce payment processing costs. It should also improve accuracy, efficiency and control over the complete bill payment process. How will automated bill payments help my business?Here are three ways automated bill payments will help your business:
When does it make sense to automate bill payments?It makes sense to automate bill payments when you feel the process is taking up too much of your time that could be spent on more value-added projects. There’s no exact number for this, but a good rule of thumb is that if you spend more than 10 percent of your work week paying bills, you probably want to automate your bill payments. It will save time so you could spend it on more valuable and intriguing work that helps grow your business. Consider this matter in the context of invoices. If you’re processing fewer than 100 invoices per month, you might not feel enough pain to look into AP automation software. But once you exceed that amount or find you’re having issues keeping up with processing in terms of monthly transaction volume, that’s when companies typically start experiencing the many pains of manual AP. Industry-leading AP automation research studies found you can save approximately $10 every time you process an invoice and payment using AP software rather than a manual system. If you process 500 invoices, you could save $5,000. If you process 1,000 invoices, you could save $10,000 (based on time and supply savings). Tips for automating bill paymentsHere are five tips for automating bill payments:
Are recurring payments automatic?Recurring payments are collected automatically from customers' bank accounts via their payment cards or through other methods like ACH and Direct Debit fund transfer. To accept these payments, the business must have a merchant account and a payment service provider.
Can you set up recurring payments in QuickBooks?In QuickBooks Online you can create templates for recurring transactions, like recurring expenses. You can do this for any transaction except bill payments, customer payments, and time entries.
What is automated recurring billing?In the simplest terms, recurring payments (also known as subscription payments, automatic payments, or recurring billing) take place when customers authorize a merchant to charge them repeatedly for goods or services on a prearranged schedule (monthly, weekly, daily or annually).
Which 3 transaction types can be made recurring?The most common types of recurring transactions include: Bill, Check, Expense, Invoice, Journal Entry, Purchase Order, Sales Receipt and Purchase Order. You cannot automate Deposits or Bill Payments. Once a recurring transaction is created, you can choose the type and frequency.
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