The average business relies on invoicing nowadays, whether delivering a product or service. The number of invoices processed globally is in the billions, with research suggesting this will grow. However, many companies spend too much time and waste a lot of money doing things the old-fashioned way.
Invoice automation can save you both. You don't have to keep track of payments, deal with overdue balances, and worry about human error. Plus, automating your invoices integrates well with existing accounting or financing systems. Best of all, the cost per statement using technology is much cheaper than the traditional route.
What is manual invoice processing?
Manual invoice processing represents the traditional way that a business' accounts payable (or similar division) department handles an invoice.
It typically involves the following steps:
A company will receive an invoice from its vendor or supplier, which usually comes via email or paper. This arrives before or after the products/services have been delivered based on a prior agreement. The accounting team will classify the invoice and manually enter its information into their system.
This is forwarded to the business AP (accounts payable) processor or whoever handles this role. This is often the person that initiated the order. Their job is to verify that everything on the statement aligns with the agreement. They need to match the payment amount and double-check potential variances.
Once the products or services have been delivered, the responsible individual or people can approve the payment. The invoice is updated on the company's accounting system, while a copy is kept in a safe place.
How does automated invoicing work?
All companies need to automate an invoice approval workflow system to ensure that invoices are valid and paid on time. Let's explain the steps involved in invoice processing automation:
Creating a document
Here are two ways provided: create an invoice from scratch or use ElegantDoc, which offers invoice templates for creating customized and beautiful documents in minutes.
Here are the fields an invoice includes:
Business name and contact information
Buyer's name and contact information
Line items (i.e., fields for quantity, price per unit, description, etc.)
Subtotal and total
Terms and conditions field
Linking to automation software
Automated invoicing is the practice of using software to process invoices. It involves extracting data from an invoice and flawlessly mapping it into a business' AP or ERP (enterprise resource planning) system.
The software will first scan an invoice. It then converts the information into a text-readable document, capturing details like the amount, quantities, supplier name, and supplier code. Invoice automation tools use intelligent data capture (IDC) and optical character recognition (OCR).
These technologies allow the software to process content regardless of the layout and use algorithms to detect omissions and errors. The filled-out fields on the software are matched according to the pre-defined validation rules of the AP or ERP system.
Here, the software can alert the responsible parties of anomalies, which will usually require manual verification. Then, if everything matches and an invoice is approved, payment will be released.
Yet, often, the software can automatically send out payments to suppliers. Of course, it's clear to tell that everything is faster when you automate invoice processing. This method also massively reduces labor costs and can scale to larger volumes without human intervention.
Invoice automation benefits
Research suggests that an invoice can take several days, if not longer, to be processed. This makes sense when we consider the effort involved with manual methods. But automation can cut down this time in half or more. This way, employees can use that time on more productive tasks to help your business move forward.
Cuts down extra expenses
Manual invoices have many subtle costs involved, which automation reduces. Typical expenses include:
Potential late payment fees (arising from the slow processing of statements)
Let's also consider that fraud is costly as an organization will make an irrecoverable payment to an unintended supplier.
Minimizes errors caused by a human factor
Human error is inevitable in any process that involves many steps, like manual invoices. Common problems include missing data, errors in the actual statement, and misinterpretations. Automation allows you to process information accurately from the get-go.
The software can tell if an item on the captured account doesn't match the existing database or vice versa. Thus, automation offers greater transparency, control, and trust.
You don't have to work in a silo when you automate invoices. This innovation can integrate well into existing accounting or customer relationship management (CRM) systems.
It can further enhance how your business handles money matters, from data capturing to processing payments. This also feeds into your overall report generation around finances or accounting.
Invoice fraud is a real thing. A manual process makes it easy for a fake statement to slip through the cracks, causing a company to make an unnecessary payment. However, automation can protect businesses from this fraud.
The software can verify all invoices fed into it by matching the data against the existing database. So, it becomes simpler to cross-reference and pick up on any funny business immediately.
Although invoicing is a straightforward process, doing it in a manual and outdated way makes it challenging. This is where automation can take off the load. Vendors and suppliers are integral to a business. They want to be paid on time and accurately to maintain good relationships. Automation is the way for a company to save time, reduce labor costs, prevent fraud, decrease human error, and, most importantly, save money.