Are you still processing invoices manually?
If you said yes, you are not alone. A survey a couple of years ago reported that 84% of small businesses relied on manual processes. As you probably know, manually processing invoices is very tedious and labor-intensive. Accounts payable automation software can help your AP department be more efficient.
In a recent study2, businesses with little or no AP automation reported the cost to process an invoice was $10. An organization with a significant automated invoice process reported their cost per invoice was $2.07.
The fact that manual invoice processing is expensive, is probably were not news to you. But maybe going the next step has been a stumbling point for you. That is the reason I am writing this article. I will give you the information you need to determine what you need and pick a system to meet your needs.
What is Invoice Process Automation or Accounts Payable Automation?
Accounts Payable automation software refers to technology that is used to streamline and automate the AP processes. It removes manual tasks. Automates the approval process and reduces data entry errors. Processing invoices are carried out in five main steps.
Invoices arrive at your office in a number of formats; paper, electronic and via portals. If an invoice arrives as paper, it must be scanned to capture relevant data from paper. During the digital conversion, the document is processed with optical character recognition (OCR) software.
Some documents arrive as electronic invoices. Most of them are PDFs. The text is extracted from the electronic documents. Other invoices must be retrieved for vendor portals and downloaded. These are often PDF formats too.
The capture is the most critical step of the invoice process automation process. The invoice capture software used in this step utilizes advanced technologies such as zone OCR, pattern matching, machine learning, and artificial intelligence to recognize and capture data off of the invoices. Such data as vendor, date, PO number, invoice total, and other important fields of information are captured and stored for use later in the AP automation process. This part of the capture is complicated by the fact that vendor invoices vary and the critical data that is needed to be captured can be anyplace on the invoice.
Some accounts payable automation software systems can capture line item detail if it is necessary for your process. This is part of the capture can also be complicated by the fact that the number of item line varies and the layout of the fields vary.
Capture Step – Realistic Expectations
It is good to have realistic expectations with the invoice capture software. OCR technology is 80%-95% accurate. Capturing data accurately off of PDFs also has its challenges because there are so many ways to create a PDF. Some methods are better than others. Some methods of creating a PDF also include the text that the PDF represents. If this is high quality, capturing the data is easy and accurate. But if the text is not high quality, getting accurate data is more challenging. And other PDF formats have no text, so the invoice capture software much uses the OCR process to capture data. And since there are so many variations in the layout of the invoices that it is nearly impossible to capture invoices with 100% accuracy. You should expect that you will have to manually verify the data. Which brings me to the next step in the processing invoices, the verification step.
In this step in the invoice processing process, the data extracted from the invoice is validated. This is done with a combination of manual and automated processes. An operator should look at the invoice and verify that the data was captured correctly. In addition, the ap automation software can help validate the invoice by querying the accounting software to verify if the vendor captured off of the invoice is a valid vendor in your AP system. It can also if you use PO, it can verify that the invoice matches the PO. In this step, the GL code information is added to the invoices meta-data. Once the invoice is verified, it moves to the next step approval.
In the approval step of the invoice automation process, the issue that plagues the manual AP process is getting the appropriate approval for an invoice in a timely manner. For this, modern AP process automation systems use workflow products to automate it. These workflow products can be set up to follow your exact approval process. It routes each invoice to the appropriate approvers. And can also validate the approval levels so that you are assured that proper approver was used to approve the invoice. This can be done by GL code or approval amounts. A good workflow product can also watch the time and send reminders to approvers and also escalate invoices that are not approved in a timely manner. Once the workflow is completed the approval process, the invoice is ready for the data entry step.
In this step, data is either entered manually into the accounting software or it is automatically entered by a software integration between the accounts payable automation software and your accounting software (ERP). When you choose to use the automatic method, you eliminate the chance for manual data entry errors and you save an enormous amount of time.
The automation method of data entry uses either a software integration sometime called an API with your accounting software. If no integration or API is available, new technology can be used. This technology is called RPA (robotic process automation). In this method, the software replicates the keystrokes it would manually take to enter the data into the accounting software.
The last step is to archive the invoice in the proper location. There are a number of ways that people want their invoices archived. We have often combined the invoice, the PO, and the check into one document and stored in the vendor paid file by vendor and date. This makes auditing very simple. But, no matter what your filing system looks like, a good workflow system should be able to automatically file your invoices in the proper location in the proper format.