An automated invoice processing solution helps businesses streamline their accounts payable operations by automating tasks ranging from data extraction from invoices to data validation, and entering data into a database for further analysis and processing. Processing invoices may be one of the most time consuming tasks, but it can’t be ignored as it is directly linked to the finances of the business. Automation solves this problem by improving turnaround times for invoice processing, and improving the quality of data.
What is automated invoice processing? How does it work? - We answer both the questions in this article, and more.
So, let’s jump right into it:-
What is automated invoice processing?
Automated Invoice Processing is a system that helps streamline the accounts payable processes by automatically processing the invoices. Simultaneously, it also updates the information in your Enterprise Resource Planning (ERP) system to ensure that all the records are digitally maintained. It aims to drastically reduce the time taken for the manual processing of the invoices and also helps reduce the margin of error that the human tasks pose.
Why is automated invoice processing necessary?
An average sized company takes about 25 days to process a single invoice manually from receipt to payment. This could increase even further if the number of invoices increases along with the number of manual touch points, eventually leading to a massive loss of time and resources of the company:-
- Manual invoice processing runs a high risk of errors and double payments.
- Apart from that, the threat of frauds and misappropriation of resources by the employees looms large over most organizations with over 74% of them being targets of payment scams in 2020.
Both the factors culminate in a delayed processing of invoices, and strained supplier relationships, eventually affecting the productivity of the enterprise.
That’s where replacing the manual processes with an automated invoice processing becomes unavoidable to ensure that the entire process is accurate, efficient, and free from errors.
How does automated invoice processing work?
Traditionally, invoice processing starts when the accounts department receives an invoice from a supplier in regards to the due amount against the goods or services duly supplied. After that, the accounts department matches the invoice against the goods/services received.
Once the invoices are tallied, the payment details are updated within the system and set for approval. When approved; the payment is made to the supplier. The levels of approval required before the payment is made varies depending on the organizational structure.
Automated invoice processing is built on the above-discussed workflow, but it successfully eliminates the repetitive manual tasks along with errors and delays caused by it. This is how automated invoice processing workflow looks like:-
- When the invoice arrives, it is automatically scanned, and the details are fed into the digital accounting system in the desired format automatically.
- Once the data is recorded into the digital database, the invoice is converted into a text searchable document that is mapped by the automated management system so that the data entered into the system can be actively tracked within the ERP system.
- The data stored includes the supplier name, purchase amount, details of the goods/services supplied, etc. and provides a detailed and well formatted account of the invoice, which can then be shared to the concerned parties for review and approval of the payment.
- If any captured detail does not pass data validation checks, it is held for manual review. Else, the processed invoice is assigned to the person responsible for approval & payment.
Benefits of automated invoice processing
The transition from manual entry towards automated invoice processing also brings with it several rewards, such as:–
1. Unified control console
The goal of accounts payable automation is to streamline invoice processing, and it does so by putting all the features at your very fingertips through a unified platform. Platform like Docsmo enables users to easily access and control all the requisite features at a touch of a button, such as:–
- Recurring billing
- Single time invoicing
- Metered, volume, and tiered charging models
- Subscription management
- Self-service for Suppliers
- Real time updates of payments
2. Reduced manual entry
According to a survey conducted by Coupa, over 51% of the respondents accepted that manual data entry is inefficient and time consuming, and they are actively looking for ways to make it more accurate and efficient. Automated data entry does just that by drastically reducing the time required to process the invoices by 10 times of what it would take to process manually.
3. Reduced margin of error & improved security
Manual processing of invoices is prone to errors and mistakes owing to the reasons like fatigue and lack of concentration.
According to Level Research as it highlights in its 2020 Payables Insight Report, over 23% of the companies surveyed regard data discrepancies as one of the major pain points of Invoice Processing.
Similarly, the number stands at 16% for the companies finding data fraud as a major pain point and it is important to understand that the lack of active supervision gives way to such risks of data fraud.
This is where automated invoice processing comes into play by ensuring that the data entered is accurate and free from any possible errors. Further, the automated solution matches the extracted data from the supplier’s invoice with the company records to reduce chances of fraud. This goes a long way in making the processes more efficient as previously, the same would have to be manually verified by an employee or a clerk and could take hours.
4. Transparent and traceable invoice records
Traditionally, once the payment is made, the invoices are stored in files or folders which are not traceable and are very hard to retrieve if necessary. However, automated invoice processing solutions use an Electronic Document Management System (EDMS) to store the data in a designated centralized digital database in a systematic manner.
Such storage creates an audit trail and makes the invoices easily retrievable in case of necessity. Further, it makes it very easy to track all the documents and reduce chances of any misplaced or missing invoices.
5. Monitoring & customization
Owing to the vast and unsystematic arrangement of manual invoice records, it is a very complicated task to monitor the same. However, in the case of automated invoice processing, the processed invoices are transparently stored in a centralized and easily retrievable database.
This helps ensure that the expenses can be monitored in real time and any discrepancy can be easily reported. The automation software also provides increased customization options to ensure that the entire operation can be streamlined to suit your personal business requirements by arranging the workflows accordingly.
Additionally, it offers easy integration of your accounting processes to ensure that all the accounting functions and processes are carried out synchronously and without any conflicts with each other.
It also allows companies to add custom logos, texts, stamps and other details automatically to save time and resources. Such software also facilitates stronger compliance to custom regulations and policies to ensure that the outcomes are in accordance with the standards of the company.
6. Early payment discounts & improved supplier relationships
By enabling automated workflows, the entire process can be made efficient, making it easier for employers to achieve deadlines. Considering the fact that most suppliers provide early payment discounts, the same can be availed by ensuring that the payments are not delayed. Further, timely payments also help keep the suppliers happy and Accounts Payable Automation software usually also has a platform to help enable suppliers get real time updates about the status of their invoices. This helps ensure that there are no disputes between the company and its suppliers and their relationship is maintained in good spirits.
7. Automated invoice routing
Over 37% of the companies find manual routing as one of their biggest pain points during the course of invoice processing. Once the invoice is processed, it is manually routed to a number of concerned parties for approval depending on the amount and nature of the payment. However, owing to a lack of designated route of approval can lead to further delays and maybe even lost invoices in certain cases.
Through the automated invoice processing software, users can easily set up the designated workflow to ensure that the invoice reaches the right approvers. Users are notified via custom notifications to remind the approvers of the pending invoice approvals ensuring timely approval of the same.
How to automate invoice processing for your business?
Automating your invoicing processes has perks, and it is abundantly clear that it holds immense benefits in contrast to manual processing. But the question is how to go about automating invoice processing.
To answer that, you need to ask yourself a few questions first:-
- How many invoices do you have to process in a month?
- What is working as a blocker in your current invoice processing? Is it slower turnaround time, inaccurate data capture, or slow business growth due to repetitive manual tasks?
If you’re processing a few hundred invoices a month, you’re better off trying to automate it in-house on a very low scale. But if you’re processing thousands of invoices, and your accounts payable team invests hours and hours in simply extracting data from these invoices and feeding into a system, you need an end-to-end automated invoice processing solution.
Here’s how you go about finding one:-
1. Does the solution come with a pre-trained invoice processing API?
Docsumo fast tracks your automation efforts by providing a pre-trained invoice processing API. The API captures common invoice key-value pairs and line items with little or no training. With the help of Machine Learning & Artificial Intelligence, Docsumo’s intelligent invoice processing API can adapt to any chances in the format and style of invoices as long as fields to be extracted are the same.
2. Is it customizable?
You can also easily customize Docsumo's pre-trained invoice processing API to meet the needs of your business by training it with as little as 50 invoices.
3. Does the solution offer a custom invoice approval workflow?
Generally, invoices need to pass through multiple approvers before the payment is made, leading to unnecessary delay. Docsumo solves this problem with auto data validation. These excel-like data validation rules check for interdependent data points within a document and database, and ensure that no incorrect data point gets through. Once the invoice is processed, Docsumo notifies the approver using the auto-assign feature.
4. Does it integrate with your existing third party tools?
Docsumo’s invoice automation software automatically integrates your invoice approval workflows into the ERP system and ensures that the data remains automatically up to date at all times.
To add to all the pointers above, Docsumo’s dashboard also provides key analytics in real time to ensure better business decision making and improved efficiency and effectiveness.
Why choose Docsumo for invoice processing automation?
With the help of Artificial Intelligence and Machine Learning, Docsumo’s intelligent invoice processing solution minimizes errors in data extraction, increases turnaround time, and provides a cost efficient way to process invoices.
You need Docsumo’s end to end automated invoice processing solution, if you need:-
- A scalable solution that can adapt to any template, format, layout, or style of the invoices.
- A solution that helps your accounts payable team to focus on much more important tasks than manual data entry thus helping you grow your business.
- A solution that offers unparalleled 100% data extraction accuracy for key-value pairs and line items.
- A solution which is easy to integrate into your system.
Schedule a demo with us today to make a hassle free transition to automated invoice processing.