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Complete Guide to Automated Invoice Processing

Brianna Blaney
By Brianna Blaney
Brianna Blaney

Brianna Blaney

Brianna Blaney began her career as a fintech writer in Boston for a major media corporation, later progressing to digital media marketing with platforms in San Francisco. She has worked as a financial writer for Tipalti for 7+years, keeping a close eye on shifting trends and reporting on the ever-evolving landscape of financial automation. She prides herself on reverse-engineering the logistics of successful content and implementing techniques centered around people (not campaigns). In her spare time, she loves to cook and take care of her pet squirrel, Marshmallow.

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Updated October 14, 2024
Accounts Payable
Invoice Automation
Invoice Management
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See how forward-thinking finance teams are future-proofing their organizations through AP automation.

The responsibility of invoice processing relies on accounts payable. The traditional method is a timely system of entering invoice data, creating paper invoices, matching purchase orders, and filing endlessly. It’s a bloated process that perpetuates an inefficient environment. Invoices are being received via mail, fax, email, etc. 

This is why AP needs automated invoice processing software. It’s the next level of manual processing. A payable department can streamline the time-consuming system with artificial intelligence and machine learning.

What is Automated Invoice Processing?

Automated invoice processing is the use of software to automate the steps in processing invoices. Seamlessly extract invoice data from your business system into your ERP, so you can save time and money while improving accuracy and reducing the risk of fraud.

In order to use invoice processing automation, you need the right software that will ultimately help streamline accounts payable processes by automatically paying supplier invoices.

A digital invoice is a component of workflow automation. Technology is redefining business processes, and this includes invoice management, from arrival to post. A company can accelerate the payable process by taking advantage of automation. 

Compared to a manual invoice, an automated invoice moves through a workflow faster. AP automation takes all of the menial tasks an accounting department must accomplish and uses a computer to complete them. Whether it is matching prices, purchase orders, or data entry, a smart automation solution can handle the easy stuff. 

How Does Automated Invoicing Work?

The traditional method of invoice document management starts when the accounting department receives a supplier’s invoice. At this point, it is matched and approved. Typically, if the amount of the invoice is a large payout, further approval is needed. 

From there, it must then be entered into the system where it is “posted” for payment. Then payment is issued. Depending on the company, sometimes the manual invoicing process can take up to 15 separate steps. This is a large amount of time; especially when processing multiple invoices.

Automated invoicing cuts to the chase. When the invoice arrives, it is scanned and fed into the digital accounting system. This form of data capture (otherwise known as invoice capture) cuts out hours of manual data entry. The invoice processing software will then convert the data into a text-searchable document. The invoice data can be extracted and mapped in the automated management system so it remembers which fields to capture and register into the ERP system. This includes data like supplier name, the purchase amount, quantity, and so forth. Invoices are then routed to the appropriate parties for review and approval.

See How Tipalti’s Invoice Automation System Works

If intelligent, fully-automated invoice processing is a business goal for your company, learn more about Tipalti’s invoice processing solution.

Benefits of Automated Invoice Processing

When you automate invoice processing, you’ll find a multitude of advantages. This includes up to an 80% reduction in a company’s procure-to-pay cycle. Additional benefits include:

  • Cuts down on error rates. Less manual entry means less room for mistakes. 
  • Speeds up the approval process and reduces processing times.
  • Saves on labor costs. Staff can work on more business-critical tasks.
  • Reduces duplicate invoices and payments.
  • Improves relationships. Employees are liberated from tedious tasks, and vendors have a more transparent process.
  • Slashes the costs of manually processing invoices (postage, paper, etc).
  • Better to secure early-payment discounts and avoid making late payments. 

The ability to assign a GL code without direct access to a company’s accounting platform is another benefit named by reviewers online.

How do you reach total AP efficiency?

It takes more than just eliminating paper! Find out in our Holy Grail of Ap.

Tools to Automate Invoice Processing

Automated invoice processing software has emerged as a disruptive innovation. The technology has produced such tremendous savings in labor and cost, it has restructured the way accounting does business. Much like word processing, many organizations consider automated invoice processing software an absolute essential. 

According to a recent report, there are around 3757 invoice processing applications in the world. When looking for a tool your finance teams can work with, consider some of these factors:

Unified Console

Accounts payable automation puts everything at your fingertips. Platforms are typically run from a single dashboard that provides managing power of buyers, vendors, invoicing, payments, financial data, etc. The processing workflow should handle:

  • Recurring billing
  • One-time invoicing
  • Metered, volume, and tiered charging models
  • Subscription management
  • Self-service

Customization

A superior automation platform should enable the customer to create custom workflows with tailored invoicing solutions. A smooth process reduces exceptions and disputes. A business should establish automated exception handling to reduce leakage from the system. This stronger compliance allows you to create an invoice solely based on tasks or staff rates. 

An automated invoice processing software platform will also allow a company to incorporate branding. Custom logos, text, and optional extras can be used with invoicing for brand continuity. 

Relationship Management

Automation has been a gift for relationship management in every industry and every job role. It keeps people from dropping the ball. Finance is no different. Invoice processing software gives suppliers clear visibility on their relationship with your business. Payments, orders, and invoices can be viewed by all parties involved. It also enables a company to provide a supplier with a number of different options for electronic invoicing

Monitoring and Reporting

Due to the transparency of invoice automation, a business can easily monitor expenses and know what is being spent, when, and where. Run insightful reports in real-time to enable quick business decisions. The more invoice data scanned into the system, the easier it is to watch for patterns and trends. 

International

A tool that will automate invoice processing allows a business to stay connected internationally, without all the hassle of paperwork. Look for a program that is multilingual and accounts for country-specific VAT regulations. The ability to sell products and process them globally does wonders for expanding operations. An integrated solution allows you to control the complexity of business on a global scale.

Operations

Invoice processing software is a divine tool for operations. Anyone who is sick of pushing paper should appreciate this type of software. The system should also provide easy management of transactions through credit cards, ACH/EFT, and PayPal. 

Accounts payable can take advantage of automated billing to ensure that services are being aligned with purchase orders and receipts. The platform should allow accounting to continuously check the status of an invoice, with indicators like “in process,” “approved,” or “not paid.”

The best-automated invoice processing software will make use of all these features in one form or another. The quicker an accounting department adopts this digital process, the easier it will be to focus on growth. 

Next, companies will be looking to manage large financial processes from mobile devices. A business that is stuck in traditional ways, won’t be around in 5 years to worry about it.

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