Automated Invoice Processing. What is it and how it works?
Updated: Nov 15, 2022
What if there is a possibility to save your company tens of thousands, if not hundreds of thousands, of dollars each year? And what if, in the course of realizing those cost reductions, you could alleviate the burden of compliance, improve process efficiency, and position an entire division as a strategic partner in your company?
The finest aspect of this transformation narrative is that the advantages of AP automation are not fictitious. They've been proven numerous times. Organizations should expect to save money, according to the research.
Let’s talk, Automated Invoice processing, which is 90% more efficient than manual invoicing. How you can make your invoice processing 99% error-free, save time and avoid leakage of funds to potential fake invoices?
What is automated invoice processing?
“Automated Invoice processing” is the seamless integration of data collected from accounts payable into generating payment requests without manual interference. The only thing left for the payment department is to verify and release payments.
With Automated invoicing, you can have invoice approval in a matter of minutes without human intervention.
An invoice processing automation assists businesses in streamlining their accounts payable by automating tasks such as data extraction from invoices, data validation, and data entry into a preferred business application for further analysis and processing.
Processing invoices is one of the most time daunting tasks. Automation addresses the issue by shortening invoice processing times and improving data quality.
Traditionally, invoice processing begins when the accounting manager gets 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 bills are totaled, the payment information is added to the system and ready for approval. When the payment is approved, the amount is transferred to the vendor. Depending on the organizational structure, the grades of authorization required before payment are different.
Vendor invoices can be of different designs, data, or formats.
How vendor invoice is identified? Whether personal or by company name, this particular field is highlighted for you to quickly determine if it's something you dealt with.
Manual Data Entry
Manual invoice processing increases the likelihood of errors or double payments.
That's not it, the risk of employee fraud and misuse of funds, of resources looms large over many organizations, with more than 74% being targets of billing scams in 2020.
These factors result in delayed invoice processing and strained supply chains, which eventually affect enterprise productivity.
To ensure that the whole process is precise, efficient, and error-free, replacing manual processes with automated invoicing becomes unavoidable.
Automated invoice processing is based on the workflow described above, but it successfully removes the repetitious manual operations, as well as the errors and delays they generate. This is an example of an automated invoice processing workflow:
When an invoice shows up, it is electronically analyzed, and the contents are automatically loaded into the cloud-based accounting system in the proper format.
Once the data has been entered into the dataset, the invoice is transformed into a readable document that is translated by automation, allowing the data entering the system to be actively tracked inside the ERP system.
The saved data contains the supplier's name, purchase amount, specifics of the goods/services given, and so on, and it gives a full and well-formatted account of the invoice.
This will be shared with the relevant parties for payment evaluation and approval.
If a collected detail fails data validation checks, it is retained for manual inspection. Otherwise, the processed invoice is allocated to the person in charge of approval and payment.
Invoice Process Comparison:
Normal Invoicing Process
With Automated invoice processing software
A vast majority of AP professionals agree that some kind of automation is necessary to display the overly crowded data in simple actionable form. The best way to do that is by improving the firm's invoicing process.
With invoice processing software displaying the core data including vendor name, amount, and date AP team can set payments out quickly and focus on financial strategy, auditing, and planning.
Accounts payable automation has proved to save huge costs and manpower in EY's world Economic Survey Report. While paper invoices received in mailboxes used to take a heavy toll on transport, fuel, and time, electronic invoice processing cost only $0.40 on average.
Have a huge data of invoices and don’t know where to start?
Step by Step Automation Process
1. Analyze current circumstances
How does your business manage invoices? Who is the recipient? How are they validated? What format do they take (electronic or printed invoices)? How long does it take your organization to honor them?
You will gain a comprehensive image of your present invoice processing procedure by asking these questions. In some circumstances, you may see various discrepancies, hiccups, and a blatant lack of accountability.
This frequently leads to subpar processes, payment delays, and the potential for fraud and error. In a non-automated system, the expenses of managing invoices are also likely to be considerable.
Even before automation, the very first analysis will allow you to address some bottlenecks.
2. Optimize Invoice Delivery
Before implementing full invoice automation, instruct all of your vendors to deliver invoices to an electronic address. Following that, capture the invoice information as soon as it is received. This can be accomplished by uploading your invoices to automation software like graip.ai.
Once this is in place, your organization will need to set clear invoice processing policies. For example, what validation is required when dealing with a Purchase Order invoice?
What kinds of checks are in the case of an expenditure invoice? Within the company, who has the authority to sign off on invoices? What happens if there are inconsistencies between invoice numbers and purchase order docs?
Establishing clear criteria will aid in the creation of an excellent workflow.
3. Data Analysis
After your system is already running for a couple of months, you will be able to use the data obtained to enhance your purchase process. You may monitor progress by looking at things like average invoice process time. You can also look into the vendors with whom you do the most business and look for methods to improve your connection.
Superior prices plus flexible payment arrangements can be obtained by streamlining your supply chain and awarding trade to more reliable providers. Finally, a strong invoice management system can help you create a reputation for processing invoices on time and honoring all terms agreed upon with suppliers.
Another area to look into would be determining the cost decreased as a result of automated invoice processing.
The ability to generate summaries and searches can aid in the tracking of odd increases or drops in invoice payments. If an invoice shows an odd difference from the prior month, it should be investigated. It is feasible to create queries within the system to assist in detecting such anomalies.
4. Accounting Automation
With time, your company should strive to create more effective invoice capture methods. In reality, it may be able to combine invoice management and purchase orders to ensure that an invoice is issued in honor of the supplier each time a transaction is completed.
Electronic invoice payments can also be integrated into your company. Despite the obvious advantages of electronic payments, the majority of vendors still accept paper checks. Your company should contact suppliers, persuade them of the integrity of the payment details they offer, and then gradually begin paying them online.
Benefits of Automation
Accounts payable automation's purpose is to streamline invoice processing by placing all capabilities at your fingertips via a seamless platform. A website like graip.ai allows users to effortlessly access and control all necessary functionalities with the click of a button, such as:
Import Multiple Invoices
Processing raw formats with a simple click
Easy to make an edit
1. Efficient Business Operations
When a client or vendor calls, digital invoices are just a few clicks away, and brand loyalty is never disrupted by an absent coworker.
Regardless of the extent of automation, shortening the times an invoice spends in someone's hands reduces the expense and boosts efficiency. For example, Employees of one organization were able to jump from executing 930 POs per month to 3,647 when organizations switched from a low level of automation to a higher degree.
In reality, automation can eliminate compliance concerns as well as manual errors. Data verification as well as quality control are embedded into digital systems. Because the data is taken from the document, manual entry errors are eliminated. Aberdeen reports that the vendor invoice mistake rate has dropped from 4% to 3.1% due to automated invoice processing.
2. Increased Control and Transparency
You will get an eagle’s eye view of every single payment going out as your business cost. You can easily export data to excel.
Manual invoice processing is prone to mistakes and inaccuracies due to factors such as weariness and a lack of focus.
According to Level Research's 2020 Payables Insight Report, data discrepancies are one of the key pain points of processing payments for more than 23% of the organizations polled.
That's where automatic invoice processing kicks in, ensuring that the data entered is correct and free of errors.
3. Avoid Duplicates
A business can send a duplicate invoice by mistake or an insider from a vendor's company can deliberately send a fake invoice.
4. Improved Workflow
Monitoring manual invoice records is a difficult undertaking due to their large and haphazard structuring. In the event of automated invoice processing, however, the processed invoices are kept transparently in a centralized system.
This ensures that spending can be tracked in real time so that any discrepancies may be promptly reported. The automation software also offers more customization choices, allowing you to simplify the entire operation to meet your specific business needs by structuring the workflows correctly.
Furthermore, it allows for the simple integration of your accounting operations, ensuring that all accounting activities and procedures are carried out simultaneously and without conflict.
5. Save Office Space
A filing cabinet isn't particularly appealing. They are heavy, inconvenient, costly, and take up important office space. Besides being a "greener" business practice, reducing the quantity of paper used in the workplace will also save money on office supplies. When files are stored digitally, they are never lost or defaced during the billing process.
6. Robust Security
Every day, the AP department may be handling a wholesome amount of money, if not now maybe soon. Yet there is minimal protection when paper bills build up on multiple workstations.
A manager can set rights with the touch of a button in an automated system. Audits are also more successful with digital systems because each invoice creates a trail that may be easily followed.
It makes sense to automate sections of your organization, such as the accounts payable department. Automation of accounts payable saves both money and time.
7. Insightful Data
Because of automated invoice processing, you will be able to better plan your investment spending and assess the health of your organization.
You'll receive vital insights into business cash flows, allowing your team members to forecast future expenditures, predict income streams, and create superior growth strategies.
Furthermore, machine learning enables your teams to leverage data about your clients - what client segments exist depending on the quantities they pay. Such data may provide the first indications of a market shift, which may be the consequence of new competitors or a cheaper option for your services.
8. Better Business Relations
The entire process becomes more effective by enabling automated workflows, making it easier for vendors to meet deadlines. Given that most suppliers offer early payment incentives, the same can be obtained by ensuring that payments are just not delayed.
Furthermore, timely payments help keep suppliers satisfied, and AP Automation software typically includes a platform that allows suppliers to receive real-time updates on the status of outstanding bills. This helps to ensure that there aren't any disagreements between the company and its vendors and that their relationship remains positive.
9. A step toward Future
Johannes Gutenberg's printing press is one of the most ingenious time-saving innovations of all time. This technology has resulted in a slew of major social and cultural shifts. Easier access to publications and the printed word has aided in the reduction of illiteracy and the spread of institutional and general knowledge.
Following Gutenberg's lead, automation boosts productivity by providing staff with AI aid in monotonous chores. More time can be devoted to intellectual issues that add value to the business.
The morale of your workforce is also affected by the growth prospects provided by your organization, and the more time-consuming jobs that aren't automated, the higher the talent churn.
According to one alarming result, small business owner waste 30% of their work time on unprofitable administrative formalities.
Looking to get in before getting late?
Why are Corporates moving to Automation?
Automation saves money. It saves time and it saves lives.
The cost of human labor is rising, as Americans are getting older, and as the cost of living rises. As a result, corporations need to cut costs where they can. This can be done through automation, which frees up workers to perform other tasks more efficiently or to focus on higher-value tasks that require less attention.
Another reason why companies are moving towards automation is that it allows them to focus on what they are good at (making money) while outsourcing other aspects of production such as sales, marketing, and customer support. This means less overhead costs and more profit margin per product sold.
Automated Invoicing — Case Studies
1. Telecommunications Company
Paying bills isn't the most rewarding experience, but it has to be handled whether you're a solitary individual or a large corporation. The timely payment of invoices is a primary concern for this telecoms company.
Keeping track of the accounts payable (AP) burden was difficult with hundreds of vendors and partners to refund, including utility providers and government agencies.
"We receive more than 1,000 mail items in AP every day, the majority of which is invoice-related," said the company's Director of Accounting Records.
Previously, individuals had to review and filter through each of those items before forwarding the bills to another department for confirmation. Finally, employees would be required to enter the invoice data into finances through manual entry so that bill payments can be cleared.
“It took us two weeks to clear a bill with more often than usual up to 25 days with late-fee (2 to 3%) incurred.”
The company implemented automation for a large number of repetitive tasks, the most important being Invoicing. Here is what they achieved:
Achieved 200% more productivity per person
The staff required to handle invoices was reduced by 50%. They were re-trained and reassigned to other departments.
The firm now receives and processes around 9000 invoices per day most of their workload shared by Automated invoice processing software.
2. UK-Based Financial Corp
One of the United Kingdom’s largest financial hubs and Business Outsourcing firms with Billions of GBP in annual revenue had 40 employees just to take care of Invoicing and verification.
The absence of proper controls or transparency of processes, along with the massive volumes of paper movement and storage generated by the process, was unacceptable.
Dealing with internal invoice management and approvals was a huge burden, and as a result, they had a reputation for late fees. The expense per invoice processed was likewise expensive, at roughly £8, far higher than the industry average.
With the correct Business Rules applied and custom (detailed) data fields extracted from incoming invoices, the company was able to identify invoices quickly. Any invoices not fulfilling the required data fields were rejected automatically.
Automation of manual purchase-to-pay (P2P) operations now means that "invoices received by email in the early hours are scanned and therefore are available in the system the same day," according to a Company representative.
Payment on time has increased, which has greatly improved our repute, and we have substantially fewer inquiry escalations."
Despite receiving and processing about 400,000 invoices every year, Company is reaping huge benefits out of its new automated operations. "We've lowered the cost of processing payments to just over £2 per invoice and decreased our back office workforce from 40 at home to just 20 in India, saving more than £1 million per year,". They realized a return on investment on scanning within the first year and were able to establish improved controls."
They not only achieved ROI but also had better control and could avoid frauds, costing them 10s of thousands of GBP before.
3. Petroleum Products Distribution firm
This case study includes a Petro Company that distributes refined petroleum products to a diversified consumer base across the United States and Canada. The company has acquired an immaculate reputation as a premier provider of energy solutions and services by utilizing a cost-leadership approach for its supply chain.
The firm's fragmented invoicing processing system generated issues.
Excessive mistake rates and poor cycle durations resulted from the high number of interface locations.
In the beginning, suppliers would send invoices to their local terminal, where they would be manually coded. After that, the printed invoice would be mailed to the company's operations department in Atlanta for further assessment. The invoice would then be mailed a third or fourth time, to Denver's AP department for final inspection and payment.
From receipt to payment, the typical cycle time was 32-34 days. 85-95 percent of the 56,000 invoices processed each year were paid late. AP established a goal to integrate its invoice handling with the successful approach in place.
Suppliers were redirected to send invoices electronically to their final department in Atlanta. Because of the late payments, vendors were also motivated to switch to e-invoices quickly.
These invoices were then scanned through automation software and processed for payments.
For the first time, the corporation began to accept discounts instead of incurring late fines. TransMontaigne was also able to easily manage its cash flow, significantly lowering the number of accruals for overdue invoices.
Greater transparency into the process resulted in additional strategic benefits for the company. Employees could promptly identify and challenge invoices, and management got real-time visibility into the organization's total liabilities and financial position.
Employees now have more time to devote to strategic activities like compliance, internal customer service, and vendor relations. The AP manager manages the department for 15 hours per week, compared to the pre-automation avg. of 60 hours per week.
$1 Million plus in monthly savings with 90% less duplicate payments and avg. cost of invoice processing decreased to $7 ($30 previously).
There are no disadvantages to this approach other than small upfront investment. Many companies have opted for the pay-as-you-go option, allowing them to continue with manual data entry for a few months, paying only for what they need. Once the system is in place, it will be worth the effort and expense because of its efficiency and reliability.
Automation is the key to reducing manual work and increasing your profit margins. Our invoicing system will save you time, money, and effort by processing your invoices from A to Z in one easy step. Our simple web-based interface allows you to run the whole operation yourself, or have us do it for you.
This allows for lower overall costs over time, making automated payment processing worth the cost upfront. Let’s discuss how can automation help your business.
What is invoice automation?
Invoice automation is a process that streamlines the invoice generation process, making it easier to send and manage invoices. You can automate your invoicing system by using third-party tools and processes that integrate with your accounting software.
Invoice automation can reduce the number of hours your staff needs to spend on invoicing, as well as improve accuracy and consistency in payment terms.
What is AP automation?
With accounts payable or AP Automation, you can create workflow rules that execute commands automatically when certain conditions are met. For example, you might want to set up a rule that sends an email when a new supplier invoice is received or when a certain number of invoices exceed the accounts payable weekly limit.
What is invoice processing in accounts payable?
Invoice processing is a job performed by the accounts payable department to efficiently handle incoming invoices. Cash flow management is a major concern for many firms. As a result, invoice processing begins with the receipt of the invoice and ends when the payment is completed and documented in the books.
What does the complete AP process include?
By fulfilling checks and collecting, processing, and confirming invoices, the accounts payable division is in charge of keeping track of what is owed to vendors and, ultimately, controlling spending. This involves gathering tax information from its suppliers, refunding employees for any minor business-related expenses, and preparing accounts payable financial reports.
The overarching goal of organizing your accounts payable division is to prevent fraud by separating duties both within and outside of the accounts payable dept structure. Good internal controls necessitate proper duty segregation. Another goal is to align responsibilities and tasks with a redesigned automated accounts payment mechanism.
To implement an AP Automation workflow throughout the organization, the Accounts Payable team, together with the Procurement departments, must cooperate with top management. This involves more than just making sure bills are received and handled on time.
AP Automation can minimize inefficiencies and delay processes that are wasting your staff's time and losing your business money.
Graip.ai, for example, provides machine adaptability such as 100% invoice data extractions. It can assist users in increasing the accuracy and speed of multi-vendor invoice processing while reducing human intervention by threefold.
How long should it take to process the invoice for a company?
The time it takes to process an invoice is based on several factors. There are two primary things you’ll need to consider:
1) How urgent is the invoice?
2) How complex is the payment process?
If you’re sending out invoices for small amounts of money that are not very urgent, you can often send them out within 24 hours after receiving them.
If you’re sending out invoices for larger payments or if you want to make sure that your customer knows that they will receive their payment promptly, then you should consider sending them out faster than 24 hours. Many companies will offer a rush option on their invoices so that customers can get their payment more quickly if necessary.