Automated invoice processing is the use of software to process invoices for a company’s accounts payable department. It provides a nearly error-free way to accelerate invoice approvals and reduce processing costs.
From automating data entry and validating information to processing invoices, an automated invoice processing solution is a powerful tool that helps businesses streamline their financial processes to save time, money, and resources.
In this article, we’ll take a closer look at what automated invoice processing is, how it works, and the benefits it can offer businesses.
What Are Invoices?
Invoices are official documents that are issued by the seller to their customers to bill for goods or services. They typically contain information such as the customer’s contact details, the quantity and description of the goods or services provided, and the total cost.
They are an essential part of any company’s financial operations, as they help ensure accurate billing and payment processing. However, manually entering all every single invoice data into a system can be a time-consuming and complicated process.
What Is Invoicing Automation?
As the name suggests, invoicing automation is a way of streamlining invoice processing and payments by automating certain tasks. Automated invoice processing systems use advanced technologies to automatically enter data from invoices, verify accuracy, and process payments faster.
For instance, most software have optical character recognition (OCR) to scan incoming invoices, extract the relevant data, and enter it into a database. They also use algorithms to check for errors and omissions, such as incorrect amounts or missing information.
Once the invoice is entered into your ERP system, businesses can then use automated workflows to manage their accounts payable process. This includes automatically sending out payments to suppliers, as well as generating reports for financial analysis.
Compared to manual invoice processing, invoicing automation makes it easier for businesses to keep track of their finances by providing real-time visibility into their accounts payable process.
How Does Automated Invoice Processing Work?
The typical invoicing process starts when the accounting department receives an invoice from the supplier. It is then matched and validated against the purchase order to make sure that all information is accurate. Once verified, the invoice is entered into an accounting system and routed for approval.
Depending on the size of the organization, there can be many steps in between. For example, large organizations may require multiple levels of approval before an invoice is finally processed and paid. It may take anywhere from 5 to 20 days to complete the entire process.
With automatic invoice processing, however, most of the manual steps are skipped. As soon as an invoice is received by a business, it is automatically scanned and uploaded into the system and routed to the appropriate personnel for approval.
The software has the ability to compare the information on the invoice against other data stored in its database, such as supplier name, quantity, and purchase amount, to make sure that all fields are correct before sending it on for approval.
Some components of automated invoice processing software are:
- Invoice capture system to scan and digitize paper invoices, extract data from them, and store it in an electronic format
- Invoice validation system to verify information such as date of purchase, supplier details, amount, and payment terms
- Workflow automation tool to route open invoices for approval or reject them if there is any incorrect information or discrepancies
- Payment processing system to track payments and ensure timely payment of invoices
Benefits of Automated Invoice Processing
More and more businesses are turning to automated invoice processing in order to help reduce errors and improve accuracy by automating data entry, validating information, and centralizing all invoices in one place.
Other benefits of invoice processing automation include:
No more manual data entry errors
With automated invoice processing, all data is automatically entered into the system with no risk of human error or typos. It automatically captures information from incoming invoices and verifies its accuracy before it is entered into the system, saving time and eliminating costly errors.
For example, if the invoice contains an incorrect item, automated invoice processing can detect and alert you of the error before it enters the system.
Increased efficiency and accuracy
When businesses automate invoice processing, it helps reduce the time it takes to process invoices. You can quickly and easily access your invoices in one place whenever you need to, which eliminates the need for manual searches and makes the entire process more efficient.
Automated invoice matching
For most businesses, manually matching invoices with purchase orders can be a tedious and time-consuming process. With automatic invoice processing, the process becomes smooth by seamlessly matching invoices with their corresponding purchase orders. It checks for discrepancies between the two documents and helps you resolve any issues that arise quickly, saving time and reducing inaccuracies.
Significant cost reduction
The cost savings associated with automated invoice processing are twofold—businesses save money by not having to employ people for manual data entry, but they also save money by reducing their reliance on paper invoices.
By cutting down time spent on processes like data entry, invoicing, and payment processing, businesses can save money that would otherwise be spent on labor. In addition to lower staff costs, automated invoice processing also reduces paper waste, as all documents are stored digitally in one place. This helps organizations become more eco-friendly while saving them money at the same time.
Faster payment cycles
Since all invoices are automatically entered into the system and verified for accuracy, businesses can process payments much faster than if they were relying on manual data entry. If an invoice is verified and approved within a few minutes, it can be sent to the accounts payable department for processing in a matter of hours.
By centralizing all of your invoices in one place, automated invoice processing allows you to gain better visibility and up-to-date information over your accounts payable processes. You can quickly get an overview of outstanding payments at any given time, giving you greater control over when bills need to be paid and helping you plan for future expenses more effectively.
What To Look For in Automated Invoice Processing Software
Today, a good rule of thumb in invoicing is to implement a three-way matching process, which involves verifying the invoice, purchase order, and goods receipt information. It is one of the best ways to avoid errors, ensure compliance, and prevent fraud in the invoicing process.
But even with this process, manually verifying and entering invoice information is extremely time-consuming and error-prone, which is why automated invoice processing technology is so appealing to businesses.
With these kinds of software, businesses can automate the data entry process for faster invoicing with fewer errors, as well as validate information to ensure accuracy. Many automated invoice processing solutions also come with built-in fraud detection capabilities to help businesses spot any suspicious activity quickly and easily.
Here are the top features you want in your automated invoice processing software:
Seamless artificial intelligence
With the rise of AI, automated invoice processing solutions are now leveraging machine learning to reduce manual data entry, validate information, and detect errors seamlessly. Aside from simplifying the invoicing process, it allows businesses to quickly spot discrepancies or fraudulent activities.
Artificial intelligence is the ability of computers to learn from data by recognizing patterns and exceptions, allowing them to make decisions without human input. It’s one thing to automate the invoicing process, but it’s another to have a system that can learn from prior experiences and speed up the entire process in minutes.
Robust optical character recognition (OCR)
Optical character recognition (OCR) is a technology that enables businesses to capture, process, and store data from documents like invoices. It uses sophisticated algorithms to convert text embedded in images into digital format quickly and accurately.
By leveraging OCR technology, businesses can easily extract information from hard copy or electronic invoices and enter them into the system without any manual intervention. It is often paired with another data extraction tool like machine learning to ensure that the data is complete and accurate.
Purchase order (PO) matching
On average, businesses spend 10 to 11 days to process a single invoice, which includes matching purchase orders (PO) with invoices. This not only wastes valuable resources, but also increases the risk of errors due to manual input.
Fortunately, automated invoice processing solutions can help businesses automate PO matching and reduce manual effort significantly. This technology uses a set of rules that are designed to match vendor-supplied invoices against internal data such as POs in order to minimize discrepancies.
Cloud-based solutions also offer improved scalability, reliability, flexibility, and security–all of which are essential for businesses looking to maximize their efficiency when it comes to invoicing.
For businesses to take full advantage of automated invoice processing, they need a cloud-based platform that provides access to the data from any device and at any time. This way, they can easily monitor their financial processes and ensure that the data is up-to-date and secure.
Integration with your existing systems
While automated invoice processing software is a great tool for streamlining financial processes, it can be even more powerful when integrated with other business systems.
Integrating automated invoice processing with your existing CRM or accounting system will allow you to automate the entire process from data entry to payments processing, making it easier and faster for you to manage your finances. Since the data is integrated across all your systems, you can easily keep track of any discrepancies and take corrective action quickly.
Automate Your Invoice Processing Today
Thousands of businesses are now using automated invoice processing software to streamline their financial processes. From eliminating manual data entry to detecting discrepancies, it helps businesses save time, money, and resources in the long run.
Machine learning and OCR technology help businesses quickly capture invoices from multiple sources—whether they are hard copy or electronic documents—and extract the relevant data with speed and precision. The result is an optimized invoicing process that improves efficiency and accuracy across all departments of your organization.
If you’re looking for a way to simplify your business financial processes, then investing in an automated invoice processing system is a must. With the right software and tools in place, you can ensure that your invoicing process is accurate, efficient, and secure all at the same time.