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Automated Invoice Processing Software: What is it and How Does it Work?


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Home / Accounts Payable Hub / Automated Invoice Processing

A smart automation solution can handle effective invoice management.

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 the ap process needs automation. It’s the next level of manual processing. A payable department can streamline the time-consuming system with artificial intelligence and machine learning.

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 price, purchase order, or data entry, a smart automation solution can handle the easy stuff. 

Automated invoice processing generally includes automation of:

  • Matching price
  • Managing purchase orders 
  • Data entry
  • Transferring digital payments
  • Streamlining workflows
  • And more…

What is Invoice Automation?

Invoice processing automation is software used by businesses to ultimately help streamline accounts payable processes by automatically paying supplier invoices. Invoice processing automation involves extracting invoice data entering a system and seamlessly inputting that data into your ERP or accounts payable system, allowing payments to be made in minutes.

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 automation 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

Benefits of Automated Invoice Processing

Automated invoicing has a multitude of advantages. This includes up to 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.

Software Solutions for Automated 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 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. 

A smart 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

An automated invoice processing tool 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.”

Invoice Automation Features

Artificial intelligence: nimble learning speeds up processes

When invoices come through, accounts payable is the front lines of recording and verifying the data, which means it also has to spot exceptions and make decisions on a case-by-case basis. In an automated solution, artificial intelligence technology does the heavy lifting of recording, verifying and identifying potential issues.

Also called machine learning or adaptive learning, artificial intelligence is the ability for computers to recognize patterns and exceptions without the intervention of manual efforts. In the context of automated invoice processing, artificial intelligence quickly learns the tasks that require judgment, like discerning the approvers for specific invoices or assigning specific general ledger codes, thus speeding up processes that were often slowed down with manual efforts. It’s one thing to automate processes, and another to make them faster as your business scales. That’s why artificial intelligence makes all the difference in an automated account payable solution that can grow with your company.

Optical character recognition (OCR): input data in real-time and with accuracy

Paperless technology is nothing new, but for it to revolutionize the accounts payable workflow, the technology needs to do more than convert documents into digital format. That’s where Optical Character Recognition (OCR) comes in. The technology extracts text in the paperless formats and assigns that data to the appropriate fields within an automated accounts payable solution, thus eliminating manual data entry. Without OCR, you would just have an image of the document, which means you would still have to input the data manually into an accounts payable system.

Even with the assurance of accuracy, it may still feel uncomfortable to set up an automated task without another check. That’s why automated invoice solutions often pair OCR with another layer of invoice data extraction to ensure that the data input was complete and accurate.

Purchase order matching (PO): business rules reduces workload puts the focus on exceptions 

Gathering and reconciling invoices, purchase orders, and approvals is an essential task in the accounts payable workflow; however, it often leads to bottlenecks and delays in the invoice payment process. At first glance, manual execution seems to be the nature of the task—but no longer. Invoice processing systems leverage the technology of business rules management system to automate purchase order matching. By configuring guidelines and percentage tolerances, companies can drill down and customize the guidelines with each seller. The AP automated system will review the digital invoices against what’s configured, automatically approving the invoices that comply with the approved business rules and match up with its purchase order. When an invoice and a purchase order amount do not match up and are outside of the tolerance range, the automation makes it easy for companies to review those exceptions within the payment system. Automated invoice system puts the focus on what truly needs attention, which cuts down the manual workload of reviewing and matching every invoice and purchase order.

Automation seems all the rage these days and rightly so—it paves the way for other much-needed features, like automated purchase order matching, that make invoice automation an all-encompassing solution for doing business on a global scale. Features like supplier onboarding, tax and regulatory compliance, global payments, reconciliation and more are also important aspects that make for an efficient end-to-end AP automation workflow, and these features are also supported by the technologies leveraged by invoice automation. Simply put, automation gives companies the ability to grow and scale and transform their accounts payable process with ease.

Conclusion

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.

About the Author

Brianna Blaney

Brianna Blaney began her career in Boston as a fintech writer for a major corporation. She later progressed to digital media marketing with various finance platforms in San Francisco.
She prides herself on reverse-engineering the logistics of successful content management strategies and implementing techniques that are centered around people (not campaigns).
In her spare time, she’s a self-proclaimed chef, lives in the middle of the woods, and has a frequent flyer card for birdseed and dog bones.


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