by martieLast Updated : Sep-25-2023
Is your company spending too much on manual invoice processing?
Invoice automation can help you!
It’s not a surprise- manual data entry and invoicing can cause your company’s finance system to experience endless frustration and inefficiency. Aside from that, your finance department is at risk of suffering from too many data entry tasks and lost documents, consuming valuable hours of your invoice processing time.
This is one of the biggest pains experienced by controllers and accountants. Good thing there’s now a better way to streamline your financial operations, reduce errors, and cut costs. This is done by invoice automation, which can serve as your company’s invoice processing solutions.
In this blog, we will talk about how invoice automation can help your finance department handle your invoice better, improving your company’s bottom line.
Invoice Automation refers to using software to automate the tasks involved in your invoice processing. Some of these tasks include:
Invoice automation is a process that can help your business save time and money, improve accuracy, and reduce errors. It also helps your business improve your cash flow by processing invoices more quickly/
Invoice management is crucial for your business to achieve effective processes. Inefficient manual tasks can lead your company to suffer from human errors, delayed payments, and costly mistakes, which can negatively impact your company’s bottom line.
Here are some of the reasons why invoice processing automation solutions is important to your business:
Streamlining your invoice management through invoice processing automation is important if you’re looking to optimize your cash flow. By eliminating time-consuming manual tasks such as data entry and invoice approval workflows, your organization can accelerate your payment processing, allowing you better cash flow management.
This enhances your company’s ability to meet financial obligations and even take advantage of early payment discounts.
Manual processing can increase the likelihood of your finance and accounting teams making mistakes, such as incorrect data entry or misplaced invoices.
By simply leveraging your invoice automation software and technologies like optical character recognition (OCR), your business can automate the extraction of invoice data, reducing the risk of costly errors and ensuring accurate payment information for your business.
Manual invoice processing is a time-consuming and labor-intensive task that requires dedicated accounting and finance teams to process and manage thousands of invoices.
By automating your processes, your organization can reduce processing costs and eliminate the need for manual data entry. Thus freeing up your team’s valuable time so you can spend it on more strategic tasks.
Invoice automation can help your business improve accuracy by reducing the risk of human errors.
For example, invoice automation software can automatically extract data from invoices and match invoices to purchase orders. This can help you eliminate errors when data is entered manually.
Invoice automation can help your business increase visibility into your invoice processing workflow.
This is because invoice automation software can track the current status of your invoices and generate reports on invoice processing activity.
This information can help your businesses identify areas where you can improve their invoice processing operations.
Invoice automation can help your business reduce fraud by automating tasks prone to human error, like data entry.
Invoice automation can help your business comply with financial regulations by automating tasks required by law, such as invoice archiving.
Manual invoice processing can have significant cost implications for your business.
The time and resources required for manual data entry alone can result in considerable expenses for your company. Accountants or finance teams spend hours entering invoice details, which tend to divert from more strategic tasks.
According to a study done by Ardent Partners, one of the top challenges for Accounts Payable (AP) teams in 2023 is the high cost of manual invoice processing. Their research shows that the average cost to process a single invoice is $10.18, which has increased by 10% in the past year.
Several factors contribute to the high cost of manual invoice processing, including:
Invoice automation uses software to automate tasks in your business relevant to processing invoices.
To streamline your accounts payable workflow, you need to achieve complete automation so your business can cover capturing invoices to making payments. This feature is something ProcureDesk offers.
The initial step in this journey involves digitizing how we collect vendor invoices, eliminating paper.
If your organization currently receives paper invoices by mail, the first move is to transition to receiving invoices via email.
The process for acquiring invoices through email entails these steps:
1. Create a dedicated email account for handling invoices, such as email@example.com.
2. Ensure that this email address is used for all vendor communication. We’ve discussed transitioning to a paperless approach previously.
3. Internally, communicate with your team and request they forward any invoices they receive to this new email address.
4. Also, it’s essential to include clear instructions in your purchase orders indicating that the company will only process electronically received invoices.
Here is a sample electronic invoice as seen in the ProcureDesk software:
Let’s dive into the steps of an automated invoicing workflow:
The invoice is received electronically via email or a secure portal. Some invoice automation software solutions can automatically retrieve invoices from vendor websites.
The invoice is recorded in the accounting system. This may involve manually entering the data into the system or using optical character recognition (OCR) software to automatically extract the data from the invoice.
The data on the invoice is verified, such as the invoice number, date, vendor name, and amount due. This may involve manually checking the data or using software to verify the data against the accounting system automatically.
The invoice is matched to the corresponding purchase order, if applicable. This helps to ensure that the invoice is accurate and that the goods or services have been received.
When introducing a 3-way match system, the accounts payable (AP) team may need to align vendor invoices with purchase orders manually. This can be a time-consuming process, requiring extensive communication with various stakeholders.
To proceed with invoice processing, the AP team must obtain answers to the following questions:
However, you can streamline the three-way matching procedure by implementing accounts payable software. With automated three-way matching, the AP automation solution automatically compares the three essential documents – the purchase order, receipt, and invoice (hence the term “3-way”) – and promptly identifies any discrepancies.
Here is an example of a missing receipt exception:
As shown in the previous example, the vendor has generated an invoice for a specific item, but there is no corresponding receipt in the system.
In a manual workflow, you would typically need to initiate an email correspondence and follow up with the employee who initiated the product request.
However, when using ProcureDesk, this follow-up process is automated. The system automatically dispatches an email to the relevant stakeholder requesting confirmation of product receipt.
Occasionally, there may be instances where the invoice amount doesn’t align with the price specified in the purchase order. This situation is referred to as a pricing exception.
Here is an example of a pricing exception:
Optical Character Recognition (OCR)
ProcureDesk’s (OCR) technology offers your company a valuable tool for extracting invoice data. This extracted data can align your invoices with purchase orders and other relevant documentation within your company’s processes.
Here’s how the invoice matching process using OCR functions:
1. Your invoice is digitally scanned into a computer system.
2. Your selected OCR software extracts key data elements from the invoice. This data typically includes the invoice number, vendor name, invoice date, quantity, price, and terms.
3. The extracted data is cross-referenced with the information in the purchase order and other designated supporting documents.
4. If the extracted data matches the corresponding data on the purchase order and other documents, the invoice is deemed suitable for payment approval. However, in cases where discrepancies arise, thorough investigations are conducted before approval is granted.
Here is a sample OCR:
The invoice is routed to the appropriate approvers for review and approval. This may involve sending the invoice to a single approver or multiple approvers for different levels of approval.
ProcureDesk has simplified the approval process for your business. Here is how it looks like in ProcureDesk:
Once the invoice is approved, a payment schedule is created. This may involve setting up a one-time payment or setting up a recurring payment schedule.
The payment is sent to the vendor according to the payment schedule. This may involve sending a check, wire transferring, or using another electronic payment method.
In addition to these basic steps, some invoice automation software solutions also offer additional features such as:
Invoice automation can offer your company a couple of benefits. Let’s quickly discuss some of the benefits that invoice automation can bring your business:
Let’s explore some of the most important features of invoice automation software that help achieve invoice automation:
An AI invoice is an invoice that is generated or processed using artificial intelligence (AI). AI can be used to automate many tasks involved in invoicing, such as data extraction, validation, and approval. This can free up accounting staff to focus on more strategic tasks and help businesses to improve their efficiency and accuracy.
Invoice cognitive capture is an AI used to extract data from invoices. It uses machine learning to identify and understand data types, such as line items, quantities, prices, and taxes. This data can then populate accounting systems, generate reports, and make payments.
There are several ways to digitize invoices better. One important step is to use a high-quality scanner to create digital images of the invoices. The images should be clear and legible and saved in a standard format, such as PDF or TIFF.
Another important step is to use OCR software to extract the data from the invoices. OCR software can recognize and convert text from images into digital text. This data can be easily imported into accounting systems or other software applications.
Invoice mismatches occur when there is a discrepancy between the data on an invoice and the data in the accounting system. This can happen for a number of reasons, such as human error, data entry errors, or discrepancies in product or service descriptions.
When an invoice mismatch occurs, it is important to investigate the cause of the discrepancy and take steps to correct it. This may involve contacting the supplier or customer, reviewing the invoice data, or making adjustments to the accounting system.
There are a number of invoice automation examples. Some common examples include:
Here are some of the important questions you would need to ask when you’re choosing the right invoice automation software:
Make sure you take note of this when you’re in the middle of looking for your automation solution options!
Invoice automation improves the invoice processing process in several ways, including:
Here are six invoice processing tasks you should automate:
An inefficient process within your organization can contribute to late payments and even missed payment discounts.
Manual process workflows often lack visibility, leading to approval status and payment delays. This can result in missed payment terms, triggering late fees, and damaging supplier relationships.
But with an automated invoicing process, your organization can finally:
With the right invoice processing software, your business can unlock significant annual savings while improving your overall payable process and making things easier for your payable department.
What you should do now
Whenever you’re ready… here are 4 ways we can help you scale your purchasing and Accounts payable process.