An automated invoice processing solution streamlines businesses’ accounts payable operations by automating tasks such as data extraction from invoices, data validation, and data entry into a database for further analysis and processing. Processing invoices is one of the most time-consuming tasks, but it cannot be overlooked because it is directly related to the business’s finances. Automation solves this problem by shortening invoice processing times and improving data quality.
What precisely is automated invoice processing? How does it function? – In this article, we address both of these concerns, as well as others.
So, let’s get right to it: –
What precisely is automated invoice processing?
By automatically processing invoices, automated invoice processing helps to streamline accounts payable processes. It also updates the information in your Enterprise Resource Planning (ERP) system at the same time, ensuring that all records are digitally maintained. It aims to drastically reduce the time required for manual invoice processing while also lowering the margin of error that human tasks pose.
What is the need for automated invoice processing?
An average-sized business takes about 25 days to manually process a single invoice from receipt to payment. This could rise even higher if the number of invoices rises in tandem with the number of manual touch points, resulting in a massive loss of time and resources for the company: –
- Manual invoice processing increases the likelihood of errors and double payments.
- Aside from that, the threat of employee fraud and misappropriation of resources looms large over most organisations, with more than 74% of them being targets of payment scams in 2020.
Both factors result in delayed invoice processing and strained supplier relationships, which eventually affect enterprise productivity.
To ensure that the entire process is accurate, efficient, and error-free, replacing manual processes with automated invoice processing becomes unavoidable.
What is the process of automated invoice processing?
Traditionally, invoice processing begins when the accounts department receives an invoice from a supplier for the amount owed for goods or services delivered. The accounts department then compares the invoice to the goods/services received.
Once the invoices are totalled, the payment information is updated in the system and ready for approval. After it is approved; the payment is made to the supplier. Depending on the organisational structure, the levels of approval required before payment are different.
Automated invoice processing is based on the workflow described above, but it successfully eliminates the repetitive manual tasks, as well as the errors and delays that they cause. This is an example of an automated invoice processing workflow: –
- When an invoice arrives, it is automatically scanned, and the details are automatically fed into the digital accounting system in the desired format.
- Once the data has been entered into the digital database, the invoice is converted into a text searchable document that is mapped by the automated management system, allowing the data entered into the system to be actively tracked within the ERP system.
- The data stored includes the supplier’s name, purchase amount, details of the goods/services supplied, and so on, and provides a detailed and well-formatted account of the invoice, which can then be shared with the relevant parties for review and payment approval.
- If a captured detail fails data validation checks, it is retained for manual review. Otherwise, the processed invoice is assigned to the person in charge of approval and payment.
The Advantages of Automated Invoice Processing
The shift from manual to automated invoice processing has several advantages, including:
1. A unified control console
Accounts payable automation’s goal is to streamline invoice processing by putting all features at your fingertips via a unified platform. There are many platforms that allows users to easily access and control all necessary features with the click of a button, such as:
- Recurring charges
- Invoicing only once
- Models of metered, volume, and tiered charging
- Management of subscriptions
- Suppliers can self-serve.
- Payments are updated in real time.
2. Less manual entry
According to a Coupa survey, more than 51% of respondents agreed that manual data entry is inefficient and time consuming, and they are actively looking for ways to improve its accuracy and efficiency. Automated data entry accomplishes this by cutting the time required to process invoices by tenfold compared to manual processing.
3. Lower margin of error and increased security
Manual invoice processing is prone to errors and mistakes due to factors such as fatigue and lack of concentration.
According to Level Research’s 2020 Payables Insight Report, data discrepancies are one of the major pain points of invoice processing for more than 23% of the companies surveyed.
Similarly, 16% of companies consider data fraud to be a major pain point, and it is critical to understand that the lack of active supervision contributes to such risks of data fraud.
This is where automated invoice processing comes in, ensuring that the data entered is correct and free of errors. Furthermore, to reduce the possibility of fraud, the automated solution compares the extracted data from the supplier’s invoice to the company records.
This helps to improve process efficiency because previously, the same would have to be manually verified by an employee or a clerk, which could take hours.
4. Accounts that are transparent and traceable
Traditionally, once paid, invoices are stored in files or folders that are untraceable and difficult to retrieve if necessary. Automated invoice processing solutions, on the other hand, use an Electronic Document Management System (EDMS) to store data in a centralised digital database in a systematic manner.
Such storage creates an audit trail and makes invoices easily retrievable in the event of a need. Furthermore, it makes it very simple to track all of the documents and reduces the possibility of misplaced or missing invoices.
5. Monitoring and personalization
Monitoring manual invoice records is a difficult task due to their large and haphazard organisation. In the case of automated invoice processing, however, the processed invoices are stored transparently in a centralised and easily retrievable database.
This ensures that expenses can be tracked in real time and that any discrepancies can be easily reported. The automation software also offers more customization options, allowing you to streamline the entire operation to meet your specific business needs by arranging the workflows accordingly.
Furthermore, it allows for the simple integration of your accounting processes, ensuring that all accounting functions and processes are carried out synchronously and without conflict.
It also enables businesses to save time and resources by automatically adding custom logos, texts, stamps, and other details. Such software also makes it easier to adhere to custom regulations and policies, ensuring that the results meet the company’s standards.
6.Early payment discounts and strengthened supplier relationships
The entire process can be made more efficient by enabling automated workflows, making it easier for employers to meet deadlines. Given that most suppliers offer early payment discounts, the same can be obtained by ensuring that payments are not delayed. Furthermore, timely payments help to keep suppliers happy. Accounts Payable Automation software typically includes a platform that allows suppliers to receive real-time updates on the status of their invoices.
This helps to ensure that there are no disagreements between the company and its suppliers and that their relationship remains positive.
7. Automated invoice routing
Manual routing is a major source of frustration for 37% of businesses during the invoice processing process. Once processed, the invoice is manually routed to a number of interested parties for approval, depending on the amount and nature of the payment. However, a lack of a designated route of approval can result in additional delays and, in some cases, lost invoices.
Users of automated invoice processing software can easily configure the designated workflow to ensure that the invoice reaches the appropriate approvers. Custom notifications are sent to users to remind approvers of pending invoice approvals, ensuring timely approval.
How can you automate invoice processing for your company?
It is abundantly clear that automating your invoicing processes has numerous advantages over manual processing. However, the question is how to automate invoice processing.
To answer that, you must first ask yourself a few questions: –
- How many invoices must you process each month?
- What is causing a stumbling block in your current invoice processing? Is it the longer turnaround time, the inaccurate data capture, or the slow business growth caused by repetitive manual tasks?
If you only process a few hundred invoices per month, you should try to automate it in-house on a small scale. However, if you’re processing thousands of invoices and your accounts payable team is spending hours extracting data from these invoices and feeding it into a system, you’ll need an end-to-end automated invoice processing solution.