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  • Maris Kolesnikovs

How to Automate Invoice Management System

Updated: Nov 15

and Why You Should In a Nutshell

Companies benefit from implementing accounts payable Automation systems since manual invoice processing is time-consuming and vulnerable to errors and theft. Legacy AP methods reduce production, efficiency, and profitability.


As a company grows, these processes become more complex and cumbersome. Many businesses recruit additional finance staff members to help them cope. However, that is an expensive remedy that can be avoided by implementing AP automation.


Graip.ai can help you automate your accounts Payable. See the system in Action.



Let’s get to the bottom of this.


The Accounts Payable Process


The accounts payable (AP) process begins with an invoice, which must be recorded on an account ledger. After receiving payment from the customer, an invoice must be sent out again — this time as a bill due date — so that other invoices can be created for each new one received during the same period of time. Once all of these bills have been recorded in their respective accounts, they can be totaled up to determine the total revenue collected during that period of time.


The Invoices Travel Path


The process of invoicing is often simple and straightforward. An invoice gets generated by the business when a customer makes a payment. As a record of transactions, invoices can be referenced at any time to see what was bought, when it was bought, what was the cost, who sold it, who it was sold to, and how to get in touch with either party.


Businesses are required to deal with numerous kinds of invoices, each of which serves a unique purpose.


Types of Invoices

Credit Invoice

Debit Invoice

Proforma Invoices

Interim Invoices


1. Credit Invoice


A credit invoice, also known as a credit note or credit memo, is a remark that shows money which has been credited back to the original invoice. The most common example of the credit invoice definition is a customer refund.


Credit invoices allow you to amend your client account and change accounts receivables without removing the initial invoice from your records. So, what exactly is a credit invoice used for in the accounting world? It's the new document that was issued as an addition to the initial invoice. It is beneficial to buyers as well as sellers since it ensures that the records are accurate.


What is it used for?


There are numerous reasons why you may be required to modify your original invoice to indicate a refund to the client's account. When considering what a credit invoice is utilized for, you're likely to come across commonplace causes such as the following:


Discounts and promotions - The merchant wishes to reward the consumer for their devotion by providing a discount. This can be credited to their account as a credit note on an invoice.


Consumer returns - If a customer wishes to return the things, they have already bought. In exchange, the seller has to give a credit note to adjust the original invoice amount.


Invoice disagreement - The buyer believes they were overcharged for the initial items, and the vendor agrees to lower the price. The credit invoice is given to reflect the price reduction.


What are the benefits it entails?


If we talk about the benefits of Credit notes, there are numerous. Prevention of errors classifies as the most common and beneficial usage of credit invoices. Instead of removing the original invoices, if a credit invoice is made against the initial one, it will remove the error of balancing the books or filing taxes.

2. Debit Invoice


A debit note, also known as a debit memo, is a kind of debt notification between a seller and a buyer. Debit notes are often used in B2B transactions, when one business may provide another business with their goods or services before sending the official invoice. The transaction is documented in the debit note, which "takes note" of it.


In business-to-consumer exchanges, for example, when merchandise is returned by a customer that was originally purchased on credit, debit notes are utilized. The buyer in this transaction issues the seller a debit note.


3. Proforma Invoices


A pro forma invoice is a sales invoice provided to customers before a product is sent. Typically, it will detail the goods purchased and other pertinent details such as shipment weight and associated costs.


Importing goods into a country requires pro forma invoices to be submitted to customs. In contrast to a mere price quotation, a pro forma invoice constitutes a legally enforceable agreement, even if the underlying terms of sale are flexible.

Pro forma invoices are used to ease the internal purchasing permitting process for businesses across all sectors. Since all terms of a sale are established beforehand in a pro forma invoice, there is no need for further negotiation after the sale has been finalized.

4. Interim Invoices


An intermediate invoice is a great way to spread out the overall cost of a massive project over a longer period. Rather than issuing one large bill after the project's duration, you issue a series of invoices at different stages.


When working on a long-term project, it can be beneficial to issue interim invoices so that you can continue receiving payments while the project is still ongoing. Your clients can profit from interim bills since they allow them to more easily budget for and track progress on the project.


Manual Invoicing Drawbacks


1. Cash Flow is Disrupted


Manual invoicing is tedious and time-consuming, which can cause problems with accuracy and the timeliness of delivering invoices to customers. Which in turn can delay payment and hurt your business's cash flow. Because unpaid invoices are not readily apparent, it is also difficult to keep tabs on overdue payments.


2. Inefficient costing


As a general rule, it will cost more money to handle a single invoice by hand. Just calculate the math if your company manually handles tens of thousands of incoming invoices. No longer is it prudent to rely on manual labor.


3. Processing Errors


In a manual system, errors are more likely to occur since they are handled by people. They're a waste of money and time for your business, and they might even cause worse problems. Besides, for manual invoicing it is likely for you as a business to hire more people.


However, processing a paper invoice manually adds significant time to the process. It seems like your staff is spending more time on less meaningful tasks. You'd have to pay more workers for working greater hours, which adds to the already high operational costs. But wouldn't it be preferable to accomplish more in less time with as little interference from human beings as possible?


4. Tedious Process


Manual invoicing is a tedious process that requires sitting at a desk for hours on end, every business day. Your team's performance suffers because of this in addition to being frequently irritating to the extreme.


Moreover, it is typically difficult and inconvenient. Invoices need a lot of complicated work, including data extraction, matching, approval workflows, check preparation, and more.


5. It Impedes Productivity


Manual systems often involve paper copies of invoices kept in a single location. You'll be unable to use it when you're not in the workplace. A team can't collaborate effectively in such a remote environment. Your employees will be stuck at the same desk, inputting data or executing other related chores preventing them from focusing on other, more value-adding or growth-oriented responsibilities.


The resulting sluggishness in innovation and development makes it tough to launch new tactics and achieve headway in other areas.


6. Security Breach


Data theft, data loss, and similar security issues are easy targets for a manual system. Data saved locally is vulnerable to unauthorized access and usage. Financial transactions are reflected in your company's data, thus protecting it is crucial.


7. Missing or Duplicate Invoices


Paper invoices are prone to be misplaced either en route to the office or once they arrive. As a result, late payments will accrue until all invoices are located. Trying to track them down will be a time-consuming and stressful endeavor for the AP team.


Not only does this harm your supplier's ability to pay its bills, but it can also negatively impact your relationship with that company. When a paper invoice and a purchase order don't match up, it can be difficult to verify that the correct amount was agreed upon.


Why is there a need to shift from manual invoicing to automated invoicing?


There are a lot of positive aspects to using an automated invoicing system. In particular, the time it takes for a business to get from submitting an invoice to having money deposited into its account might be cut by manifolds. It reduces the number of mistakes with fewer keystrokes and transcription errors are also reduced.


What is Automated Invoicing?


With online invoices, it's simple, quick, and cheap to introduce new invoice templates. This means that the customer will not have to deal with a mountain of unnecessary paper invoices because the change only needs to be made once for it to be reflected on all subsequent invoices.


Invoice processing automation, in simpler terms, is the action of setting up your invoice process to run mechanically. Without any human intervention, "automated Invoice processing" (or "AP automation") uses data gathered from accounts payable to generate payment requests.


With automated invoicing processes, invoices are created digitally, transmitted and received in a matter of seconds, and stored securely on a server or in the cloud. The proper application of invoice automation, which is a potent instrument, can facilitate the streamlining of the billing process. As a result of the time and money it saves and the increase in cash flow, businesses should consider adopting this automation.


Who can Benefit from Automated Invoicing?


Companies of all sizes can benefit from automated invoice processing since the technology handles the entire invoicing process, from vendor invoice production to payment reconciliation, saving time and money. More conventional invoice processing software requires physical delivery of invoices before data can be recorded (either electronically or manually) into an accounting system or, in some situations, ledgers.


Benefits of Invoice Management Automation


An automated invoice management software streamlines your Accounts Payable procedures and enables quick payment processing by extracting, validating, and maintaining your invoice data. Due to the high operating expenses, a massive volume of invoices, and a rise in manual mistakes, invoice processing may pose a danger to some B2B businesses.


1. Faster Processing of Invoices


Processing the bills, confirming the figures, and obtaining the necessary permissions might take up to two weeks, without an automated system. By creating a simplified workflow for the procedure, an automated system may drastically cut down on the amount of time.


2. Minimizing Errors


Due to the data input required and the several levels of communication between departments, manual procedures are prone to mistakes. Any moment may be a bad time for lost invoices, incorrect computations, and process problems. You can eliminate mistakes, avoid duplicate invoices and boost accuracy using an automated system.


3. Avoid Late Fees and Delays


A manual method is prone to several hits and misses when dealing with numerous invoices from vendors and suppliers. Vendor agreements might include late fees and penalties, which will raise your prices even further. You may avoid these fines and process bills more quickly by using an automated invoice processing system.


4. Maximize Transparency


A lack of transparency can result in unresolved problems such as ineffective procedures, underreported costs, and incomplete accruals, among other things. Automation increases process chain visibility, providing you with all the data you need to handle problems as they happen.


5. Reporting and Monitoring


Automation increases transparency, allowing your company to more readily track costs. The majority of invoice processing platforms come with robust reporting and analytics features that provide you with a real-time visual representation of the data to aid in corporate decision-making.


6. Strengthen Connections with Vendors


Strained relationships could be a consequence of delayed payments or inaccurate invoice processing, which ultimately impact your business negatively. Hence, by guaranteeing on-time payments and removing the back-and-forth calls and trouble that suppliers are typically subjected to, an automated system may help establish strong relationships.


7. Adjourn the New Hiring


Robotic Process Automation helps in increasing the productivity of the staff. More work can be done in less time so you can put off adding new resources for a while. Your employees will be far more adept at handling an increase in volume.


8. Rapid ROI and Increased Savings


Consider the time saved for processing every invoice and the number of resources used for the job. Furthermore, you are no longer incurring late fees or penalties. The overall result of automating your invoice processing department yields a rapid return on investment and, over time, results in significant savings.


How to Automate Invoice Management?


You need an automated invoice processing software like Graip.ai and a willingness to catch up with the future. How does it work?


This software is designed to make sure that every transaction is recorded accurately and efficiently. It can be used for tracking customer orders, inventory levels, sales, and so on.


Step 1: Invoice Data Capture


The first step in collecting data from invoices is to import them into the software. This process is called 'data capture' or invoice capture. The data will then be displayed in a convenient way for the most important values like “Company name, Invoice amount, date and number of units”.


It can also capture these important details via electronic invoices coming into your email from recent sellers.


The software will then analyze the order details, calculate the tax and shipping rate based on your business rules, and generate an invoice for you to review.


This information captured by invoice automation software is the essential part of the data entry that helps in tracking different aspects of a business.


Step 2: Data Extraction


The extraction process is as follows:

The document is scanned by an automated scanner powered by AI, which then generates an ID number for each scanned document.


The ID numbers are transmitted to a central database where they are stored to be retrieved later if necessary; this database contains information about all documents that have been captured before.


A list of all documents that have been scanned is then created; this list contains the identification number of each document, as well as its type (for example: invoice types).


Step 3: Data Verification


Invoice Approval is the process of checking the accuracy of the invoice, making sure that all the details are correct. The invoices are matched to Pay Orders before sending for approval.


If there is any mismatch between the invoice and the payment order, you will be notified of the error details. The system compares invoice numbers with payment orders using a unique identifier for each order.


You can set the Business Rules to make sure that the automation system is working in an error-free manner. If you are unsure of this, Book a Call.


If there is any error in payment details, they can be corrected before sending the invoice. The system is designed so that you can view your invoice details on system anytime.


Step 4: Data Export


The data extraction program then extracts invoice data and effortlessly enters it into the ERP (Enterprise Resource Planning) or AP (accounts payable) system, allowing payment processing to take place in just a few clicks.


Optical characters recognition (OCR) technology translates scanned papers into digital text, whereas digital documents like digital PDFs can pass directly through. The data is allocated to the correct fields within the user's ERP or automatic accounts payable management systems using AI technology.


Each record contains all the information necessary for its processing in a standardized format and is prepared for the following:

- Creation of printed materials (e.g., invoices, bills of lading)

- Creation of electronic documents (e.g., purchase orders, payment notes)

- Creation of electronic documents with additional information (e.g., purchase orders with terms and conditions)


The advantage of using an external tool to extract data is that it is not dependent on the internal logic of the system and therefore can extract all types of information (e.g., customer data) with no problem at all.


Application Scenarios of Automated Invoice Management


1. Print and Paper Distribution Company


The Company shifted its attention to client acquisition and set a primary vision of double-digit revenue growth with no additional payroll hires. They were also purchasing several lower-volume merchants who were used to meeting their customers' deadlines.

Their system for collecting and paying invoices, on the other hand, was manual, arduous, and extremely slow. Invoices were received by fax, email, and mail by the team that maintained the manual process after the point of sale and supported back-end accounting.


Each document then required 12 touchpoints from reception through filing, with 8 to 10 people physically routing it to different departments. The end result? A single document was handled in five days.


Given that they received somewhere between 8 to 10K bills every week, the extent of time spent merely routing papers was astonishing.


Furthermore, the possibility of committing mistakes was exponential. With multiple invoice processing individuals, each of them handled almost 1.6 million documents each year, the team was continually asking,


"Where is that invoice?" Storage space was also a significant liability, and the corporation had to keep extra floor space to accommodate all of the filing cabinets.


The Automation Result:


Although they expected months not weeks, the whole automation process took 12 days and all their original invoices were transitioned for better processing.


10 People previously handling invoices are now reduced to 2 with the rest of them successfully transitioned to other roles. Not to mention all the paper and space they saved along the way.


2. Baking and Confectionery Business


This Company is a prominent manufacturer of improved crackers, pies, snack bars, and baked mixes produced with natural, calorie-rich ingredients and no artificial chemicals.

The brand attempts to make healthy decisions simply by providing foods that taste delicious and sustain in the long run. Above all, Simple Mills is dedicated to positively improving the broader health of the earth and its inhabitants by innovating the way the planet eats.


The first concern was the lack of correct entry hierarchies in the system, which necessitated considerable workarounds. "I was keeping a separate worksheet with different approval hierarchies arranged by vendor types" Manager recalled. "I discovered that this took a lot of memory and hard labor on my part." For instance, if an invoice surpassed an approver's threshold, I would have to pause my work to determine who I should send it to next.


The prior AP system did not easily link with Business's ERP system, causing complications with bill syncing. This constraint necessitated more manual work to ensure critical information was input or maintained for accounting precision and more visibility over AP-related data.


The Automation Result


For everyone involved, the entire AP process has become easier, and more effective. "We now have a dedicated mail account for most of our suppliers, which reduces the time and trouble to process paper invoices," explained the frustration of people at the firm.

"Instead of spending time, capturing, process and verifying each invoice, We can simply let the invoices go through automation and compare them with POs to make sure everything is in line for payment processing." When invoices are ready, they are immediately transmitted to the proper approvers".


While the Automated invoice management has assisted us in eliminating the need for additional approvals, it has also assisted the AP team in improving overall business communication. Invoice Automation offers visibility to users outside of AP and spot anything that may be incorrectly billed. It also allows them to provide comments on rejection, minimize errors by 90% and increase payments accuracy.


3. Healthcare Management


With over 1,000 bills every month, the management estimated that it took them two people five to six hours per day to input information, format spreadsheets, and email invoice summaries. Furthermore, team members across eight locations lacked real-time access into invoice status, making it impossible to monitor approvals and risking a manager missing an important invoice.


Finally, when it comes to settlements, they would perform two check runs a week, which required printing and matching checks before submitting them to the finance manager for evaluation and approval. "It was quite a procedure," the one which they were keen to improve.


The Automation Result:


The benefits were quickly apparent in the AP department. Because the organization requires suppliers to send digital invoice by email, all invoices now flow directly into Automation Software through various channels and are instantly synced with Company's ERP system.


The system allowed them to simply define rules at the supplier, manager, and class levels to ensure that the proper person receives the right invoices for approval.


Conclusion


The primary purpose of accounts payable automation is to streamline the process of managing cash flow by automatically reconciling sales invoices with customers and vendors. This reduces invoice processing cost, improves accuracy, reduces errors and provides an audit trail for all transactions.


In addition to improving accounting accuracy, accounts payable automation also increases the speed at which your business can pay its bills. Therefore, making the whole process more robust and time efficient.


The more time you spend manually processing invoices and payments, the less time you have to spend on other things. It's also easy for human error to creep in when you're dealing with numbers every day. If a supplier invoice is incorrect or does not process as expected, it's a lot easier to find and correct.


Which accounting software can I use for invoice automation?


You can export multiple invoices to any format for ERP integration. In order to discuss Workflow Automation, Book a Call with us.



How to Achieve Complete Accounting Automation?


Automation is the key to successful accounting. It saves time and effort, increases accuracy, and reduces the risk of errors.


To achieve accounting automation, start with a solid foundation of financial data and use that as your basis for developing automated processes. Create clear objectives and assign them to individual roles within the organization. Then start building your system, one step at a time.


An automated accounting system should be able to handle all aspects of a business's accounting needs: budgeting, reporting, analysis, reconciliation between system and manual process, cash management, journal entries and ledger entries, accounts payable and receivables management and much more.


Automated accounting systems can be used for small businesses or large enterprises; they can also be used for different industries such as manufacturing, retail or hospitality. So whichever industry you're in or whatever stage your company is at — whether it's just starting out or already doing well — having an automated accounting system will help you get there faster.


What do the accounts payable process entail?


Accounts payable is the process of recording and tracking a company's expenses and corresponding revenues. This process is used to keep track of what expenses an organization has incurred, and how much it has collected in revenue. These two important financials are then used to determine how much cash is available to the business.


Accounts payable are the financial obligations owed to vendors or customers. They include all bills that have been paid, but which have not yet been settled. Accounts payable is also sometimes used synonymously with "accounts receivable," which refers to money owed by customers for products sold.