An invoice is a document that records all the services or products provided by a business and details the amount of money owing for the work. Invoice processing is a function performed by the accounts payable department that operates invoices from receipt to payment and documents in a general ledger.
Before automation, employees would manually review and input relevant data from the invoice into the company system to complete the record. With automation, invoice processing software can extract invoice data, populate the information in an accounts payable system, and process invoice data for accounts payable. Using invoice automation will save time, costs and reduce errors for businesses.
1. Current State of Invoice Processing
The number of companies applying automation for Account Payables is still limited. According to Nexus System, about 50% of companies with more than 10,000 employees applied automation, 40% of companies with 1,000 – 10,000 employees, and 30% of companies with 100 – 1,000 employees. Businesses receive only 39% of their invoices electronically in a format that can be processed straight-through without human operator intervention. That means 61% of invoices have some sort of manual tasks while processing.
2. Invoice Automation Software Functions
Invoice automation tools can automate all the steps in the invoice process such as data capture, and dispatch for approval.
- Monitoring invoices: the function helps capturing different forms of invoices when they arrive. If invoices are sent through emails, RPA bot or automation tools can help mark those email and either save or forward to move on with the extraction step.
- Data capture: the automation software, tools, or bots can extract relevant data from the invoices.
- Evaluating invoices: cross-check against purchase orders, VAT rules, or for duplicity to make sure the information and payments are accurate.
- Record invoice-related information in systems
- Making payments: automatically settle incomplete invoices.
3. Benefits of Automated Invoice Processing
As invoice processing is rule-based, automation can be applied here and greatly benefit this process. Saving time and better compliance are the biggest advantages for automation as software can perform these tasks faster and more accurately than humans. Having an automated system also helps with more overall control over the process as the system can track every step and transaction. Overall, it is more efficient to automate as robots can help reduce errors such as losing paperwork or duplicating payments. According to Rudolf Melik in his book The Rise of the Project Workforce: Managing People and Projects in a Flat World, an automated solution can reduce imprecision caused by human error by 1-3%.
4. The Importance of Invoice Automation
A lot of companies can get their understanding mixed up between automation and digitization. Currently, the invoice management system is already digitized, which demotivates companies to automate invoice processing. However, this process is still as manual as doing things in “the old days”. Employees are still required to physically review data or input them into the system. With Robotic Process Automation (RPA), businesses can fully automate the process where the robot can perform all the tasks from managing invoices, collecting data to paying and settling them.