Crush Invoice Processing Challenges with Automation
Manual invoice processing is monotonous, time-consuming, and error-prone for many businesses, leading to missed payments, misplaced invoices, time-consuming corrections, and high financial costs. Despite this, many businesses overcome these challenges, as evidenced by the key performance metrics of top and bottom invoice processing performers (Figure 1). A crucial part of turning invoice processing from a stressful and inefficient chore into a streamlined, highly effective process is automation. Below, we’ll cover the most pressing challenges around invoice processing and how to solve them with intelligent information management (IIM).
Manual Invoice Processing Challenges
Approval Bottlenecks
The approval process is frequently bogged down by a lack of communication and visibility, a significant culprit of lengthy payable cycle times. Invoice PDFs are frequently lost or forgotten about in email inboxes, and paper invoices left on approvers’ desks are often subject to a similar fate, getting lost in the shuffle of paper. Because of the lack of information visibility and communication involved in this process, invoices can go great lengths of time without being approved, leading to missed payments and soured vendor relationships.
Frequent Errors
Invoice processing errors often come from two sources: an unremedied vendor error on the invoice or a typo while transcribing the invoice. Vendor errors are intended to be found during 2- or 3-way matches, where data from the proof of delivery and purchase documents are matched against the invoices. A consistent failure to find these errors may indicate an overwhelmed payables department.
Typos during data transcription into your financial system may also stem from this task’s time-consuming and tedious nature. When double-checking this data entry, significant diligence is needed, as even one misplaced decimal can drastically throw off transactions in your organization’s general ledger. However, with a large number of invoices to process or other tasks to tackle, time for this diligence may not be available.
Lack of Visibility
Information is key when prioritizing which invoices to process and which vendors to pay. Data on invoices is essential to generating reports such as AP aging and invoices awaiting approval that help inform these decisions, but this data often must be transcribed first, creating gaps in the information available in these reports. Data entry takes time, after all, and entering the data from every invoice your organization has received, while ideal for this reporting, is often not feasible when done manually.
High Processing Costs
The average cost of invoice processing varies greatly between top and bottom-performing accounts payable departments. According to American Productivity and Quality Center data, this cost can range from $1.42 to $6.00. Costs involved in invoice processing include labor expenses, physical storage space, postage and courier fees, late payment fees, and the risk of errors. Due to the high expenses of this process, eliminating costs and increasing the productivity per payable clerk is essential to a lean business initiative.
Adapting to Remote and Hybrid Work
Between the recent rise in hybrid work models and a frequent need for organizations to collaborate across offices, warehouses, storefronts, and more, the ability to process invoices and access information remotely has become necessary for competitive organizations. The Dutch Group, a Square 9 customer that solved its remote invoice processing challenges through automation, was sending invoices between its corporate office and clinics, resulting in lost invoices and blocked services due to non-payment.
But with every challenge comes a solution, and invoice processing is no exception. Automating accounts payable through intelligent information management can reduce the costs, time sinks, and stress involved in invoice processing for a leaner, more efficient, and informed payables department.
Simplifying Invoice Processing with Automation
Timely and Efficient Approvals
By routing invoices to approvers based on department, location, and invoice amount and issuing automatic email reminders after set durations, your invoice approval process can be significantly shortened. This will reduce accounts payable cycle time overall and allow your organization to avoid late fees and take advantage of early payment discounts.
Error-Free Automation
With intelligent information management, the 2 and 3-way matching process becomes far more efficient, allowing payable clerks to instantly and simultaneously search for the invoices, packing slips, and purchase orders associated with an order number, vendor, or other key indexing component. This eliminates sifting through stacks of paper, a frequent occurrence in the matching process, and allows your clerks to focus on details in these side-by-side comparisons. The matching process can even be automated entirely by lifting the data on these documents using OCR and matching each field against itself on each record.
OCR doesn’t just help with matching, though. Data entry into your financial system can also be streamlined, especially with template-free AI-powered extraction. By using the information’s format and the surrounding context, AI-powered OCR can lift data from invoices with near-100% accuracy, allowing accounts payable staff to focus on quality assurance instead of hours of typing.
Complete Information Visibility
With invoice data automatically captured and routed to your financial system, your organization will have all the information it needs to generate reports on outstanding payments and approvals. This will allow you to make informed business decisions about these outstanding items, develop priorities for timely payments, and improve vendor relationships with better insights into their questions.
Proven Financial ROI
Accounts payable is a labor-intensive process, but many tasks are highly repetitive and easily strengthened through automation. This makes accounts payable a common starting point for many organizations investing in intelligent information management. For example, a solution that costs $340 a month but automates all data entry, streamlines the matching and approval process and files all invoices for you would be equivalent to paying a full-time employee $2.12 an hour in a four-week month to perform this amount of work.
This is why organizations that deploy accounts payable automation through IIM solutions see a return on investment in 24-29 months or, in Square 9’s case, just 19 months. Add in all of the intangible benefits, such as instant information access, improved compliance, and enhanced business relationships, and it’s clear why implementing payable automation is a smart fiscal decision.
Streamlined Cross-Department Collaboration
Secure cloud access to your intelligent information solution means your team can harness the efficiency and information you now benefit from across locations. With the ability to interface with approval workflows, document repositories, and OCR systems from any modern web browser, not only will you eliminate the typical pitfalls of remote operations, such as communication delays, data silos, and bottlenecks, you’ll benefit from fully informed, highly productive, and error-free payables department, all while adhering to information best-practices.
In the words of Lily Setiawan, corporate controller for Square 9 customer, the Dutch Group, “With Square 9, all the information is in there. You just see your store’s invoices. That’s all the stores need to know, and that’s all they need to be responsible for.”
In Summary
While payables departments are often prone to bottlenecks, errors, information silos, and high costs, automation has been proven to be an effective and fast-acting solution with the potential for a financial return on investment available as soon as just a year and a half of use. By automating approval workflows, eliminating data entry, and providing fast and secure access to vital business information, your organization can control costs, reduce errors, boost efficiency, and improve vendor relationships.
How Square 9 Can Help
Square 9 is a leading provider of AI-powered intelligent information management solutions that take the paper out of work and make it easier to get things done. With digital workflows that automate many aspects of how you work today, we make it easy by extracting information from scans or PDFs, storing documents in a searchable archive, and building digital twins of your current processes through graphical workflows.
