Invoice Automation: A Powerful Tool for Streamlining Your Business

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.

What Is Invoice Automation?

Invoice Automation refers to using software to automate the tasks involved in your invoice processing. Some of these tasks include:

• Receiving and scanning invoices
• Extracting data from invoices
• Matching invoices to purchase orders
• Approving invoices
• Paying invoices

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/

Why Is Invoice Automation Important?

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:

Optimize Cash Flow

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.

Minimize Risk Of Human Errors

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.

Significant Cost Savings

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.

Improve Accuracy

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.

Increase Visibility

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.

Reduce Fraud

Invoice automation can help your business reduce fraud by automating tasks prone to human error, like data entry.

Improved Compliance

Invoice automation can help your business comply with financial regulations by automating tasks required by law, such as invoice archiving.

Cost Of Manual Invoice Processing

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:

• Labor costs: Manual invoice processing is time-consuming, requiring skilled employees to enter data, match invoices to purchase orders, and approve payments.
• Errors: Manual invoice processing is prone to errors, leading to costly mistakes, such as late payments, duplicate payments, and overpayments.
• Slow processing times: Manual invoice processing can lead to slow processing times, damaging relationships with vendors and impacting cash flow.

How Does Invoice Automation Work?

Invoice automation uses software to automate tasks in your business relevant to processing invoices.

How Does ProcureDesk Help In Automating Digital 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 invoices@yourcompany.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:

Step 1: Invoice Received

The invoice is received electronically via email or a secure portal. Some invoice automation software solutions can automatically retrieve invoices from vendor websites.

Step 2: Invoice Accounted For

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.

Step 3: Data Verified

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.

Step 4: Data Matched

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.

How Does ProcureDesk Help With Data Matching?

3-Way Matching

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:

1. Has the person who made the request received the product or service?
2. Does the invoice amount match the price specified in the purchase order?

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:

Step 5: Invoice Approved

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:

Step 6: Payment Schedule

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.

Step 7: Payment Sent

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.

Additional Features

In addition to these basic steps, some invoice automation software solutions also offer additional features such as:

• The ability to create and send custom invoices can help your business create invoices tailored to their specific needs.
• The ability to track and manage invoice payments: This allows your business to see the current status of all of its outstanding invoices and to ensure that payments are made on time.
• The ability to generate reports on invoice processing can help your business identify areas where they can improve their operations.

Benefits Of Invoice Automation

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:

• Reduces Manual Entry: Invoice automation minimizes the need for manual data entry, reducing errors and saving time.
• Improves Invoice Verification: Automation enhances the reliability of verifying invoices against purchase orders and other documentation, ensuring accuracy.
• Easy Access to Information: Digitized invoices offer quick and convenient access to invoice data, streamlining retrieval and reference.
• Automated Workflows: Automation enables the seamless flow of invoices through approval processes, eliminating bottlenecks and delays.
• Leveraging Early Payment Discounts: Automation helps identify and take advantage of early payment discounts, optimizing cash flow.
• Reduced Audit Preparation Time and Effort: Automated systems simplify audit compliance, reducing the time and effort required for audit preparation.
• Increased Scalability: Scalable automation solutions accommodate growing invoice volumes without a proportional increase in labor.
• Sizable Cost Annual Savings: Automation efficiency gains translate into substantial cost savings over time.
• Reduced Business Risk: Automation improves control and compliance, reducing the risk of errors, fraud, and financial discrepancies.
• Improved Visibility: Real-time tracking and reporting provide enhanced visibility into the invoice lifecycle and financial performance.
• Enhanced Vendor Relationships: Timely payments and streamlined processes foster better relationships with vendors and suppliers.
• Positive Environmental Impact: Reducing paper usage through automation contributes to a greener, more sustainable business environment.

Important Invoice Automation Features 

Let’s explore some of the most important features of invoice automation software that help achieve invoice automation:

• Unified Console: A unified console provides a single view of all invoice processing activities, including invoice receipt, data extraction, matching, approval, and payment. It streamlines your invoice processing workflow and improves efficiency.
• Customization: Invoice automation software should be customizable to meet the specific needs of your business. This may include the ability to customize the invoice processing workflow, create custom reports, and bring custom integrations with other systems.
• Relationship Management: Invoice automation software can help your business manage your vendor relationships. This may include the ability to send and receive invoices electronically, the ability to track vendor payments, and the ability to generate reports on vendor performance.
• Monitoring and Reporting: Invoice automation software allows your business to monitor invoice processing operations and generate reports on invoice processing performance.
• International: Invoice automation software can support international invoicing and payments. This is important if you want your business to operate in multiple countries.
• Import vendor invoices: Invoice automation software should be able to import vendor invoices from various sources, such as email, fax, and mail.
• Match information: Invoice automation software should be able to match invoice information to purchase orders and other relevant data. This is to ensure your business that invoices are accurate and complete.
• Apply predefined rules: Invoice automation software should allow your business to create and apply predefined rules to invoices. This is to make automating tasks such as invoice routing, approval, and payment easier.
• Accept tolerances: Invoice automation software should accept tolerances for invoice amounts to reduce the number of manual interventions required.
• Flag discrepancies and exceptions: An invoice processing software should be able to flag discrepancies and exceptions to predefined rules, such as incoming invoices missing information or invoices exceeding a certain amount.

FAQs

What Is An AI Invoice?

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.

What Is Invoice Cognitive Capture?

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.

How To Digitize Invoices Better?

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.

How To Handle Invoice Mismatches?

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.

What Are Some Invoice Automation Examples?

There are a number of invoice automation examples. Some common examples include:

• Automatic invoice generation: AI-powered invoicing software can generate invoices automatically based on data from other systems, such as CRM systems or ERP systems. This can save businesses a significant amount of time and effort.
• Automatic invoice processing: AI-powered invoice processing software can automatically extract data from invoices and populate accounting systems with this data. This can help businesses to improve their efficiency and accuracy.
• Automatic invoice approval: AI-powered invoice approval software can automatically approve invoices based on pre-defined rules. This can help businesses to speed up their payment process.

What Are Some Questions To Ask When Choosing The Right Invoice Automation Software?

Here are some of the important questions you would need to ask when you’re choosing the right invoice automation software:

• Can the software accurately extract invoice data from all the different formats I receive from my vendors, such as emails and scanned paper bills?
• Does the software include reporting features and dashboard views that make finding and tracking invoices easy? Can I customize the reports?
• Does the software integrate seamlessly with the other cloud accounting and ERP systems I use now or may use in the future?
• How fast can the software process the volume of invoices I currently have?
• Can the software automatically pay invoices?
• Can I configure the software to match my workflow by adding business rules?
• Is the software scalable? What happens when my volume of vendor invoices grows?
• Can my staff access the software from different devices and remote locations?
• Are there other companies like mine that use and are happy with the automated software?

Make sure you take note of this when you’re in the middle of looking for your automation solution options!

How Does Automation Improve Invoice Processing?

Invoice automation improves the invoice processing process in several ways, including:

• Minimizing manual data entry: Automated invoice processing software can extract data from invoices automatically, eliminating the need for manual data entry. This can save businesses a significant amount of time and effort, and it can also help to reduce errors.
• Automating 3-way matching: Invoice automation software can also automate 3-way matching, which is the process of comparing invoices to purchase orders and receiving reports to ensure that the goods or services were ordered, received, and invoiced correctly. This can help businesses prevent fraud and ensure that they only pay for goods and services they have received.
• Automating the routing of invoices for review and approval: Automated invoice processing software can also automate the routing of invoices for review and approval. This can help to speed up the invoice approval process and ensure that invoices are paid on time.
• Centralizing records: Automated invoice processing software can also centralize invoice records, making tracking and managing invoices easier. This can also help businesses better understand their spending patterns and identify areas where they can save money.
• Improving performance: Automated invoice processing can help businesses improve their overall performance by streamlining the invoice processing process and reducing errors. This can free up staff to focus on more strategic tasks and help businesses improve their bottom line.

What Are 6 Invoice Processing Tasks You Should Automate?

Here are six invoice processing tasks you should automate:

• Invoice receipt: Automated invoice processing software can automatically receive invoices from vendors, regardless of the format in which they are received (e.g., email, paper, etc.). This eliminates the need for manual data entry and reduces the risk of errors.
• Vendor verification: Automated invoice processing software can verify vendors’ identity and ensure they are authorized to do business with the company. This helps to prevent fraud and ensures that invoices are only paid to legitimate vendors.
• Purchase order lookup: Automated invoice processing software can match invoices to purchase orders, ensuring that the goods or services were ordered before they were paid. This helps prevent duplicate payments and ensures that the company only pays for goods or services it has received.
• Two-way and three-way matching: Automated invoice processing software can automate two-way and three-way matching. Two-way matching compares the invoice to the purchase order, while three-way matching also compares the invoice to the receiving report. This helps to ensure that the invoice is accurate and complete before it is approved for payment.
• Invoice routing, approval, and payment: Automated invoice processing software can automatically route invoices to the appropriate approvers and then automatically approve and pay invoices once approved. This helps to speed up the invoice payment process and ensure that invoices are paid on time.
• Payment: Automated invoice processing software can automatically pay invoices using various payment methods, such as electronic bank transfers and checks. This eliminates the need for manual payments and saves businesses time and effort.

The Bottomline

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:

• Skip the labor expenses
• Organize incoming supplier invoices
• Avoid potential errors and late payment fees
• Take advantage of payment discounts and favorable terms

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.