Automated Invoice Processing: The Modern Invoice Approach

Regardless of how reliable your accounting workforce is, there will be cases of human error from time to time.

Inefficiencies can creep in, resulting in wasted resources and financial loss.

Aside from error-prone processes, the manual invoice process comes with other challenges, from higher process costs to transparency or trust issues, workload-intensive processes, delays, hampered productivity, and so much more.

Manually processing a single invoice alone can take days or weeks for larger organizations. It’s a time-consuming process involving multiple touchpoints and much human involvement.

For these reasons, it pays to automate the invoicing process. It will improve your invoice management, centralize your records and speed up the approval process.

In this complete guide, we’ll look at automated invoice processing, how it works, what it is used for, its benefits, the features to look for in automated invoice processing software, and all things related to invoice processing solutions.

We’ll also share how you can switch to a paperless invoice approval system and provide better customer service by reducing manual work using Envoice’s smart invoicing feature. Get started.

Don’t get left behind in old ways of invoicing when there’s a better way. Integrate Envoice with your existing software for a powerful automated invoice solution.

What is Automated Invoice Processing?

As the name suggests, automated invoice processing uses advanced technologies to automatically enter data from an invoice, verify its accuracy, and process payment.

An invoice is a time-stamped document that records and itemizes a transaction. It is issued by the seller to the buyer to bill goods or services and is the most used commercial document in a business.

Typically, an invoice contains details, such as the quantity of the product, the customer’s contact details, the total cost, and the description of the goods and services provided.

Invoices are volatile documents. They are:

• Prone to errors
• Easy to lose
• Hard to track
• Easy to forget about

Invoicing automation helps minimize the risks. It also helps reduce processing costs, minimize errors, and speed up invoice approvals.

Most automated invoice processing software uses optical character recognition (OCR) to capture, store, and process data from physical documents like invoices. It uses algorithms to convert the embedded text in images into a digital format accurately and quickly.

How Invoice Automation Works

Invoice automation captures hardcopy invoices or printed or handwritten receipts through mobile capture or scanning.

For digital invoices and receipts, the invoice arrives as an email attachment (PDF, JPEG, EDI, PNG, etc.) These digital formats go automatically for invoice automation.

After capturing and extracting key data from invoices (paper or digital), the next step of the invoice automation process is delivering the data into the company’s system.

It can be an ERP (Enterprise Resource Planning), BPM (Business Process Management), or RPA (Robotic Process Automation) to facilitate the processing of invoices. The invoice automation software will validate the extracted data of invoices with business rules.

If the extracted values pass or are manually reviewed by approvers, they will be moved to “Verified.” If they don’t pass the validation rules, they remain under the “Review” section.

A final report that contains all invoice data will then be generated.

To better appreciate the process, check out the Key Steps in the Automated Invoice Process section in this guide.

What does it mean to capture an invoice?

Capturing an invoice means extracting data from invoices, whether digital or paper. This is the accounts payable department’s first step in automated invoice processing.

Key Steps in the Automated Invoice Process

Step 1: Capture

Many automated invoice processing tools work by checking emails for incoming invoices. When it finds an email with an invoice, it will flag such email and automatically extract it on your behalf.

Vendor invoices are received by email, fax, or an accounts receivable payable system.

Step 2: Data Extraction

Invoice data is then processed using OCR technology, converting printed or scanned invoices into machine-readable text.

Leveraging OCR technology

OCR uses sophisticated algorithms to capture, process, and store information from documents, such as invoices, without manual intervention. It is usually paired with another data extraction technology, such as machine learning, to verify that the data is accurate and complete.

Step 3: Validation

The next step of the process is validating information, such as supplier details, date of purchase, payment terms, and amount.

Step 4: Approval/ Rejection

Authorized approvers will then approve or reject the invoice for payment.

Step 5: Recording

The next step in automatically processing invoices is to store the paid ones with history for later audits or reference.

A more efficient automated invoice processing system allows you to measure performance across your workflow. This helps you determine bottlenecks that slow down invoice approvals.

Don’t get left behind processing invoices manually. Envoice has a powerful automation tool that can read invoice information and import it into your existing accounting software. For $11 a month, you’ll receive the benefits of automated invoicing processing and much more. Sign up now and don’t waste any more time or resources with manual data entry.

 

Transformative Benefits of Automated Invoice Processing

Here are the benefits of replacing manual and paper-based invoice processing with automation:

Saves Time

Automation invoice software cuts your invoice processing in half and enables you to capture early payment discounts.

Eliminates Error-Prone Manual Data Entry

Automating invoice processing eliminates error-prone steps and reduces touchpoints in the accounts payable process so your staff can give more attention to value-added tasks.

Prevents Fraud

In 2020 alone, nearly 75% of organizations became targets of fraud. Some payment fraud schemes include using fake or duplicate invoices from employees, unsolicited invoices, and false billing scams from third parties. [1]

By automating your invoice processing and using invoice automation software like Envoice, you can set strict access controls and require multiple approvers to prevent unauthorized access to your company’s invoice workflows.

Lowering Processing Cost

The cost to process a single invoice is an essential key performance indicator (KPI) that businesses should track.

A report shows that the average AP benchmark cost to process an invoice is slightly over $10, while some experts claim it’s around $12 to $30. [2]

Improves Data Quality

Automated invoice processing enables you to nullify incorrect data or amounts due to manual data entry. Thus, it improves your company’s data quality and will consequently help the accounts payable team to:

– Improve financial forecast accuracy
– Easily track payments
– Facilitate auditing
– Improve compliance

Automatically Creates Audit Trails

Automating the invoice process automatically creates audit trails, making it easier to search your records.

This automation provides real-time reporting and tracking of the invoices’ statuses. Such visibility into the invoices’ lifecycle helps the business forecast expenses, track outstanding payments, and make a more informed financial decision.

Better Cash Flow Management

Real-time tracking of invoices and payments enables businesses to manage and monitor cash flow effectively.

Improves Vendor Relationships

Incorrect processing of invoices and late payments can result in strained relationships with suppliers and external vendors. Consequently, it can affect your business.

Automating invoice processing fosters positive relationships by removing back-and-forth calls and ensuring on-time payments.

Transform your invoice process with Envoice. With smart rules that are based on the products or services you offer, every invoice will be accurate and delivered on time. Get started today.

How to Implement Automated Invoice Processing ( 7 Steps)

Now that we’ve learned how touchless invoicing offers clear benefits, here are steps to implement such a solution.

1. Assess Your Existing Invoice Processing Workflow

Kickstart your invoice automation efforts by analyzing your existing invoice processing workflow. The purpose of doing this is to spot inefficiencies and bottlenecks early. Focus on areas where automation will bring the most value.

2. Engage Key Stakeholders for Input

Second, gather stakeholder input and concerns. Include those in finance, IT, and procurement. Their involvement in implementing automated invoice processing is necessary for a successful and easy transition.

3. Install an Invoice Approval Workflow

Next, install the software. It’s better if it has a pre-built approval workflow, just like Envoice, that allows you to run manual approval workflows or apply an automated approval process.

Envoice – an intelligent, flexible, and scalable solution for invoice automation. Get started with a 14-day free trial to create an automated workflow customized to your business.

4. Customize Your Workflow

Invoices typically go through several approvers. So, once the software is installed, the next step is to customize it to forward the invoice to the next approver.

A sample conditional invoice routing is from a manager (for review), sent as an email. If the amount involved is over $10,000, it should be routed to the VP for Finance and Administration. Then, the last step of the workflow is payment.

Conditional logic enforces compliance with the company’s internal policies and helps the invoice workflow more efficiently.

5. Assign Authorized Invoice Approvers

The next step of the implementation is assigning the invoice to the person tasked with payment and approval.

Who approves invoices?

Small business owners or designated managers and supervisors with budgetary controls are usually the ones who approve invoices.

However, company policy may require a second approval signature, especially for a particular amount. The second approver typically holds a higher-level position in the company.

6. Test and Review

Conduct thorough testing of the automated invoice processing system and approval process before actual use to address any issues. It’ll also be helpful to collect feedback from your internal stakeholders.

7. Perform User Acceptance

Perform user acceptance testing. This is where you train system users so they’ll be familiar with the software. In fact, regular performance testing is necessary to guarantee that expected results are met.

8. Continuously Monitor the System

The last part of the workflow is to monitor the performance and effect of your system continuously. If you see areas for improvement, make adjustments.

 

Features to Look For in Automated Invoice Processing Software

Choosing the right automated invoice processing solution is essential to maximize the benefits of digital invoicing. Here are a few features you can consider when making a choice:

Automation Feature

Look for software that offers automation features, like invoice matching, automatic data capture, and approval workflows. These help accelerate the invoice processing cycle and reduce manual tasks.

Deep Learning and OCR

Some of the best automated invoice processing solutions have deep learning and OCR features. Leveraging the two makes extracting data from invoices hassle-free.

It also enabled easier data entry procedures, better response times, lower errors, and better logging and storage.

Integration Capabilities

The right software should integrate with your existing ERP, accounting, and other relevant systems to process invoices. These advanced technologies reduce manual data entry and streamline data flow.

Three-way Matching

The three-way matching process involves verifying the invoice, goods receipt, and purchase order information. It is one of the best ways to ensure compliance, prevent fraud, and avoid errors in the invoicing process.

User Interface and Ease of Use

Choose an intuitive, user-friendly, and easily navigable invoice processing automation software for efficient usage and seamless adoption.

Approval Workflows

The best automated invoice processing systems allow multi-level approvals for timely processing.
Analytics and Reporting
Some software uses an electronic document management system (EDMS), which stores data in a centralized database and creates an audit trail. This process makes invoices easily retrievable.

Check It Out: Streamline Your Invoice Process with Envoice

Envoice is the future of automated invoice processing. Your ultimate invoice management solution offers an end-to-end solution, covering the whole journey of invoice processing from issuing an invoice to payment.

Effortless invoice creation

It can simplify invoice processing without worrying about lengthy installations, staff training, and coding. Envoice simplifies invoice automation so your team can achieve better business outcomes.

Envoice’s smart invoicing feature allows you to easily create electronic invoices and send them to partners through email without added cost. This guarantees that you get paid faster.

Automates the invoice flow

Envoice also allows you to create smart rules based on the products and services you provide and the clients you serve or customers you sell to. This ensures that every invoice it makes is delivered on time and accurately.

Integrates with the tools you use every day

Plus, Envoice can be automatically synched to your accounting software, reducing the risk of errors and saving you time.

To automate invoice processing with Envoice, take the following steps:

1. Register for a free trial for 14 days (no credit card needed) or automatically choose the plan that fits your business needs. Pricing plans include Essential ($6/mo) with optional add-ons and Business ($11/mo).

With Envoice, you only pay a small monthly fee for the added items you process.

2. Create an Envoice account with the option to use the Envoice mobile app to submit purchase invoices and receipts or create expense reports. Here’s a complete guide on How to Use the Envoice Mobile App.

3. Start automating your invoice process.

Sign up for a free trial today.

How to Measure Invoice Processing Automation Success

Invoice processing automation is a straightforward solution for organizations searching to boost key performance indicators (KPIs) for their accounts payable.

To measure invoice processing automation success, you should account for:

Quantitative benefits include reduced costs (from lower fraud, no late payment penalties or duplicate payments, and labor productivity), efficiency merits, and improved cash flow.

Qualitative benefits include higher employee satisfaction because of better vendor relationships, increased visibility, improved compliance, and higher employee satisfaction from automating manual and repetitive tasks.

Some KPIs you can track include the following:

• Error Rate: Track errors, including data entry mistakes and duplicate payments, to evaluate accuracy.
• Processing Time: Calculate the time it takes to process an invoice from receipt to payment. A reduction in the processing time suggests increased efficiency.
• Cost per Invoice: Compute the cost of processing each invoice, including software and labor expenses. Lowering this cost marks increased efficiency.
• Supplier Satisfaction: Assess supplier satisfaction through feedback or surveys, as accurate and timely processing affects business relationships.
• Invoice Approval Time: Estimate the time it takes for invoices to be approved, reflecting the efficiency of your workflow.

Use this ROI formula to calculate the return on investment (ROI) of automated invoice processing:

ROI = (Benefits – Costs) / Costs x 100%

Automated Invoice Processing FAQs

What is automated invoicing?

Automated invoicing or invoice processing automation uses software that automatically performs the invoice lifecycle from data capture to approval.

How do I make an automated invoice?

You need to find the proper invoice or billing automation software to automate your invoices. The right software for the job will allow you to automate your invoicing process, regardless of complexities.

Why automate invoice processing?

Automating invoice processing cuts manual data entry hours and moves through a workflow faster. It paves the way for greater efficiency plus a plethora of benefits, such as the ability to process large datasets without human intervention.

What is AI invoice processing?

Artificial intelligence-based invoice processing automates the entire process of invoice processing across different systems. The AI enables data synchronization and transfer.

Automate Your Invoice Processing Today

It’s time to go digital with your invoice processing. Why wait any longer?

From increased productivity to less paperwork and strong vendor relationships, automated invoice processing allows your accounts payable team to do more with less.

Start reaping the benefits of automating your invoicing process.

Break away from the daily grind of manual invoice processing. See how Envoice’s invoice automation works.

Key Takeaways

• As the name suggests, automated invoice processing uses advanced technologies to automatically enter data from an invoice, verify its accuracy, and process payments.
• Manual invoice processing is manageable in the early phases of a business but not practicable when you begin to scale.
• Choosing the right invoice automation software is a crucial decision that significantly affects your accuracy and efficiency in managing invoices. Some features include automation, deep learning OCR, and integration capabilities.
• Envoice’s smart invoicing feature allows you to effortlessly create and send invoices without an additional cost.
• To properly implement automated invoice processing, begin by analyzing your existing invoice processing workflow. It is important to monitor the performance and effect of your system continuously.

Next best reads for you:

• How Invoice Approval Workflow Unlocks Operational Efficiencies
• The Ultimate Guide for Invoice Processing Automation
• The Step-by-Step Guide to Setting Up a Streamlined Invoice Automation Process

Footnotes:

[1] https://www.jpmorgan.com/content/dam/jpm/
[2] https://go.gobyinc.com/hubfs/Marketing