Scenario 1: When your Accounts Payable (AP) process is working well, invoice payments happen on time, vendor relationships thrive and you stay confidently in control of cash flow.
Scenario 2: When your AP process is less defined, issues such as data entry errors, overdue invoices and double payments can impact your bottom line—and your ability to accurately manage spend.
The difference between scenarios 1 and 2? The strength of the vendor invoice policy.
A strong vendor invoice policy sets out standard, simple-to-follow guidelines for how your AP team manages invoices, addresses exceptions and handles documentation. And fortunately, any small or medium-sized business can create or update a vendor invoice policy rather easily.
If your business has a paper-based AP process, you’re probably already aware you’re going to outgrow it sooner or later.
Our template guides you through creating an invoice policy that contains the following sections:
- Statement of Purpose
This statement explains the benefits of having a policy for employees, vendors, and the business so your team understands why it’s important to follow the guidelines with every vendor invoice.
- Company Expectations and Policy Compliance
Here, you’ll summarize the expectations for managing the receipt and storage of all vendor invoices, notes and backup—as well as the responsibilities of each employee who comes into contact with an invoice for any reason.
- Delegation of Authority, Approval Chains, and Purchase Price Variance
This section addresses common areas of confusion, such as who can approve invoices, the rules for purchase price variances, and who can approve exceptions.
- Subject areas
The nuts and bolts of your vendor invoice policy appear in detail here. This section covers everything from where invoices should be sent to how to record receipts, code and send invoices to AP, manage approvals, manage exceptions, store and access documents, and any other related policies and procedures.
Once created and enforced, an effective invoice management policy can not only minimize errors, but reduce invoice processing time as well.