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.
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.
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.
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.
Here are some of the main advantages and drawbacks of recurring invoices:
The 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.
Correcting 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.
AP 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.