Guide: All about automated invoice processing

Processing invoices is an important aspect of keeping your business operations running smoothly – but it’s also a time-consuming task. Luckily, invoice automation is here to make it a lot easier.

Invoice automation enhances the efficiency, accuracy and overall effectiveness of your invoice processing. It brings numerous benefits to your business and your vendors alike. If you haven’t automated your invoice processing yet, we’re here to convince you to take the plunge.

In this guide, we’ll cover what invoice automation is, how automated invoice processing works and the benefits you stand to gain from invoice automation.

What is invoice automation?

Invoice automation, also known as automated invoice processing, is a technology-driven approach to managing the end-to-end process of handling invoices.

Invoice processing is traditionally a manual process. This, however, comes with many challenges.

Here are but a few of them:

• Inefficiency: Manual entry is a slow and labour-intensive process prone to bottlenecks.
• High error rates: With manual entry comes an increase in typographical errors, misinterpretation of data and incorrect entries. Paper invoices can also easily become lost or misplaced, causing delays and payment disputes.
• Higher costs: Manual processes require more human resources for data entry, validation and error correction, making them more expensive in the long run.
• Payment and cash flow issues: Manual processes can lead to late payments, resulting in late fees and strained vendor relationships. Inconsistent processing times can also complicate cash flow forecasting and management.
• Fraud risk: Due to less stringent controls, manual processes can be more susceptible to fraud, such as invoice duplication or falsification.

Automated invoice processing enhances accounts payable workflows by reducing manual data entry, minimising the risk of errors and improving overall efficiency. In short, if you’ve yet to automate your invoice processing, now’s the time to do it.

Step by step: How automated invoice processing works

Automated invoice processing varies depending on the solution you’ve chosen and the number of invoices your company processes. However, certain steps in the process are largely the same regardless of these factors.

Let’s take a look at them:

1. Invoice receipt: First, the invoice is received. Invoices can arrive in a variety of formats, including physically via fax or post, as a PDF attachment or as an e-invoice.
2. Data capture and extraction: Next, the data is captured and extracted. For electronic invoice formats, relevant data can be directly extracted. For scanned invoices, OCR technology is used for capture and extraction, converting text into searchable data.
3. Data validation: In this step, the extracted data is automatically checked for completeness and accuracy. The system also cross-references the invoice with purchase orders, contracts and delivery receipts and applies predefined business rules to identify discrepancies or anomalies.
4. Invoice approval: Next, the invoice is automatically routed to the appropriate personnel for review and approval based on predefined workflows and approval hierarchies. The system sends automatic notifications and reminders to approvers and flags discrepancies that require further review.
5. Payment processing: Once the invoice is approved, the system schedules payments according to the agreed-upon payment terms. It also automatically updates the invoice status when the payment has been successfully completed.

When the payment has been processed, the invoice automation system provides insights and tracking through dashboards and reports, allowing you to track performance metrics, identify bottlenecks and monitor spending patterns.

The system also helps to ensure compliance by maintaining a comprehensive audit trail and ensuring adherence to internal policies and external regulatory requirements through automated compliance checks.

Benefits of automated invoice processing

Automated invoice processing offers a wide range of benefits to enhance the efficiency, accuracy and overall effectiveness of your accounts payable operations.

Here are some of the key benefits you can expect from incorporating invoice automation into your workflow:

• Increased efficiency: Invoice automation reduces the time it takes to process invoices. It can operate 24/7, meaning you can process invoices outside of standard business hours – it’s that efficient.
• Cost savings: With less need for manual intervention, invoice automation reduces the labour costs associated with data entry, validation and error correction. It also reduces costs related to paper, printing and physical storage. In other words, the savings are tangible.
• Improved accuracy: Through automated data captured, invoice automation minimises the risk of errors associated with manual processing.
• Faster approvals: Automated routing and approval workflows accelerate your approval process, ensuring timely payments and reducing the risk of late fees.
• Improved cash flow management: Optimised payment schedules help you manage cash flow effectively and take advantage of early payment discounts. Invoice automation also enhances visibility, improving the accuracy of your cash flow forecasting.
• Better vendor relationships: Invoice automation ensures transparency throughout processing, providing you and your vendors with visibility into the status of invoices and payments. Consistent and timely payments also help you improve trust and build lasting relationships with your vendors.

And much, much more.