Without automation, gathering invoices, capturing invoice header and line-item data, recording general ledger information, matching invoices against purchase orders (POs) and proof-of-delivery documents, and posting approved invoices can bog accounts payable (AP) teams down.
Eighty-four percent of the typical AP professional’s day is spent keying invoice data, pushing paper, processing emailed invoices, fixing errors and mistakes, chasing down information, and responding to telephone calls and e-mails from suppliers about the status of things, the Institute of Finance and Management (IOFM) reports.
That’s the reason more AP departments of all sizes are automating their invoice processing.
What are the benefits of automated invoice processing?
Invoice processing is sometimes referred to as AP automation. Whatever you call it, automating the way that supplier invoices are received, processed, and posted delivers big benefits to AP teams.
- Lower invoice processing costs. Highly automated AP departments spend less than one-fourth as much as their peers to process a single invoice.
- Higher AP staff productivity. Highly automated AP departments process eight times as many invoices per full-time equivalent (FTE) as their peers.
- Faster invoice approval cycle times. Highly automated AP departments process a single invoice in less than one-fourth the time as their peers.
- Fewer invoice processing errors. Highly automated AP departments experience less than one-third as many duplicate payments and other errors as their peers.
- More early payment discounts. Highly automated AP departments capture seven times as many early payment discounts as their peers.
These AP benchmarks from IOFM illustrate the primary reasons to automate invoice processing.
But automated invoice processing software also helps AP departments improve control over their internal processing through access privileges, segregation of duties, chain of custody controls, automated document retention, complete audit logging, and real-time visibility into invoices.
All this helps AP departments capture, code, approve, post, and pay invoices more efficiently than ever.
And AP automation and invoice processing software benefits businesses across industries, including media and advertising, property management, pharmaceuticals, and banking and financial services.
How does automated invoice processing work?
AP automation streamlines invoice processing in six critical ways:
1. Invoice receipt: A digital mailroom aggregates all paper, emailed and electronic invoices submitted by suppliers (including invoices sent via e-mail, File Transfer Protocol upload and supplier portal) onto a single platform. Paper invoices are digitized and aggregated as well.
2. Intelligent data capture: All invoice header and line-item data is extracted and validated with a high degree of accuracy and matched against PO and proof-of-delivery information. Automated invoice processing software can capture data such as the supplier’s name, the remittance address, the invoice number, the PO number, unit price, and unit quantity.
3. Dynamic workflow routing: Matched invoices are routed straight through to your ERP, Accounting and/or Bill Pay systems. Unmatched invoices or invoices that require review and approval (such as non-PO, high-dollar invoices, invoices from strategic suppliers, or invoices from recently registered suppliers) are digitally routed based on pre-defined business rules. Digital processes provide all users immediate access to all invoice information enabling fast decisions on all invoices.
4. Invoice posting: Approved invoices are posted directly to any accounting software or enterprise resource planning (ERP) application, without the need for human intervention. Posting invoices touch-free eliminates manual and duplicate efforts such as double keying of data.
5. Supplier payments: Invoice-to-pay solutions make it easy to pay suppliers electronically in their preferred payment method, including Automated Clearing House (ACH), vCard or P-card. An automated solution parses an approved-invoice file from AP department’s ERP or accounting software and initiates payments per the supplier’s preference, according to payment terms.
6. Reporting and analytics: AP managers always know where things stand in the process. Graphical dashboards – sometimes referred to as invoice management dashboards – display Key Performance Indicators (KPIs) or metrics and the status of invoices. Digital archival centralizes all information in a single place, eliminating data silos. Drill-down capabilities help decision-makers identify trends and uncover the source of problems. Ad hoc reporting makes it easy to adapt reports to changing business requirements. Exports get information downstream fast. And mobile access keeps decision-makers in-the-know while on-the-go.
Automation enables AP departments to go digital or even paperless for processing invoices.
By eliminating manual, repetitive steps with automated invoice processing software, AP departments of all sizes can streamline their existing invoice processes to achieve better business outcomes.
How to determine if invoice processing is right for you
If you want to streamline your AP processes, start by benchmarking your current operations.
Identifying weaknesses in your AP operations will help you focus your digital transformation efforts and lay the groundwork for a winning business case for automated invoice processing software.
Be sure to ask frontline AP staff about the effectiveness of your invoice approval processes.
Here are some considerations when determining if automation is right for your AP department:
- How much does it cost your AP department to process an invoice?
- How many invoices can a single FTE process each month?
- How long does it take your AP department to process and pay an invoice?
- What percentage of supplier invoices does your AP department pay on time?
- What percentage of early payment discounts does your AP department capture?
- What percentage of payments to suppliers are incorrect or duplicate?
- What percentage of payments to suppliers are made with a paper check?
How to get started with invoice processing automation
If you haven’t automated your invoice processing, now is the time to get started.
Automated invoice processing software can help you reduce costs, remove inefficiencies, and more.
By eliminating manual, repetitive invoice processing tasks, your AP staff can have more time to focus on fulfilling, higher-value activities such as analyzing data or collaborating with stakeholders.
Ready to learn how IPS can help automate your invoice processing?
Contact us to arrange an online consultation with one of our experts today!
What are the benefits of accounts payable automation?
Why should I use IPS to automate invoice processing?