Invoice Automation: All You Need To Know For Your Business

Invoice automation involves leveraging technology or software to streamline and manage the processing of invoices effectively. If your company handles a large volume of invoices on a monthly basis, you are likely familiar with the challenges it poses for your accounts payable (AP) team. Manual invoice processing is prone to errors, consumes significant time, and can result in financial losses due to delayed payments and missed discounts. By implementing invoice automation, you can effortlessly manage, store, and process invoices, resulting in time and cost savings for your organization.

Processes involved in invoice automation

Invoice automation software efficiently handles all stages of the invoice processing workflow.

Extraction of invoice details

Leading invoice automation software leverages Optical Character Recognition (OCR) technology to automatically extract relevant information from invoices. This includes crucial data such as vendor name, invoice amount, due date, and invoice date. The OCR technology accurately matches the extracted text data with the appropriate fields, streamlining the overall process. Advanced OCR technologies go a step further by extracting line item data from invoices, facilitating more precise general ledger (GL) and cost center accounting. By reducing processing time and labor costs associated with payables processing, OCR technology contributes to faster book closing and enhances operational efficiency.

Data validation and error correction

The subsequent stage in invoice automation involves data validation. Once the OCR technology extracts and matches the data, it identifies any missing information from the invoice. In such cases, the software either auto-fills the missing data or alerts the accounts payable (AP) processor about the discrepancies. Additionally, these software solutions aid in identifying  potential duplicates that may be overlooked by the accounting software, along with other invoice or vendor-level errors. By detecting and addressing these errors beforehand, organizations can rectify them prior to processing payment, ensuring accuracy and efficiency in the accounts payable process.

Performing a 3-way match

Accounts payable (AP) teams employ a 3-way match methodology to validate the authenticity of received invoices. This process entails cross-referencing the information on the invoice with the corresponding purchase order (PO) and goods/service receipts. The AP teams verify the quantity and price of the delivered goods before granting approval for payment. With the aid of invoice automation software, AP teams can streamline the 3-way matching process by identifying discrepancies within the invoices. This significantly diminishes the chances of oversight errors and reduces processing time, enhancing overall efficiency.

Benefits of invoice automation 

Invoice automation can provide a myriad of benefits for your company. 

Improve efficiency 

Invoice automation is a valuable tool that can significantly enhance the efficiency of your accounts payable (AP) team. By automating labor-intensive tasks such as data entry and purchase order (PO) matching, invoice automation saves both time and money. This streamlined approach results in faster processing times, enabling your team to allocate their valuable time to more critical responsibilities. Moreover, with invoice automation, you can ensure timely payments to vendors, thereby nurturing stronger vendor relationships.

Minimize errors

Manual invoice processing is prone to errors and the risk of duplicate payments, ultimately impacting your company's financial performance. By embracing automation, you can effectively mitigate these risks by ensuring accurate invoice processing and payment allocation. Automation safeguards against processing errors, enabling you to pay vendors for the exact amount owed, thus safeguarding your bottom line.

Achieve cost savings

Invoice automation offers numerous avenues for cost savings. By expediting invoice processing, you can significantly reduce labor costs while maintaining efficient accounts payable (AP) operations. This efficiency enables you to scale your AP processes without the need for additional headcount.

Manual invoice processing involves the handling and storage of substantial volumes of paper invoices. Invoice automation allows for digital document storage, eliminating the need for physical inventory and reducing associated costs. Some automation software, like ClearTech, offers the added benefit of reducing payment processing costs through lower-cost check printing and mailing services.

Automation also helps prevent manual errors, ensuring accurate payments to vendors and eliminating the risk of overpayment. Furthermore, it simplifies the process of capturing early payment discounts, enabling your company to take advantage of these cost-saving opportunities. By embracing invoice automation, you can effectively save money and optimize your financial operations.

Enhanced compliance and streamlined audits

Automating the invoice processing workflow guarantees adherence to your company's policies and government regulations. It proactively identifies any invoice discrepancies, safeguarding against potential compliance issues. By digitally storing documents, you establish a robust audit trail for internal and external audits. This fortified trail not only strengthens your control over payables but also acts as a deterrent against payment fraud. Increased visibility and control provide an added layer of protection, ensuring greater accuracy and accountability throughout the accounts payable process.

Saving insights with spend analytics

By automating and digitally storing invoice data, you gain the ability to analyze your payables spend and uncover opportunities for cost savings, leading to reduced vendor expenses. Utilizing AI-powered invoice automation enables you to delve deeper into your invoices and extract meaningful insights. These insights encompass areas such as duplicate spend detection, identification of any spikes in invoice value, and analysis of categorical spend. Leveraging these analytics empowers you to enhance your budgeting and forecasting processes, driving better financial planning and decision-making for your organization.

Challenges of implementing invoice automation

Implementing invoice automation software may present certain challenges. Here are some common obstacles companies encounter and tips to overcome them:

• Resistance to change: Implementing invoice automation requires obtaining buy-in from all stakeholders. Clearly communicate the benefits of automation and address any concerns or misconceptions that may arise. Highlight how the software streamlines processes, saves time, and improves accuracy.
• Integration with existing accounting systems: Seamless integration with your current accounting software is vital for a smooth transition. Ensure that the invoice automation software offers robust integration capabilities, including data migration and two-way sync functionality. Strong integrations facilitate a cohesive workflow and prevent disruptions in data management.
• Data security: Protecting sensitive data, such as credit card numbers and addresses, is paramount. Choose invoice automation software that prioritizes data security and complies with industry standards and data protection regulations. Look for features like encryption, access controls, and regular security updates to safeguard your information.
• Onboarding time: Implementing invoice automation software may involve a period of onboarding and training. Account for the time required to set up the software, train users, and migrate data from existing systems. Consider the vendor's reputation for customer support and ensure they provide timely assistance during the onboarding process.

By addressing these challenges head-on and selecting a reliable invoice automation software provider, you can overcome obstacles and reap the benefits of streamlined accounts payable processes.

How to select the right invoice automation software

When selecting an invoice automation software, it's crucial to evaluate your specific business requirements. Determine whether you need a basic invoice automation solution or a comprehensive accounts payable (AP) automation software. AP automation software encompasses all the functionalities of invoice automation, while also automating your workflow and payments processes. It allows you to directly process payments to vendors using your preferred payment method.

For a seamless invoice processing experience, consider AP automation software like ClearTech, which offers a range of additional features. With ClearTech, you can:

• Extract invoice data with 100% accuracy with a combination of OCR technology and managed services.
• Automate your general ledger (GL) and cost center allocation with robust machine learning technology. 
• Streamline your approval process with smart approver assignments, automated email reminders, and one-click approvals via email. 
• Save money and get the best return on your investment with low invoice and payment processing rates and labor cost savings.

ClearTech notifies you of any spikes in line items and identifies duplicate invoices to ensure that you are getting the best value for your money. With ClearTech's capabilities, your accounting team can confidently embrace invoice automation to improve efficiency and optimize costs.