Manually processing a single invoice can take days—even weeks—for a business.
The process is arduous—laden with bottlenecks and inefficiencies at every step. From capturing and digitizing to validation and reporting, it’s a bloated workflow posing a regular drain on accounting resources. Plus, manual invoice processing leaves you vulnerable to human errors—which even the most proficient of accounting teams are prone to at times.
Fortunately, there’s a solution to all your invoicing problems: automated invoice processing.
Automated invoice processing streamlines your workflow, reducing the chance of error while ensuring your company pays vendors efficiently. It makes accounts payable easier by completing time-consuming processes such as data entry, invoice approval, and invoice filing automatically.
In this article, we explain automated invoicing, its benefits, how it works, and how to automate invoice processing in your organization for maximum efficiency.
What is Automated Invoice Processing?
Automated invoice processing is the practice of using software to streamline and automate the invoice processing workflow. Typically, it automates each invoicing step, such as data extraction, data entry, and reviewing and approving invoices based on your preset rules.
Many tools will also update your Enterprise Resource Planning (ERP) system to ensure all your invoices are filed and digitally maintained. An automated invoice processing software aims to complete all these administrative tasks seamlessly, making the tasks monumentally easier for your entire finance team.
What Are its Benefits?
Transitioning from manual invoice processing to automating your workflow has several key benefits for businesses, such as:
- Fewer errors: With manual processing, mistakes happen. However, automated invoice processing uses machine learning to enhance accuracy and minimize costly mistakes for important steps like data entry or invoice placement.
- Increased efficiency: Automating invoicing and accounting ultimately speeds up your workflow. From invoice capture to approval and payment, it reduces the time taken for each invoice. This allows businesses to handle a much higher volume with the same resources (or transfer resources elsewhere).
- Unified control console: An automated invoice processing software puts all steps of your workflow at your fingertips. You have access to a centralized system, making it easy to monitor and manage invoice processing along with company-wide cash flow.
- Customizable workflows: Automating invoice processing with purpose-built software allows you to configure payment according to your specific needs. You can easily adjust features to accommodate changes in roles, policies, or organizational structures.
- Improved vendor relationships: Reliable and on-time processing fosters stronger partnerships with your vendors.
- Transparent and traceable records: When manually processing invoices, finance employees store and manage them in files that can be difficult to trace or retrieve. An automated process stores invoices in a centralized system and makes an audit trail.
Above all, automating invoicing streamlines the entire process, making it easier for both those giving and receiving payment. But how does it do it?
How Does Automated Invoice Processing Work?
Automated invoice processing begins when your company’s accounts payable department receives an invoice from a vendor. The invoice is received via email and the invoice processing software scans it into the system where it reads, captures, and digitizes relevant data in the document.
Typically, this will include essential information points like:
- The date
- Invoice number for filing purposes
- The vendor’s name
- Services provided
- Invoice amount
Your software will then cross-reference the invoice data with your pre-existing records to check for accuracy and if the invoices were properly filled out.
After checking for accuracy, the system routes the invoice for authorization using pre-defined criteria established by your company’s accounting team. For example, invoices over a specific amount might need the green light from higher management before they can be paid.
Upon approval, your software will electronically transfer funds from the company to the vendor's bank account. It then sends out a notification confirming payment before storing the invoice in a digital library for future reference.
💡 Cledara’s automatic invoice capture system retrieves your SaaS invoices and matches them to the transactions you've made with Cledara, thus making them available in the platform with a single click.
How to Implement Automated Invoice Processing in Your Organization
Automating invoice processing is easy when you’ve got the right software for the job. However, implementing this type of tool in your organization requires careful planning for a smooth transition and minimal mistakes.
Here are four steps to seamlessly adopt automated invoice processing within your workflow.
1. Map Out Your Current Invoice Processing Workflow
Begin by mapping out the steps of your current workflow. What happens after you receive an invoice? Identify each step and the approximate time to complete it. If you’re planning on making the switch, it’s a good idea to pay attention to how long it takes to process an invoice from start to finish next time you do it.
The goal here is to identify any inefficiencies or friction points in your workflow. Do steps like accuracy checking take the most time? Perhaps manual data entry is your biggest error risk? Look into approval paths, data point entries, common bottlenecks, and pain points. Highlight inefficiencies where automation will bring the most value.
Finally, turn to other stakeholders directly involved in the invoice processing workflow. Their insights can be crucial for identifying challenges and ensuring your new system meets everyone’s needs.
For example, let’s say your company receives around 72 monthly invoices from software vendors. Out of each phase, you’ve determined data entry to be the most inefficient. And it takes your finance team about five to ten minutes to manually enter the details for each invoice.
If you time your invoices (72) by the time it takes to process them (10 mins), and then divide by 60 to get an hourly figure, you’re looking at up to 12 hours spent monthly just on data entry.
You’ve also identified another bottleneck—checking invoice accuracy. This phase might take a team member anywhere between 10–15 minutes per invoice. The accuracy checking phase is especially important because it can also lead to delays if there are discrepancies between invoices and past records.
You’re looking at yet another 18 hours lost monthly. And that’s if there are no issues with each of the 72 invoices—talk about inefficiency!
2. Select an Automated Invoice Processing Software
Once you’ve singled out your most inefficient phases, it’s time to consider the right automated invoicing processing software for the job. Ideally, this tool will be able to streamline every invoice processing phase—especially the urgent bottlenecks you've identified in the previous step.
Besides looking at particular phases in the invoicing process, look for tools that have:
- An easy-to-use interface: Invoicing tools are all about convenience. Their interface should be easy to configure, customize, and manage to reduce the demand on your team.
- Invoice capture and extraction capabilities: For a tool to work successfully, it needs to have advanced optical character recognition (OCR). This allows it to capture, digitize, and extract invoices in different formats
- Customizable workflows: Not every business has the same needs. Your chosen tool should have the ability to establish approval workflows based on your unique criteria.
- Real-time data: Functional tools process invoices. Exceptional tools keep you in the loop to monitor the entire process.
- Integration: For your tool to work, it needs to seamlessly integrate with your company’s existing ERP, accounting software, automated payroll, and other business systems. Look for a tool with custom API integrations so you can connect it to your tech stack. For example, Cledara integrates with a range of popular tools like Xero, QuickBooks, and NetSuite.
Let’s go back to our example of data entry and accuracy checks taking hours to complete. A tool like Cledara automatically captures invoices, matches them to payments, and stores them for download. It gives you full visibility of every charge while directly syncing with your accounting system.
How Cledara Captures Invoices Automatically
Cledara’s Automatic Invoice Capture retrieves all your SaaS related invoices by matching them with the transactions you’ve made through the platform.
You can forward invoices for retrieval through either a company-specific email address or by connecting your Outlook and Gmail account. Cledara will then scan your inbox for invoices, match, and upload them, with retrieval taking between only one to two days.
It’s as simple as that! Once captured, you can track an invoice’s status in the transactions tab and monitor its status.
3. Customize and Test Your New System
After choosing software, you can work on customizing the system to fit in with your established workflow. Typically, you’ll need to set up:
- Approval paths: These are predefined workflows that the software actions for processing invoices. By setting approval paths up, you can direct the invoice to the appropriate person or department for approval where necessary.
- Data validation rules: Automated checks that ensure information on incoming invoices is accurate and meets your organization's specific criteria. Data validation rules catch errors and discrepancies before they lead to complicated payment problems.
- Integration with different systems: Integrating your ERP, automated accounting software, and customer relationship management (CRM) systems ensures seamless data flow and up-to-date financial records
Many automated invoice processing software will also have exception handling as a key feature. This allows the software to detect anomalies within invoices, flag them, and send them to a specific person or department for further investigation and resolution.
Make sure to test the system with a small amount of invoices while including stakeholders in the process. Here’s a checklist detailing what your automated invoicing software should do:
- Accurately performs invoice capture
- Routes invoices to the right people and departments for approval
- Integrates seamlessly with other systems
- Handles anomalies through predefined criteria
- Handles invoices without errors
Once you’ve conducted a round of testing, you can decide if you wish to continue using the software. If you’re still unsure, you can test the system again, this time with more invoices during the next payment period.
4. Monitor and Optimize Your Automated Invoice Processing
With your automated invoice processing solution in place, paying vendors should be smooth sailing. But don’t get comfy just yet. You still need to monitor your system during upcoming payment periods. Be sure to note down any errors or inconsistencies if they arise.
If your tool has analytics and reporting capabilities, you’ll get increased visibility into invoice processing times. Compare that to the manual process times we discussed in the first step and present the difference to stakeholders.
Finally, regularly collect data from users and identify any areas for improvement. This will let you continually adjust your tool and optimize it for even smoother processing.
Cledara Captures, Pays, and Stores Invoices so you Don’t Have to
There aren’t many downsides to adopting automated invoice processing—in fact, we’re struggling to find a single one. From improved efficiency to centralizing invoices into one error-free system, it’s the perfect solution for CFOs and finance managers looking to save valuable time and resources.
However, the only way to maximize these benefits is by using the right tool.
With Cledara, you can say goodbye to countless hours spent processing invoices. Cledara automatically captures invoices, matches them to payments, and syncs with your existing accounting system. You can keep track of all your payments with instant updates and custom tags to view detailed reports.
Automated invoicing keeps both your vendors and your finance team happy with a process that's easy, effective, and efficient. Start simplifying invoice management for your organization today.
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