It is manageable to process invoices manually only when a business is starting. However, when the business is scaled, manual processes can result in problems like unpaid invoices, payment delays, and even fraud, which can negatively impact your business and relationships with your suppliers.
What steps can you take to improve your invoice management and avoid costly mistakes? And how can the entire accounts payable process be made more transparent?
By setting up an automated invoice processing solution.
In this article, we will look at automated invoice processing and a step-by-step system for automated invoice processing.
So without further ado, let’s begin.
What is automated invoice processing?
Using software to handle invoices for accounts payable and update data in the enterprise resource planning (ERP) system is known as automated invoice processing. It facilitates quicker invoice approvals, minimizes mistakes, and lowers processing expenses.
Step-by-step system to automate invoice processing
There are numerous reasons businesses need to automate and streamline the handling of invoices. It frees staff members in the accounts payables department to work on more time-consuming, expensive, and complex duties. Additionally, it reduces the probability of fraud, particularly in large businesses. The software additionally enables data collection for analytical purposes. But how can you proceed from the current state to automate invoice processing system completely?
- Analyse your current process
How are invoices managed at your organization? Who is the recipient? How are the invoices verified? Are these printed or electronic invoices? How long does it take your business to honor them?
By asking these questions, you may get a comprehensive view of your existing invoice-handling procedure. You may notice that there are several discrepancies, difficulties, and in some instances, a blatant lack of responsibility. This frequently leads to poor processes, payment delays, and the potential for fraud and mistakes. In a non-automated system, invoice processing costs are likewise probably to be considerable.
Before opting for invoice automation, you will have the chance to address any bottlenecks thanks to the initial study.
- Centralise invoice management
Before you opt for automated invoice processing, inform your suppliers to submit their invoices to a single location or email address. As a follow-up, record the invoice data immediately when it is received. Physical documents can be scanned to do this. As soon as they are received, they should also be indexed.
After this is put into effect, your business will need to create explicit policies for managing invoices. What verification is necessary, for instance, while managing a purchase order invoice? What checks are used when an expenditure invoice is presented? Who inside the company is authorized to certify invoices? What happens if the figures on the invoice and the paperwork for the purchase order differ?
A good workflow can be created when given explicit instructions, which the invoice-handling software will subsequently assist in automating. No matter how excellent the software, there must be an existing, well-defined workflow that it supports.
- Pick the right automation solution
You can choose an automated invoice processing solution that best matches your approval procedure once the policies and controls are in place. This should be automated software that performs tasks like invoice validation, source document comparison, discrepancy resolution, payment authorization, and even data collection for reports and analysis. No matter where the invoice came from, the verification and payment procedures are always the same. The invoice could have been submitted electronically, scanned, or submitted using any other method of data entry into the program.
- Get suppliers on board for self-service
Once things are underway, you must enlist suppliers. Tell them about the advantages of the new program, such as being able to monitor the status of invoice processing. They will save time and money on postage services by being able to send their invoices electronically. Additionally, the time needed to pay them will drastically shorten. For suppliers to avoid having to call the Accounts Payable Department whenever they need to follow up on invoices, suitable software should provide a supplier portal on the front end where they may examine current and prior transactions.
- Draw insights from analytics
A robust system for managing invoices can help you establish a reputation for processing them promptly and upholding all supplier agreements. You will be able to optimize your purchasing processing from the data gathered after your system has been running for a few months. The average time it takes to process an invoice is one improvement you can monitor. You can also look for the suppliers you work with most frequently to see how you might improve your connections. Your organization can benefit from better costs and accommodating payment terms by streamlining your supplier network and awarding contracts to the most dependable vendors.
- Better invoice capture
Your business should establish more effective methods of invoice capture over time. In fact, it would be conceivable to combine invoice management with purchase orders such that an invoice is created for the supplier each time a purchase is made. With time, you could implement new techniques for invoice capture, but your workflow won’t likely be affected.
Additionally, your company can accept electronic invoice payments. Even though electronic payments have several clear advantages, the majority of vendors still only take paper checks. Your company should speak with its suppliers, reassure them that the financial information they provide is secure, and then gradually begin paying them online. In order to guarantee that all the information a supplier provides is correct and current, a vital supplier connection will be necessary.
Analyzing your present system and locating bottlenecks in the procure-to-pay process is the first step in implementing an automated invoice processing system. Before introducing any software, your processes must be thoroughly checked and controlled. The chosen automated solution must support all stages up until payment approval and should complement the workflow. Your company should benefit from quicker processing, fewer errors, and improved supplier relationship management over time.