Understanding the Ins & Outs of Invoice Processing Automation

11/30/2022
  1. Understanding the Ins & Outs of Invoice Processing Automation

Do you know how useful it is to automate your invoice processing, but don't know where to start? We've got the answers for you.

Invoice automation uses software to help businesses streamline their accounts payable (AP) processes. This automation process works by pulling out invoice data and syncing that data with your CRM and AP software.

With automated invoice processing, you can say goodbye to annoying manual data entry that ends up taking far too much of your time. Instead, you can sort and categorize your invoices digitally so you can have a clear and full view of purchase orders and automatically match and verify pricing. No rifling through cabinet drawers and searching through countless papers. You can also set up workflows to alert you when payments are due from a customer (or late) and use online payment systems to collect payments quickly and efficiently. 

Let's take a deeper look at how automated invoicing works, its benefits and how it can actually protect your business from risks. 

Chapter 1

How does invoice processing automation work?

Finance team processes

Invoice management traditionally starts when your business receives an invoice from a supplier. Accounting then matches and approves the invoice. Usually if it’s a large invoice, then it requires further approval. 

The invoice will then be inputted into a system and then ‘posted’ for payment. Lastly, the payment is issued. How long this manual process takes will depend on the size of the company. But manual processing can be extremely slow, especially when you’re dealing with a large volume of invoices. 

Automated invoicing speeds up this process considerably. With automated invoicing, the new invoice is scanned and inputted into the digital accounting system - eliminating countless hours of manual data entry. The automated invoice software will then transform the data into a document where terms can be easily searched.

Additionally, the invoice data can be mapped in the automated management system so it will automatically know which fields to capture and register into the AP system, such as purchase amount, supplier name, quantity, etc. Invoices are then sent to the relevant staff to be reviewed and approved.

Chapter 1

What makes automated invoice processing so necessary?

Invoice processing automation allows your accounting department to focus on more complex and specialized tasks, while assigning the more menial tasks such as data entry, invoice matching and purchase orders to an automated system. And one of the most important benefits is that it helps your workflow move a lot faster. 

But what are the other benefits of automated invoicing? 

  • Reduces error rates

  • Cuts down on duplicate invoices

  • Makes the approval process faster 

  • Reduces late payments

  • Reduces labor costs so employees can concentrate on tasks more critical to the business

  • Creates an audit trail of invoice approvals

  • Improves relationships with suppliers by ensuring payments are made accurately and on time

  • Cuts out manual processing costs, such as paper and postage

  • Opens the door to early-payment discounts

Invoice processing automation has made massive changes and improvements to traditional accounting. Just like it’s difficult to imagine running a business without using Microsoft tools, it’s just as hard to imagine a business today that doesn't have automated invoice processing software.

Business relationships

There are thousands of invoice processing software programs out there. So, when you’re searching for the right one, make sure it has the following features and functionality.

  • Consolidated Console: An automated invoice process should give you easy access to everything you need. These platforms normally have everything you need on one dashboard, such as buyers, financial data, invoicing, payments, and vendors. Built-in workflows should take care of charging models (metered, tiered and volume), one-off invoicing, recurring billing, self-service and subscription management. 
  • Customization: The best invoice processing software should let you create customized workflows with invoicing solutions tailored to your business needs. A streamlined process also cuts down on disputes and exceptions. And you should set up automated exception management to keep exceptions contained within the system. An intuitive software platform should also let you customize the platform with your business branding. Being able to add your brand’s text, logos and any other extras will ensure continuity with your brand.
  • Relationship Management: Automation seriously reduces error and ensures payments run smoothly, and this is crucial when you’re paying supplier invoices.Automated invoice processing allows you to seamless pay your suppliers on time without error. Doing this helps to build trust with your suppliers and can also help improve your business credit score. Many AP software packages can seamlessly integrate with the credit bureaus such as Creditsafe allowing you to demonstrate a good payment history automatically. As payment behavior is a key indicator of a company’s financial health, a favorable payment history will help boost your credit score.
  • Reporting And Monitoring: Thanks to how transparent automated invoices are, businesses can monitor expenses easily, and clearly see what you’re spending money on, as well as where and when. An automated invoice system should be able to give insightful and useful real-time reports so you can make quick and confident business decisions. Plus, the more invoice data is added to the system, the simpler it will become to spot trends and patterns. 
  • Smooth International Operations: Automated invoice processing software lets businesses connect all over the world, and you should look for software that operates in multiple languages and takes into account Sales Tax regulations specific to certain countries. Being able to sell products internationally as well as process them around the world is a surefire way to expand and grow your business. Integrated software lets you effectively manage the complexities of operating on an international scale.

Automated invoice processing is an excellent solution for operations in general, especially if manual invoicing just doesn’t fit your business anymore. An automated system should let you easily manage credit card transactions, PayPal transactions, and ACH/EFT transactions too.

The accounts payable process can be enhanced with automated billing and making sure services match up with receipts and purchase orders. Your chosen platform should make it easy for your accounting department to regularly check invoice statuses with indicators such as ‘in process,’ ‘not paid,’ or ‘approved.’

Chapter 1

How can invoice automation protect your business?

Invoice automation can safeguard your business by making the process by which you receive and send invoices more transparent. Not only does this ensure your payments are accurate and received by suppliers on time, but it also ensures that any invoices you send to customers are also paid accurately and on time.

A good relationship with suppliers and customers is built on trust. You can never be too careful about who you’re doing business with. That's why it's so important that you review the business credit reports for any potential customers you're considering working with. This will show you just how reliable they are, how often they pay invoices on time vs. late, if they have derogatory marks on their record and are on any sanctions lists. 

With just a quick search, you can see whether a supplier, existing customer or potential customer has a history of bad debt and what their DBT (Days Before Terms) score is when it comes to outstanding payments. The more you know, the better protected your business will be. Knowledge is power and in this case, that's especially true. 

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