February 07, 2024 |
Invoice processing automation is an Accounts Payable (AP) solution that can transform the workflow of any business, large or small.
Whether your AP team is dealing with traditional paper, emailed, or even faxed invoices, manual invoice processing can be a tedious and time-consuming process. It can take hours or sometimes days to process an invoice depending on the number of line items, and some AP teams receive thousands per day. The nature of invoice processing means that, no matter how careful and skilled your employees are, errors are inevitable. Invoice processing is also an expensive workflow. On average, it costs around $15 to process an AP invoice manually, and incorrectly handled invoices can cost you a lot more.
Read on to learn what invoice processing automation is, how it can help your organization, and how to choose the best solution.
What is Invoice Processing Automation?
Invoice processing automation uses software to implement a structured, systematic invoice process with little to no human intervention. Depending on the solution, the data can be extracted from the invoice and validated against the original purchase order (PO) with 100% accuracy. Pending validation, the invoice gets delivered to the ERP for final validation against the receipts. Invoice processing automation is fast, accurate, and scalable, increasing productivity and profits without augmenting your workforce.
Benefits of Invoice Processing Automation
Overall, replacing traditional invoice handling with invoice processing automation enhances efficiency and can lower your transactional costs by up to 80%.
Let’s look at how exactly invoice processing automation can benefit your business.
Reducing the steps and human touch needed to process an invoice minimizes delays and lets your AP team pay suppliers at incredible speed. Invoices can be recognized, processed, and reconciled in seconds instead of hours.
Save on Costs
By minimizing manual invoice processing, you can reduce overtime and hiring costs and redirect staffing resources to higher-value tasks. Accelerating the overall invoice approval and payment cycle also enables companies to increase control of cash flow. It also enables AP teams to avoid late payments, earn early payment incentives, and build stronger relationships with suppliers.
When it comes to manual AP invoice processing, errors are inevitable. Manual data entry has an unacceptable accuracy rate of 70%, and mistakes can be costly. For example, duplicate invoices can cost organizations $100,000 for every $10 million spent. Paper invoices can often be misplaced or lost, leading to late or missed payments.
By harnessing automation, you can maximize the accuracy of data extraction and minimize the risk of human errors such as typos or duplicate payments
Invoice processing automation helps your organization follow compliance regulations and avoid fines or expensive legal fees.
Invoice processing automation software automatically reconciles your accounts payable records. This gives you real-time access to past and present invoice data, so you can produce accurate and up-to-date financial reports when needed. With a verifiable and accurate “paper” trail, you can be confident that everything is in order regarding an audit.
Invoice Processing Automation Tools
So, what are your options for automating invoice processing?
Optical Character Recognition (OCR)
OCR is a text recognition technology that automates text transfer from written, printed, or typed invoices. OCR creates a digital copy of paper invoices and then uses pattern recognition and data processing algorithms to identify key information. This includes addresses, dates, and line item amounts, which can be converted into digital text and transferred to a centralized records system.
While OCR is one of the original methods for invoice processing automation, it’s not 100% accurate or reliable. Foreign characters, unusual fonts, and handwritten or badly scanned invoices can be challenging to process correctly. The technology also has difficulty with regular characters that look similar, such as ‘0’ and ‘o,’ or ‘5’ and ‘s.’ This requires manual review from AP staff and reduces the benefits of automation.
OCR isn’t an end-to-end solution that turns unstructured invoices into structured data. If they aren't compatible with your ERP, your AP team will have to transfer the information into your primary system using alternative technologies or software packages.
AI-Driven Invoice Processing Platforms
A more comprehensive solution is an AI-driven processing platform. This is a full automation tool that delivers EDI 810s directly into ERPs for easy review. Using AI and machine learning (ML), this type of software completely automates your AP processes.
End-to-end invoice processing platforms can watch your email accounts or EDI system to automatically detect when invoices are received. ML and AI algorithms identify and extract important data fields, including dates, amounts, vendor details, and line items.
The system then validates the extracted information by consulting with your ERP to perform a two-way match between the invoice details and the PO and a three-way match with the PO, receipts, and the original invoice. If any of the details don’t match, the software alerts your AP team so they can investigate the discrepancies. Once invoices are successfully validated, it uses reference tables, business logic, and business rules to determine where to route them. Invoices can be automatically approved or sent to a relevant employee for manual approval.
These platforms can be connected to your payment systems to allow approved invoices to be paid promptly. The final step is for the software to update and reconcile your payment records in your ERP or accounting system.
One example of this type of solution is Conexiom’s invoice processing automation platform. Read about why Woodhill Supply chose Conexiom and how they saw a return on their investment in just four weeks.
How to Evaluate Automated Invoice Processing Software
With many options available, it can be overwhelming to choose the right software for your organization
Ease of Use
Automated invoice processing software doesn’t have to be difficult to use. Make sure your chosen platform offers an intuitive and user-friendly interface. This means you can get teams up and running without much training, and simplicity also helps reduce errors and increase employee engagement.
Choose a platform that'll adapt to the needs of your business as you grow. You don’t want to commit to a solution that creates bottlenecks as invoice volume increases.
Select a solution that offers flexibility to meet your unique business requirements. This includes handling your specific invoice types and formats.
Your solution should be able to integrate with your current ERP and other business-critical tools. Seamless integration means accurate records, reduced manual intervention, and smooth data flows.
The technology industry has developed standards for data protection and compliance with privacy regulations. Make sure your software has strict security features to protect your valuable financial information.
Any issues with your AP workflow could severely impact your bottom line. Choose a software vendor with a reputation for training and responsive customer support, including timely updates and on-call maintenance.
Automate Your Invoice Processing with Conexiom
Conexiom is the only AI-driven invoice processing platform that provides 100% data accuracy. Our system offers touchless automation of the AP process from invoice receipt to reconciliation. Unlike OCR or workflow tools, Conexiom uses AI and ML with custom data mapping and automated business rules for specific vendors and SKUs to manage your invoice data.
With Conexiom, you can cut invoice processing costs by 81%, enjoy 73% faster processing times, and save your accounting staff thousands of overtime hours. Accelerated invoice processing speeds let you avoid late-payment penalties and access 5x as many early payment discounts. With full visibility on invoices, due dates, and receipts, you can get more out of EDI for less cost and effort.
Discover how Conexiom can streamline your business with seamless automated invoice processing.