Finance and accounting departments often search for strategies that streamline operations and enhance efficiency. Automated invoicing is a solution that can do just that.
Invoice processing involves time-consuming manual tasks. Automated invoice processing helps speed these tasks and frees up time for accounts payable (AP) professionals to be more productive and focus on other priorities like expanding their skills or participating in strategic initiatives.
Wondering, “What is automated invoicing?” or “How does automated invoicing work?” This post will answer all your questions about automated invoice processing.
What is Automated Invoicing?
Automated invoicing is a technology-driven solution designed to transform the procure-to-pay (P2P) cycle. By leveraging software tools, businesses can automate tasks that traditionally require manual intervention, such as coding invoice data, matching invoices to purchase orders, and executing timely payments.
Automated invoicing not only helps accelerate invoice processing, but it can also reduce human error, ensuring more accurate AP management. Most importantly, automatic invoicing makes AP processes paperless, so accounting and finance teams are no longer required to manually handle invoice data capture, PO matching, approval routing, filing, and payment execution. This can enable them to do their jobs more efficiently.
How Does Automated Invoicing Work?
Automated invoicing involves multiple steps, outlined below.
1. Invoice data capture: First, AP teams receive invoices, typically via e-mail attachments in formats including PDF, JPEG, or EDI. If suppliers send paper invoices, they’re scanned to become digital files.
Generally, automated invoice processing systems use Optical Character Recognition (OCR) to extract information and code invoices. OCR is a form of artificial intelligence (AI) that “reads” text in digital images. This minimizes the need for manual data entry by AP teams.
2. Data validation: Once captured, the system cross-references invoice data against existing records for accuracy. This includes PO matching, verifying vendor information against the master vendor file, and checking for duplicate invoices.
3. Approval workflow: Next, dynamic workflows route invoices to the appropriate individuals for approval. Custom-built rules help to ensure that invoices are forwarded to the appropriate approvers promptly, allowing them to view and approve invoices digitally, no matter their location. This streamlines the approval process and expedites payment to suppliers.
4. Payment processing: Once the invoice is approved, the system can issue payment. Some automated invoicing platforms can schedule payments to optimize cash flow and adhere to supplier terms.
5. Integration with other systems: Most automated invoice processing platforms integrate with enterprise resource planning (ERP) and accounting systems to ensure transaction data is reconciled and recorded properly.
Benefits of Automated Invoice Processing
Automated invoicing offers businesses several valuable benefits outlined below.
Time Savings
Automation helps reduce the time spent on manual data entry and processing. Automated invoicing is designed to handle a large volume of invoices quickly, helping to boost productivity and allow AP staff to focus on higher-value tasks.
Additionally, with AP automation, staff spend less time digging through paper piles or locating physical invoices to determine where they are in the workflow. Instead, they can find invoices with a quick digital search, which helps speed up response to supplier and stakeholder inquiries.
Cost Savings
By reducing the need for manual intervention, invoice automation can decrease the labor costs associated with invoice processing. It also helps lower the hard costs associated with things like paper, ink, envelopes, postage, and storage.
Because automated invoicing is designed to speed the payment cycle, it can also play a role in reducing expenses related to late fees and duplicate payments. AP teams may even be able to secure discounts for early payments.
Accuracy
Automated invoicing systems can help reduce common oversights in manual invoice processing. By minimizing human error, records are more accurate and there’s less time spent identifying and fixing mistakes.
Reducing errors may also help with maintaining positive supplier relationships and avoiding accidental overpayments and late fees.
Visibility
Automation can provide better visibility into the invoice processing workflow. It helps allow organizations to track invoices at each stage of the process, monitor AP metrics like average days to approval, and ensure compliance with internal controls and policies.
Supplier Communications
One of the benefits of automated invoice processing is that these digital systems can offer suppliers payment status updates, notifications, and digital payment options.
This can improve supplier satisfaction and strengthen relationships by supporting timely payments and proactive communication. It also potentially reduces the volume of supplier inquiries and related AP team response time.
Scalability
Automated invoicing systems can scale to handle growing volumes of invoices without significant increases in resources or infrastructure. This helps organizations adapt to changing business needs and accommodate expansion without compromising efficiency or accuracy.
Choosing an Automated Invoicing Provider
Transitioning from a manual system to automated invoicing isn’t a difficult decision – the benefits of automation are clear. Download our free checklist to help evaluate your options for invoice management software.
Consider the following features when deciding on the best automated invoicing system for your organization:
Pricing: Obviously, cost is an important consideration. Inquire about pricing structure and any additional fees.
Integrations: Ensure the platform integrates with your existing ERP and accounting software.
Scalability: Make sure the automated invoicing platform you choose can support future growth and organizational changes.
Customization: Choose a system that allows you to tailor workflows to match your existing processes.
Security: It’s essential that any software handling financial data employs encryption, authentication, and compliance with security regulations.
Analytics: Automated solutions with built-in reporting and analytics features allow teams to benchmark performance to create informed goals.
Support: To boost adoption, select a provider that offers full-service support and training throughout the lifetime of the relationship.
Automated Invoicing: Final Thoughts
Automated invoicing offers a myriad of benefits to help AP teams streamline operations. By leveraging automation technology, organizations can potentially reduce manual errors, save time, and cut costs associated with invoice processing.
Selecting the right automated invoicing provider is crucial for maximizing these benefits. When evaluating potential providers, consider factors such as ease of integration with existing systems, scalability to accommodate growing business needs, and the level of customization available to tailor the solution to your specific requirements. Additionally, ensure that the provider offers robust security measures to protect sensitive financial data and compliance with regulatory standards.
To learn more AvidXchange’s invoice automation solution, click below to connect with an automation expert.