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How To Implement Paperless Invoice Processing In 2024

  • By ProcureDesk
  • January 01,2024
  • 10 min read

How To Implement Paperless Invoice Processing In 2024

paperless invoice processing

In today’s fast world, accounts payable teams need to work smarter, not harder.

Thinking about going paperless with your invoices?

You’re in the right place.

Using paper is old school, and it’s holding you back with too much scanning and data entry.

There’s more to your job than just handling paper invoices.

This article is your guide to ditching the paper and going digital. We’ll cover what paperless invoice processing really means, how it can make your life easier, and how to make the switch. Let’s simplify your work and hit those important goals together.

By the end of this, you’ll understand how paperless invoice processing can just do the trick in helping you improve productivity in your AP team. If you’re looking for a tool that can help you with AP processing, we have a team of experts who can help you understand how our tool works. Click here to see it in action

What Is Paperless Invoice Processing?

Paperless invoice processing is automating your invoice capture process so that you don’t have to scan the invoices and input the data like GL codes.

Paperless invoice processing includes AP automation software that helps AP managers set up automated workflows and almost eliminate paper processes.

With paperless invoice processing, you can:

  1. Automate the invoice capture process by enabling supplier self-service.
  2. Automate the three-way match process to match the invoices to the purchase orders and receipts.
  3. Reduce your data indexing cost because you are not manually entering each invoice in the AP system.
  4. It greatly simplifies the AP Process.
  5. Increase visible cash flow because the invoices are processed faster.

Related: Streamline Your Finances: Embrace Paperless Accounts Payable For Business Success

How Does A Paperless Invoice Processing System Work?

The paperless invoice processing system is a revolutionary way of ditching papertrail and automating your invoices.

Here’s how a paperless invoice processing system works:

Capture The Invoice

In this process, your suppliers will send invoices electronically. It will be in formats like PDF or e-invoices which will be sent directly to your system.

The system then uses Optical Character Recognition (OCR) technology will extract the data from the documents.

Data Extraction And Processing

With advanced systems like OCR and AI, you can automatically extract key data points like invoice number, amount, date, vendor details, line items, etc.

Three-Way Matching And Validation

The system then automatically compares invoice data with the purchases orders and receipts. This ensures accuracy and completeness.

Shall there be any discrepancies, there should ideally be triggler alerts for manual review and resolution before proceeding.

Approval And Payment

Based on pre-defined rules and approval levels, invoices automatically route to relevant individuals for review and authorization.

Approvers within your company can view invoices, supporting documents, and comments electronically, streamlining the approval process.

Once approved, the system should initiate payment to your vendor electronically.

Recordkeeping And Auditability

All your electronic invoices and other related documents are stored. This makes it easier to retrieve for audit trails if needed.

Depending on your chosen tool, there should be real-time insights into your invoice processing status and payment history as well/

5 Steps To Switch To Paperless Invoice Process

If you’re planning to switch into paperless invoice, you might want to learn about the 5 steps to strategically transition into paperless invoice.

Step 1: Assess Your Current Processes

Start by assessing your current invoicing proess.

Identify the key steps involved in creating, distributing, and processing paper invoices. Understand the roles and responsibilities of the stakeholders in your company that exist in your current system.

Step 2: Select A Digital Invoice Solution

The next step is to choose a reliable and secure electronic invoicing platform or software that aligns with your business needs.

Look for features such as automated invoice generation, electronic delivery options, and integration capabilities with your existing accounting systems.

Step 3: Train Your Team

Once you’ve chosen the digital invoice solution you prefer, it’s time to provide a comprehensive training to your team members on the new electronic invoicing system.

Make sure they are familiar with the features, functionalities, and security protocols of your chosen platform.

Address any concerns or questions they may have during the training process.

Step 4: Communicate With Your Clients

The next step is to inform your clients about the transition you’re doing to a paperless invoicing system.

Share the benefits it gives like increased efficiency and reduced environmental impact.

Encourage clients to update their contact information and preferred communication methods to ensure seamless electronic delivery.

Step 5: Implement And Monitor

Gradually implement your paperless invoicing system.

Begin with the pilot phase if necessary. Monitor your transition and address any issues or challenges that may arise.

Make sure to collect feedback from both internal stakeholders and clients to make the necessary adjustments and improvements.

Related: 6 Steps To Automate Your Purchase Order Process

What Are The Goals Of Paperless Invoice Processing?

Yes, we know it is obvious that you should have clearly defined goals for any automation initiative, but you would be surprised to see how many companies don’t do this right.

The goal is to reduce the time spent on processing invoices, but how do you measure it, and what other productivity improvements it would drive for you and your team.

Let’s look at three KPI’s and how paperless invoice processing impacts them

Cost For Processing An Invoice

As the name suggests, it is the cost to process an invoice. The lower the cost, the better it is.

There are a lot of benchmarks out there that peg the cost anywhere between $2.45 to $21. We covered this in detail in our article on Invoice approval workflow.

Invoice Processing cost - Benchmarks

But at a very high level, this cost includes

  1. Cost to scan the invoice and enter the data in the system.
  2. Cost to identify the exceptions and route it to the right stakeholder.
  3. The cost of getting an invoice approved. It is the time cost of stakeholders who needs to approve the invoice before it can be paid.
  4. Any system costs. For example, if you are using a system for processing invoices then the cost of the system as well it’s support cost.

If you automate the process of capturing and processing invoices, the cost automatically goes down, reducing your cost for processing the invoice.

Pro tip: When looking for a paperless invoice processing solution, you should consider how the solution would impact all the areas mentioned above. That way, you have a holistic solution.

On Time Supplier Payments

Whether you pay suppliers on time is sometimes a measure of cash flow and company policies. However, if cash flow is not an issue, then a good practice is to, of course, pay suppliers on time.

Many of your suppliers might be getting paid late because their invoices are stuck in the exception review process, and are not ready to be paid yet.

Exception Rate - Invoices

It could be a factor of errors on the invoice, or you have a highly manual process to match the invoices with the purchase order.

If there is no purchase order process, you probably rely on stakeholders’ approval for every invoice.

Reduce the exceptions, the faster you can pay the vendors.

Pro tip: Automate the matching processing so that you are not spending time identifying discrepancies between PO and Invoice

Early Payment Discounts

Capturing early payment discounts is one of the important KPIs for world-class AP teams. You can only capture early payment discounts if your invoice approval workflow is highly efficient and you have drastically decreased the time spent on processing invoices.

Let’s say your vendor terms are 2%10 Net30. So, to get a 2% discount, you must process the invoice in under 9 days and then leave a day to settle the payment.

So if you reduce the cycle time, you can capture more early payment discounts.

Pro tip: Capturing early payment discounts is a factor of first negotiating them with the vendor and then your ability to pay early i.e cash flow. Before setting up this KPI. Talk to both purchasing and treasury to understand the feasibility of both.

What Are The Advantages And Disadvantages Of Paperless Invoice Processing?

While paperless invoice processing can offer your company advantages over traditional paper-based methods, it’s hard to forget that it also has it’s own set of challenges just like any other system.

Advantages Of Paperless Invoice Processing

  • Increased Efficiency: Automates data extraction and routing, significantly reducing manual tasks and processing time.
  • Reduced Costs: Eliminates printing, mailing, and storage expenses. Aside from that, it also lowers error rates.
  • Improved Accuracy: Automatic data extraction and three-way matching minimize error.
  • Enhanced Visibility And Data Analysis: Powerful search and analytics tools facilitate better invoice tracking and financial insights.
  • Environmental Benefits: Reduces paper consumption and associated environmental impact.

Disadvantages Of Paperless Invoice Processing

  • Initial Investment: Implementing software and training staff can require an upfront investment.
  • Dependence On Technology: System outages or technical issues can disrupt processing and cause delays.
  • Digital Literacy And Adoption: Requires both suppliers and internal stakeholders to adapt to using digital tools and workflows.
  • Security Concerns: Secure storage and transmission of sensitive financial data are crucial.

How To Find The Right Supplier Channel Fit?

So, if scanning is not the one-size-fits-all solution, what is? The short answer is there is no single channel. For a long answer, read below.

Let’s explain.

When it comes to process the invoices efficiently, the focus has been mostly on one channel – that is scan the invoices.

The fact is that other channels can be used to receive invoices from vendors, and that depends upon the capability of the vendor/s.

Our recommendation is to use the most effective invoice process based on your supplier preferences and capabilities, which is what we call Supplier Channel Fit.

So, what are the different channels through which you can receive invoices?

Supplier - channel fit

Electronic Invoice Receipt

Electronic invoice receipt as a channel refers to electronically transferring the invoicing document from the supplier to the buyer. In this case, there is no paper copy or electronic PDF copy of the invoice.

The metadata of the invoice, which includes invoice #, amount, line details, etc., is sent electronically by the supplier.

This method is very efficient when you have an approved purchase order against which the supplier is issuing the invoice.

The greatest benefit of this approach is that the process is completely touchless. The invoices are transferred using an agreed-upon protocol between the buyer and supplier. The Invoicing system then sends notifications to respective team members. The invoice can also be routed as per your AP process.

There are two most common protocols used for electronically transferring data.

  • EDI EDI stands for Electronic Data Interchange. Buyers and suppliers both need to implement this protocol to seamlessly exchange data.
  • cXMLcXML stands for (commerce eXtensible Markup Language), and is a very common protocol used nowadays for exchanging invoice data and supplier data.

Any good AP automation tool would support both protocols so that you don’t have to spend additional resources to develop infrastructure for invoice data exchange.

Supplier Portal For Invoices For Vendors

A supplier portal is primarily meant for supplier self-service. A supplier portal is used when suppliers don’t have the infrastructure to support electronic invoices.

In a supplier self-service model, a supplier login to a web portal where they can see open Purchase Orders (POs) and submit invoices against them. This process is also called PO flip or, in other words, flipping a PO to an invoice and then attaching the invoice document.

This approach is highly effective because you get electronic invoices, and your suppliers don’t have to spend a dime implementing any IT infrastructure.

The key to adoption is that the vendors should not pay any fee for the portal; otherwise, the adoption rate decreases.

Email-Based Invoices

In this channel, suppliers send you invoices through email. Most AP departments can set up a common email box, something along the lines of invoices@company.com.

You can then automate the process of reading the emails, downloading the attachments, and automatically creating the invoices in your invoicing system.

This method should be used if the vendors can’t do Electronic invoices or refuse to use the supplier portal. We will talk more about how to work with vendors to implement a paperless invoicing process.

Embedded Invoices (HTML)

These invoices are becoming common nowadays, where the invoice is embedded in the body of the email instead of as an attachment to the email.

This is no different from Email invoices, as most AP automation systems can easily read the email body and create invoices directly.

Related: Invoice Automation: A Powerful Tool For Streamlining Your Business

Good Old Email

The least effective channel is receiving invoices through mail. It is least effective because a lot of work is involved in receiving, opening, scanning the invoices, and then the data entry.

In some cases, it is not possible to go completely paperless. For example, some utilities still send you paper bills and would refuse to send you electronic invoices.

Hopefully, this would change with time but in your channel mix, this channel should not account for more than 5% of your invoices.

Supplier Analysis To Identify The Optimum Channel

Once we have identified all the channels you could use, the next step is to identify Supplier Channel Fit.

To find the most effective channel for each of your suppliers, follow the step-by-step approach

Identify Your Key Vendors

When you are implementing a paperless invoicing process, avoid the mistake of tackling all suppliers at the same time. It is overwhelming, and you probably need additional resources to tackle 100% of your supplier base.

Instead, let’s use the Pareto principle to identify the top suppliers we want to go after.

Here,, the decision is based on the volume, not the total spend. For example, if you spend $1M with one vendor but only create 2 invoices in a year,, then automation will not drive many benefits for you.

Let’s look at the volume to identify the key vendors

  1. First, extract invoice history for the last 12 months from your accounting system. For example, if you use QuickBooks, then you can use the export functionality to export all the bills.
  2. Get the count of invoices for each supplier.
  3. Sort the suppliers by count in descending order.
  4. Add a column next to it to calculate the cumulative total of the count % compared to total invoices.
  5. Pick the suppliers that contribute to the first 80% of the invoices. For example, if you have 10,000 total invoices, pick the top suppliers who contribute to 8000 invoices.
  6. It generally should follow the 80-20 rule, i.e., the 80% of invoice count should be with 20% of your supplier base.
  7. Ignore the rest 80% of the supplier base for now. We will cover that later.

Survey Vendors To Know Their Preferences

The next step is to reach out to the vendors to understand their capabilities and preferences.

Keep a simple tracker with the supplier name and their preferred channel (see invoicing channels above).

It is helpful that the communication is effective. In most cases, you are probably reaching out to your sales contact, who will connect you to the Accounts Receivable contact.

We recommend that you draft a letter to send to all your suppliers. There are three key aspects of vendor communication.

  1. First, explain the rationale for the change. For example, you are working on increasing the efficiency of the Accounts Payables department, and paperless invoicing is a key strategy for achieving your efficiency goals.
  2. Second, explain what is for them. For example – suppliers would be able to track invoice status and check whether the invoice is ready for payment.
  3. Third, provide them with different options you support for paperless invoicing and ask them to choose a preferred option.

Presenting An Approach For The Entire Supplier Base

You must be wondering what happens to the remaining 80% of the supplier base. There are two things to consider here.

  1. The volume of these invoices is generally low, so even though these suppliers are not onboarded with your paperless invoicing / AP automation solution, it would not add much to your workload.
  2. Some of these might be one-off vendors and not billing you consistently.

We recommend the following strategy for these vendors.

Assuming these vendors send invoices through email, you could set up an autoresponder that will automatically let the vendor know that you are moving to a paperless invoicing process and what options they have available.

If the volume is low, it is probably not worthwhile for the supplier and your team to invest the effort in electronic invoices.

Instead, route these vendors to a supplier portal option where they can submit their invoices against a purchase order.

The ProcureDesk supplier portal is designed to make this process simple. The registration process is just one click, so it is easy to onboard the suppliers.

Supplier Communication For Better Adoption

Do you know what is the typical adoption rate for e-invoicing?

As per Ardent partners, the adoption rate of e-invoices is around 24.9%, which is much better than it used to be.

Manual vs E-invoicing

The key to better adoption of e-invoicing is constant communication with the vendors to ensure that the rate keeps increasing.

As we mentioned earlier, In the beginning, we recommend that you focus on the top 20% of the vendors contributing to 80% of the volume.

However, the remaining 20% needs a staggered approach, which requires constant communication.

The other challenge with small vendors is that their personnel keeps changing and something is always lost in the handover process. The result – you guessed it, they go back to paper invoices.

On top of it, you will always have new vendors, so you need to ensure they are also onboarded to the e-invoicing process.

New Vendor Setup: Supplier Onboarding

To ensure that the new vendors follow e-invoicing channels for submitting invoices, ensure that new supplier onboarding steps cover the process for submitting invoices.

There are a couple of ways this can be done

You could add a contract clause that the vendor must submit the invoice electronically. You can provide your preference based on the volume and anticipated spending.

For example, if you only purchase twice a year from the new vendor, then it doesn’t make sense to spend time setting up EDI or any other electronic data exchange protocol.

Instead, you might be better off if they just submit their invoices to a supplier portal.

You can add the e-invoicing instructions in the new supplier onboarding package. To remove any ambiguity, you could give the supplier options from the different channels they can choose. For example, you could say something like this…

If you are going to submit more than 100 invoices in a year, then our preferred method is EDI. Reach out to suppliers@company.com to start the onboarding process.

Ongoing Supplier Communication

For existing suppliers, it is possible that you probably won’t get 100% adoption on day one. That is why it is important to have an ongoing supplier communication plan.

Follow a three-strike rule for onboarding existing suppliers. Even after 3 reminders, if they aren’t on board with the new program, you should follow the no PO, no pay policy.

To ensure you are constantly reminding vendors for on-boarding, set up a tracking system so you can easily track who is onboarded and who is not.

If possible, just set up a flag in your supplier management system so it is easy to run reports and identify vendors who are not on board yet.

Paperless Invoice Processing With ProcureDesk

Enhance the efficiency of your invoicing process by implementing electronic invoices through ProcureDesk.

Streamline your transactions with major trading partners using electronic invoicing standards like cXML.

In this automated process, suppliers send invoices electronically, eliminating the need for traditional email communication. The electronic invoices are automatically posted by the supplier, expediting the submission and significantly reducing the occurrence of late fees.

By processing invoices faster, you gain the advantage of early payment discounts. Opt for automated matching and processing to make the entire procedure hands-free, allowing for seamless and efficient operations.

Electronic invoices minimize the risk of creating double invoices and payments, contributing to a more accurate financial workflow. The Accounts Payable (AP) team’s involvement is simplified to the payment of vendors.

We have successfully implemented electronic invoicing with prominent vendors, including Amazon, CDA, Staples, Home Depot, and more. This transition not only enhances operational efficiency but also establishes a more secure and streamlined invoicing system with your key trading partners.

Here is an example of an electronic invoice in ProcureDesk:

approved supplier invoice

If you want to understand how our tool can help you go paperless, we have a team of experts who can show you how it works. Click here to see it in action


Paper Invoices vs. Paperless Invoices

Let’s discuss the difference of paper invoices and paperless invoices.

Paper invoices involve tangible documentation. It offers a physical record of a transaction. They don’t rely on electronic devices for accessibility, which makes them suitable for companies with no strong digital capabilities.

There are companies who might prefer paper invoices due to their accustomed accounting practices.

Paperless invoices on the other hand embrace a digital approach compared ot paper invoices. Paperless invoices streamline the invoicing process, which reduces the cost associated with printing and mailing.

This digital format is more environmentally friendly. The great thing about electronic invoices are that it’s easy to access, and can be processed more efficiently.

What Is Paperless Payment System?

A paperless system eliminates the need for your company to use traditional payment systems such as checks and cash. It’s all about transitioning your financial transactions into digital platforms.

This encompasses secure online payments, mobile wallets, and digital money transfers. It increases convenience, speed, and fraud protection when transacting payments.

What Is Paperless Automation?

Paperless automation leverages the use of technology to replace manual tasks which are usually done with physical documents.

This involves extracting data automatically, workflow routing, and approval processes that streamlines your operation.

Is It Better To Go Paperless?

Without a doubt, there are a lot of advantages when going full paperless.

Apart form environmental benefits, this translates into significant costs on printing, storage, and postage.

Aside from that, paperless systems also improves efficiency, accuracy, and data accessibility while allowing your business to perform real-time tracking and enhanced security.

Can AP Department Go Paperless?

Yes, your business is capable of going paperless. There are  a lot of software and system available to AP departments that help automate invoice processing, book keeping, and reporting.

Why Are Invoice Scanning Solutions Not Effective?

The most common approaches to paperless invoicing like document management systems are not that effective anymore.

When the invoices are scanned, you might or might not have an OCR technology solution to further extract the data from the invoice.

Though OCR capability has come a long way, there is still an accuracy issue.

Here are some of the reasons scanning solutions might not work for you:

It Doesn’t Work In A Remote Environment

A scanning solution typically needs a high-quality scanner to increase the quality of the scan. When you are in an office environment, it makes sense, but if you are working remotely (like the current situation), you might not have access to your scanner.

The process is not scalable when it comes to a remote environment. Also, with a solution like this, you are restricted to having staff in the office. What if you need to hire remote employees or if you have shared survival teams in low-cost countries?

Accuracy Of Data Highly Varies

The accuracy of the invoice scanning solution varies based on the quality of the invoice. Sometimes, it is greatly accurate, and sometimes, not so much.

Now, you might say it gives us 90% accuracy. That’s great, but how do you know which 10% to check for accuracy?

If your solution has an extensive AI algorithm, it might be able to spit up a confidence score and help you identify records that need review.

Exception Management Is Still A Challenge

Scanning and inputting the data is just the first step. But companies, on average, spend 2-3 hours on the invoice approval process. The reason companies take so much time to process an invoice is that it is sent for approval after it is scanned.

You can overcome that by implementing a purchase order process. There are two main benefits of implementing a purchase order process

  1. You get better cost control because everything is authorized for purchase, or most of the items are pre-authorized. You could set up purchase order approvals so all purchases are not routed for approval.
  2. Once you have the PO, you don’t need to route the invoice for approval. Instead, you can match the invoice with the PO, and if everything checks out, you can auto-approve the invoice for payment.

The Bottomline

Paperless invoice processing is not a pipe dream. If done right, you can easily achieve up to a 90% adoption rate for e-invoicing.

The key is to approach this scientifically by understanding different channels and matching those channels with your supplier preferences. We call this supplier-channel fit.

You can only achieve supplier channel fit if you think of paperless invoicing as a mix of channels and strategies rather than a single approach – scanning solutions for invoices.


What you should do now

Whenever you’re ready… here are 4 ways we can help you scale your purchasing and Accounts payable process.

  1. Claim your Free Strategy Session. If you’d like to work with us to implement a process to control spending, and spend less time matching invoices, claim your Free Strategy Session. One of our process experts will understand your current purchasing situation and then suggest practical strategies to reduce the purchase order approval cycle.
  2. If you’d like to know the maturity of your purchasing process, download our purchasing process grader and identify exactly what you should be working on next to improve your purchasing and AP process.
  3. If you’d like to enhance your knowledge about the purchasing process, check out our blog or Resources section.
  4. If you know another professional who’d enjoy reading this page, share it with them via email, Linkedin, Twitter.