Accounts Payable departments everywhere have a big problem: too many invoices and not enough time.
Why? Companies are racing against the clock to get all important data off invoices, so they can pay invoices before due dates and avoid penalties. Traditionally, that responsibility has fallen to AP teams, who enter invoice data manually into accounting systems.
This is an inefficient, time-consuming process that is rife with many problems, including:
But with every problem, there is a solution: automated invoice processing software eliminates these problems.
In this Ultimate Guide to Automated Invoice Processing, we will help you understand how automated invoice processing works and look at all the details of how it works. We will also give you a free Cheat Sheet for Invoice Automation Software.
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Automated invoice processing is leveraging software to process data on invoice documents to streamline accounts payable tasks, like updating invoice information in accounting systems and Enterprise Resource Planning (ERP) systems.
Automated invoice processing accelerates invoice approvals and significantly reduces processing time and errors.
These solutions accomplish this by using many technologies (like artificial intelligence and machine learning) to locate and extract the correct data from invoices. This replaces the need for humans to find and enter the data into ERP systems manually. Most ERP systems are not designed for high-speed data entry. This makes a manual task like entering invoice information even more time-consuming.
Most companies deal with invoices daily, so there is a big demand to automate invoice processing tasks in every industry. In fact, according to a recent study, manual data entry is the top challenge in AP departments.
Invoice automation improves company AP processes by drastically decreasing the time and effort required to pay supplier or vendor invoices. This is especially important for overworked and understaffed AP departments.
Compared to manual invoice processing methods, invoice automation cuts processing workflow times by at least 70%.
Here are the steps involved in invoice automation:
Also, automated invoice processing software can work within a larger procure-to-pay automation framework. It can be one of several technologies that work together to streamline a company's procurement process from the beginning (vendor onboarding) to the end (processing payments).
Once an automated invoice system is in place, AP departments can work faster, have easier oversight of spending, and increase the timeliness and accuracy of payments.
Let's dive deeper into how automated invoicing works, its many benefits, and even how to implement an automated invoice processing system at your company.
Interested in automated invoice processing software for your company but confused by all the different solutions? We understand.
That's why we made this cheat sheet, which gives you the 11 most important things you need to know to make an informed buying decision.
GET THE CHEAT SHEET:
But how much time and effort is required to implement an automated invoice processing software? Every organization is different, so that answer varies. But with Grooper's no-code platform, automation for invoice processing workflows can be set up in days, compared to weeks that other solutions require.
Here are the steps to follow to get started with automated processing:
The good news is that this modeling can be done with no-code / low-code tools without coding experience. In many cases, pre-built models can drastically decrease the configuration that needs to be done. But either way, the higher-volume vendor invoices must be modeled and tested to ensure the correct data is extracted.
This modeling is done through a point-and-click interface that maps data from the invoice to fields in the accounting system. Invoices all have standard data - invoice date, invoice number, line item information, etc. Mapping that data lets the automation software know where to put the extracted data so the next process can use it.
Traditional invoice automation used "templates" where the designer had to draw boxes around the data needed — and each vendor needed their own "template."
This made it difficult for companies to automate their invoice processing if they had thousands of vendors. That template building took a lot of time!
It's much easier now. The technology has improved so that boxes no longer have to be drawn. Data just needs to be mapped to the invoice fields needed for workflows and approvals.
The most critical part of invoice automation is ensuring the line-item table data is extracted correctly. This data ultimately ends up being coded into the accounting system (and several GL codes could be used in one invoice), so it's essential to get it right.
Business rules can then be added similarly through a simple configuration interface that allows "look-ups" of data into various business systems.
This is commonly the PO number for PO invoices — that number is used to retrieve all the data for the PO being paid. This matching type removes any manual labor around matching POs to Invoices. Invoices that don't match their corresponding PO are brought to the attention of a worker.
Additional business rules can be configured, such as tolerances for errors (anything under $10 can be automatically approved, for instance) and basic calculations to ensure line items and totals match what was extracted.
Drop-down boxes and lexicons (dictionaries of industry terms) can also be configured to aid in automation and validation when business rules cannot be utilized.
The workflow builder is entirely visual in many systems, like the one pictured. A code-free interface like this ensures that you don't have to be a developer or have an IT skillset to apply aspects, like conditional rules, to your workflow.
For example, logic and rules can be added to automatically route invoices that exceed $1,000 to a director or senior executive of that specific department. This ensures that senior executives spend their time wisely and don't have to examine every invoice, especially those of low value.
Or if multiple people need to approve, it can be set up through efficient workflows and conditional routing.
In addition, compliance with internal policies can be enforced easily using workflow conditional logic.
The problem is that invoice data has to be transferred between these disparate systems. Enter modern automated invoice processing software.
These solutions streamline invoice data processing by eliminating virtually all manual entering of line-item invoice data from approved invoices. This is a massive improvement over the manual method, which is tedious, time-consuming, and error-prone.
Grooper's automated invoice processing leverages the latest AI technologies and advanced OCR methods to enable AP departments to integrate more data than ever before into business systems. AP personnel can ensure that their invoice records are up to date, approvals are streamlined, and manual data entry is nearly eliminated.
Then it's time for deployment, processing any invoice backfiles, and enjoying the significant benefits of invoice process automation, bringing us to our next section.
There are seven benefits of processing invoices with automation. They are:
We have many customers who first looked into automated document processing for other kinds of documents...only to realize that automating their invoice processing was where the value really exists. And it's easy to see why.
Invoices are an integral part of every business' operations. So it's an easy decision if you can solve multiple problems (saving big money, running efficiently, de-stressing your employees).
Companies can also use improved invoice processing to meet early-payment discount deadlines and avoid late invoice payment penalties.
But that's not all. Before the end of the month, many AP teams are racing to have invoices and financial tasks completed to meet deadlines.
Saving time through automated workflows means that invoices are processed days faster. So AP teams can experience the end of the month as just another day and not as a stress-inducing time that drives away valuable employees.
Workers tend to leave when they're most stressed. So an automated invoice solution means not losing your best employees when you need them the most. AP department staff can have their work finished by 5 pm, and they never miss another meaningful moment at home again. That's a huge benefit!
How much of a problem is AP fraud? Recently, 74% of organizations were targets of payment scams and other billing schemes.
Performing manual matching means that someone has to find the accompanying documents to match them to a specific invoice. They then have to compare all of the prices and quantities for each line item and the taxes and total. Manual matching becomes even more arduous if invoices also need to be matched to an inspection document (known as four-way matching).
But automated systems integrate with accounting systems to match these documents and flag invoice discrepancies.
In addition to preventing AP fraud, automated PO matching:
In addition, looking into department spending is a much easier lift with complete invoice data available in one place.
With Grooper's connectivity, you can easily integrate and store invoices in content management systems like Hyland OnBase, Box, Microsoft SharePoint, Laserfiche, Oracle, OpenText, IBM FileNet, and any other system that accepts external data.
The accounting team manually enters invoice data into their ERP or accounting system. This step is fraught with problems, as typing the correct line-item data and general invoice information is painstaking, slow, and prone to manual errors.
AP teams then match the invoice data to a purchase order and receiving document and then approve the invoice manually. Typically, many organizations have internal policies that stipulate invoices exceeding a certain amount require multiple approvers, including an executive-level approver.
After an invoice is approved, it is then posted for payment. But that is not the end of the process. Occasionally, old invoices have to be pulled for a customer's request or an audit. Depending on the organization, this can be a very laborious, time-consuming process as it depends on manual work to locate the invoices.
Manual accounts payable processing can take more than 30 days to complete every step, based on an AP team's backlog of invoices to process.
Automation to the Rescue
However, automated invoice processing eliminates nearly all manual work and steps. When paper invoices arrive, they are scanned as images and loaded into the automation software.
Electronic invoices are easily imported into automation software as well. Emails are automatically imported, and documents submitted to vendor portals are also automatically imported.
This step is known as data capture (or document capture), and it is vitally important as it automatically finds and extracts all of the invoice data you want. This ends almost all manual data entry needed to get invoice data into business systems. Invoice images can also be fully text-searchable, which aids in quick retrievals.
The AP automation software then maps the extracted invoice data with the correct label so the correct field data is entered into the ERP system. This includes fields such as:
After data and invoice images are loaded into ERP and accounting systems, the invoices are routed to the appropriate personnel for review and approval.
Months or years later, in the event of audits or customer inquiries, invoices can be quickly found as invoice automation empowers quick searches for a vendor name, invoice number, or many other parameters.