Invoice automation enables straight-through invoice processing with no human interaction to free up back-office finance or procurement teams to concentrate on higher value-added tasks.
Most businesses still receive most of their invoices on paper rather than digital forms. While these physical copies aren’t an issue on their own, many companies still handle these invoices with manual processes, which tend to incur higher costs, primarily due to cash flow and invoice processing inefficiencies associated with these manual processes. Companies using a manual system tend to experience higher error rates, more process exceptions, and often fail to take advantage of early-pay discounts to reduce their operational costs.
The easy solution is invoice automation (also called automated invoice processing) to help manage invoices more efficiently. Invoice automation reduces the errors and problems associated with manual invoice processing, and to achieve higher efficiency and reliability levels.
Automated invoice processing generally includes automation of:
- Managing purchase orders
- Data entry
- Matching price
- Transferring digital payments
- Streamlining workflows
- And many more…
How to reduce manual invoice processing in a company?
- Implement a cloud-based accounts payable automation solution which you can access anywhere, anytime, that offers a zero-risk subscription, pay per invoice processed, and a free trial period.
- Make it a complete end-to-end invoice and payment processing automation solution. Allow your Accounts Payable staff to spend time on the work that adds strategic value by reducing the need to process invoices manually.
How Does Invoice Automation Work?
The standard invoice document management method begins when the accounting department receives a supplier’s invoice. At this time, it is matched and approved. Typically, if the invoice’s value is a huge payout, further approval is required.
From here, it must be entered into the system where it is posted for payment. Then the payment is issued. Depending on the business, sometimes the manual invoicing process can take up to 15 steps. This takes a lot of time, especially when processing multiple invoices.
Invoice Automation cuts to the chase. As soon as the invoice arrives, it is scanned and copied into the digital accounting system. This mode of data capture eliminates hours of manual data listing. The automated invoice software will then convert the given data into a text-searchable document.
The invoice data can be obtained and mapped in the automated management system, identifying which fields to capture and register into the ERP system. This holds data like the supplier name, the purchase amount, quantity, and more. Invoices are then forwarded to the appropriate parties for review and approval.
How does Invoice Automation add value to your organization?
Many companies continue to use paper-based invoicing, which is both expensive and increasingly inaccurate. However, companies that choose to implement invoice processing automation can realize many benefits, a few of which are listed here:
Time-Saving: Using business process automation to handle accounts payable activities reduces the time required to process an invoice. Implementing an automation system saves a significant amount of time searching for an invoice or tracing it down in the approvals process.
Improved Visibility: Automation reduces processing time, decreasing financial risk and the attention one needs to give to low-value tasks. With increased visibility, your business can closely monitor billing miscalculations and payment terms while avoiding late fees and taking advantage of supplier discounts.
Improved Supplier Relations: Faster invoice processing leads to more on-time payments that improve the relationship between organizations and their suppliers, which is valuable for both organizations.
Better Compliance: Businesses that implement automated invoicing reduce their compliance risk compared to paper-based systems due to significantly better traceability, missed or misfiled invoices, and ease of invoice retrieval during business audits.
Easier Globalization: Obtaining invoices electronically and uploading them to the web allows the users to access the data for processing through offshore operations from anywhere in the world.
Scalable Technology: Companies can extend their initial investment by introducing the same document capture technology to other business fields, such as employee records management, order processing, claims processing, or case management.
Less Manual Errors: Keeping track of invoices and paying the correct amount using paper-based invoicing can be confusing. If the complete purchase-to-paid process is automated, it can be assured that the correct product was ordered, the correct price was quoted, and that the correct invoice was paid at the correct time.
Improved Cash Flow: Greater control and visibility over payables helps improve reports’ accuracy while improving the overall cash flow of the business. Automated processes help streamline workflows that compress the payment cycle through electronic payment reminders and accurate invoicing.
Reduced Costs: By automating the accounts payable process, you will never mistakenly pay a bill twice, make late payments incurring interest charges or fees, or overpay an invoice. The system alerts you of duplicates, overpayments, and reminds you of all the pending due dates.
Personalized Process: You can customize the accounts payable workflow process to accommodate your company’s needs using an automated invoice system. You can route invoices above a designated amount to those with proper authorization, create and maintain approval workflows, and validate payables as needed.
Enhanced Collaboration: Automated invoice systems allow various people to collaborate on any particular payable in real-time. No matter where they are, someone with an interest or stake in an invoice can concurrently access it to confirm or dispute charges, seek clarification, or explain errors.
Continued Follow-up: E-invoicing systems are beneficial when it is time for an audit. The electronic audit trails inherent in invoice software make tracking an invoice from receipt to payment an effortless task. Accounts payable fraud detection also becomes easy with an automated system.
What is today’s level of invoice automation?
Most of the invoices submitted through an organization’s Electronic Data Interchange (EDI) are processed automatically.
However, for large organizations, a significant share of invoices (up to 50%) are sent by smaller organizations that are not part of the organization’s EDI. Most of the Fortune 500 companies using technology that was not made in the last few years have 10-15% automation rates. Simultaneously, deep learning, leading edge-based invoice extraction solutions can increase this to >80%.
Step-by-step approach to invoice automation:
Analyze current processes
Figure out how invoices flow through your company today.
Centralize invoice management
Consider organizing a centralized or shared service for invoice management. Notify your suppliers that they should send all invoices to your AP function and support the policy.
Standardize policies and procedures
Describe and document standard policies and procedures for the PO and non-PO invoices processing – e.g., duplicity and mathematical integrity checks, discrepancy resolution workflow, matching criteria and tolerances, dispute, approval workflow, etc. Also, document your working capital optimization policies – e.g., when to take and not take early payment discounts. Your primary goal is to clarify precisely how invoices should be processed to your organization. This will properly guide your current manual processes and prepare you for the automation of your policies and procedures.
After establishing your policies, procedures, and controls, you are ready to automate. At that point, you are prepared to select and implement a technological solution that provides the elements of automation explained in the previous section.
The most important task is a single “processing engine” that will allow you to automate your policies and procedures for validation and coding, matching, payment authorization, discrepancy resolution, reporting, and analysis. You need a single, consistent invoice automation process despite how many ways you initially capture invoices. On the front end, leverage any electronic invoicing opportunities you may already have while using a combination of scanning, OCR, and planning to capture paper invoices.
Your aim is to process as many invoices as possible “straight-through” with limited or no human interaction and significantly streamline the discrepancy resolution process. Once the capability is in place, you can update the front-end capture process incrementally.
Enable supplier self-serviceAfter processing all the invoices in a consistent electronic manner, it’s an easy step to make status reports available to suppliers through a secure self-service Internet portal. Your goal here is to reduce the time AP personnel currently spend on the telephone answering supplier inquiries about where their invoice stands and when they will be getting paid.
Proactively request early payment discounts
With the capability to process invoices much more quickly, you will be in a situation to take advantage of each early payment discount term your vendor may offer. In addition to current opportunities, you may need to begin asking for such discount terms as you negotiate new deals. Once you have a real arm on invoice processing, this may be a vast savings source over time.
Leverage information for better sourcing
Automated invoice processing can ease your procurement department to enhance its sourcing activities in two ways. First, with all your payment activity captured electronically, they will have better data for spend analysis for supplier base consolidation and other sourcing plans. Second, with a reputation for on-time paying and making it easier for suppliers to manage their accounts’ receivables, suppliers may be ready to give your organization preferred prices and terms. Ultimately, your goal here is to provide your procurement team with information and on-time payment performance that allows them to gain even better value from suppliers over time.
Incrementally automate invoice capture
After you have your back-end invoice processing automated, you can shift your attention to finding even more effective ways to capture invoices on the front end. This can be achieved on an incremental basis by executing electronic invoices with your larger customers or trading networks, and/or adding capabilities like invoice upload or “PO Flip” to your supplier portal. This will act as an increasingly effective means of moving invoices into automated invoice processing. Your aim here is to continue to take cost and time out of invoice capture – even after the significant savings from automated invoice processing.
All of these steps are manageable and provide incremental benefits. As stated at the beginning of this guide, manual processing’s direct and indirect costs are just not required anymore. The technology to eliminate the great bulk of paper handling is available, affordable, and easily implemented within the circumstances of your existing financial systems. The advantages go beyond cost reduction to create cost management and information availability benefits that will help your company better compete for the coming years.