Automated Invoice Processing: How to Reduce Errors and Boost Efficiency

Every smooth-running business needs to process invoices quickly and accurately. Manually submitting everyone, however, is costly and time-consuming.

On average, most companies today will spend between $15 and $40 per invoice.

What pushes an invoice into the upper end of the spectrum? There are always going to be transaction fees from payment processors, but the actual cost boils down to time. After all, it takes time to:

• Verify invoice details
• Input invoice information
• Approve invoices
• Send out payments

Late charges may be added to your already inflated overheads if it takes too long to pay an invoice. On the flip side, clients who are late to pay you put your cash flow at risk.

By automating many invoice processing stages, you can minimize the time it takes to input, process, and approve invoices. This saves you time (and money) and keeps everything in your system squeaky clean if you ever need to check a document or prepare for an audit.

Want to Automate? You Have to Digitize

Automation and AI are today's big business words, but neither can be achieved unless you fully digitize your business. After all, you need more than just a single invoice processing tool. You need it all, from sales enablement software to an invoice processing tool, to an enterprise resource planning framework and beyond. In fact, invoice processing tools work best when part of a wider system. This way, your sales team can onboard new clients and suppliers and set them up using your new digitized invoicing method.

Then, the invoice processing tool can link to your ERP, business process management system (BPM), or robotic process automation tools (RPAs). Together, these tools smooth over invoice ingestion, processing, and payment.

What is Automated Invoice Processing?

Automated invoice processing is a streamlined workflow that uses a built-for-purpose tool to enter, process, and approve invoices automatically. These systems work to:

• Minimize how much data has to be manually entered
• Automatically run 3-way matching checks to verify invoice data
• Automatically sort invoices and send them out for approval
• Keep all your records accurately stored in an electronic document management system (EDMS)
• Streamline invoice processing workflows

There are two common ways these systems automate your invoice processing workflows.

1. Optical character recognition (OCR) converts scanned invoices into usable data and sorts that info into pre-made templates.
2. Suppliers are asked to create and send invoice details using your template forms.

The information in that template is then verified with 3-way matching, which helps prevent fraud or errors from costing your business dearly. As an added benefit, this is how you can easily keep your invoice processing compliant for audit season.

How to Get Started with Automated Invoice Processing

To successfully get started with automated invoice processing, follow these steps:

1. Choose an Automated Invoice System

The first step is to choose an automated invoicing system. There are several brands out there to choose from. To make sure the option you select is right for your brand, however, check that it:

• Is compatible with your existing system
• Includes built-in features that suit your industry
• Looks simple and intuitive to use
• Can be customized
• Tracks KPIs
• Can generate invoices on your behalf (bonus)

2. Create or Customize Templates

Invoice processors scan invoices and populate a file with the relevant data into their designated fields. For example, the name will go into one slot and the date into another. This file is then added to the centralized platform, where it can be processed.

For best results, the designated fields should be customizable via pre-made templates or a drag-and-drop designer. This allows you to adapt your system to suit your industry.

3. Create the Rules

Every system needs rules and conditions to work efficiently. The rest of your system might falter if you don’t manually create and fine-tune these rules to suit your setup.

Examples of rules can include:

• If the Invoice exceeds $10,000: Send it to an executive for approval
• If the invoice is for a new vendor: Send it to the procurement or finance manager for approval
• If the invoice is past due: Send out an automated final payment reminder and flag it for review

4. Integrate Into Your Wider System

You must then properly integrate this invoicing tool with the rest of your accounting, marketing, and inventory system. You could connect your chargeback dispute system with your invoice processing tool so you can keep track of the invoices you have sent out for your records. For example, a chargeback on an invoice you thought had been paid must be flagged throughout your network.

Your invoicing tool must also link to your accounting software and data management system. You can share data seamlessly if it can connect to the various tools it needs to interact with. That seamless data sharing is how you can automate your business beyond OCR scanning and invoice processing.

Tips to Boost Efficiency

Create a Standardized Checklist for New Supplier/Client Onboarding

Creating a standardized invoice format is one of the easiest ways to ensure your invoices, goods, receipts, and purchase orders match. You’ll want to use either a checklist or a sales coach AI to give each one of your sales or onboarding teams access to the information they need to successfully bring all new clients and suppliers/contractors up to speed on the invoicing and payments process.

Remember that on the client side, you’ll discuss your invoice process (e.g., when invoices go out, when you expect payment, if there’s an early repayment discount, etc.).

Integrate SLA Management

Service Level Agreements (SLAs) are the contracts between you and your supplier/client. They must be met for the invoice to be paid. You can keep client and supplier relationships straightforward by integrating SLAs alongside the invoices. If there is a chargeback or payment refusal, you can easily pull up the service level agreement and work from there.

When in Doubt, Invest in an ERP

If you are still digitizing your business, an enterprise resource planning tool is one of the better options today. This works like a shell that wraps around your system. Certain ERPs will have built-in APIs that bridge even older systems to your more comprehensive network with minimal fuss. Getting multiple brands, tools, and software to talk to each other can be challenging. ERPs make integration simpler.

Choose a Cloud-Based System

Your data should be cloud-hosted, as this allows multiple departments and offices access to the same information. Cloud-based systems are also the most up-to-date. For example, if a supplier or client changes their contact details, that update should be sent to your broader system. This, of course, can only happen if you have a single data source rather than multiple silos.

Tips to Reduce Errors

To reduce errors (and, in turn, improve efficiency) even further, you’ll want your system to have:

• Multi-channel support so it can scan and understand multiple file formats.
• A very easy-to-understand and use interface, so minimal training is needed
• A built-in OCR so you can scan and extract data from paper to digital files

You will also want to regularly use KPIs and other analytics data to improve your invoice processing system. Run tests to ensure all essential processes are working flawlessly, and ask team members for input so you can work on adjusting your approach to improve the workflow best.

Key Takeaways

Automated invoice processing can speed up data entry, verification, and approvals so you can get payments out faster and stay on top of the invoices you send. Just remember to fully customize the tool you choose, carefully integrate it into your system to maximize performance, and run regular tests to improve your workflows continually. This comprehensive approach will help boost invoicing efficiency and reduce errors.