Step-by-Step Invoice Automation Process

According to statistics, 39% of invoices in the United States are paid late, and 61% of late payments are due to billing mistakes. See below.

Moreover, 82% of finance departments report overwhelming amounts of invoices they must process daily, and they further report exhaustion from the different formats in which they receive these invoices.

There’s no doubt that dealing with invoices is stressful, and you are certainly not the only one experiencing this. How can you keep your invoices organized and avoid costly errors? Is it possible to gain greater visibility across all aspects of accounts payable? The answer is to implement an invoice automation process.

This article outlines a step-by-step process and the reasons why automated invoice processing is required.

Invoice Automation Process Steps

With the advancement of technology, the invoice processing method has undergone a number of phases over the years. Listed below are four steps that can be followed to automate the invoice processing workflow. 

Now let’s begin.

1. Analyze your present invoicing processes

Having a clear understanding of how invoices are flowing through your organization is essential. For example, where is the invoice received, how is it transported to accounts payable (AP), how is it validated, and how long does it usually take to process the invoice? How should an invoice be processed? 

A key to reducing delays and bottlenecks is to identify bottlenecks and delays, as well as the costs associated with them when they occur. When reviewing your current procedures, you are likely to find opportunities for improvement.

2. Define invoicing policies and procedures

Defining invoicing policies and processes is critical to ensure everything runs smoothly during the invoicing automation. 

The key to making this process efficient is to determine procedures for the delivery of purchase orders and invoices. 

Make sure that the process for processing invoices is clearly defined. This way, you can better guide your current procedures and policies.

3. Automate invoice tasks

The invoice process can be automated using various tools, but it is essential to always ensure that the tools you choose comply with the requirements you have established for the process. Invoice management tools often use cloud-based technologies that enable your company to receive invoices, process them, and pay them no matter where you are located.

The key to successful invoice automation is to adopt a single, standardized process, no matter the number of ways you capture your invoices at the beginning. 

People who use paper-based, manual processes for the accounts payable process are now facing problems due to the new regulation. It is readily available to process invoices “straight through” without interacting with humans.

As long as you’re already using electronic invoicing, you can take advantage of it by combining scanning, optical character recognition, and keying to capture the paper invoices already in place. 

As an option, your large customers may be able to receive electronic invoices on an incremental basis if you may implement electronic invoices through your trading network or, if needed, with individual customers. 

By using these methods, it is anticipated that you will be able to move invoices into automated invoice processing increasingly efficiently.

4. Make use of invoicing software

Your organization will likely suffer from business continuity problems in the future if your company does not automate its invoice processes yet. Software like InvoiceOwl will save thousands of dollars on your invoicing needs, enabling you to focus on the most critical aspects of your business rather than worrying about the invoicing process itself.

The best invoicing and estimation software on the market is InvoiceOwl, which is the perfect solution to ease the invoicing tasks in your organization.

If you’re interested in trying this wonderful tool out, don’t wait any longer before you do so. With the free trial offer, you will be able to realize that sending your invoices is now as simple as a few clicks instead of several hours.

You can manage several things with it, such as: 

• Automate the process of creating invoices instead of having to do it manually.
• Assure that all invoices are captured from the very beginning.
• Ensure that relationships with suppliers are improved.
• Take advantage of the early payment revenue you receive from your suppliers.
• Improve cash flow.
• Track expenses.

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Reasons to Automate Invoice Processing

Some businesses still utilize manual processes for invoicing to process invoices, and they may consider switching to automated tools to improve their overall efficiency.

1. Make sure that human error is minimized

When processing invoices, avoid using email, spreadsheets, or pens and paper because these methods increase the risk of human error. To prevent discrepancies in their calculations and handwriting, employees must double-check their data entry every time, wasting valuable time and resources.

However, with automated invoice processing software, you can automate the process of using it to record, file, and report invoices in a way that minimizes human error. Therefore, the AP department can digitize invoices and upload them to the software if they haven’t already done so.

This way, employees can search the system to quickly retrieve information such as the vendor’s name, price, and product order by using keywords.

2. Get the most out of your money

Today’s market is full of software options that are affordable even for small businesses, making it easier for them to take advantage of management systems.

Although the initial cost of the solution may be high, the total return on investment (ROI) from the solution outweighs the initial purchase cost. Automation tools are essential because they help companies avoid late fees by ensuring invoices are paid on time. 

As a result, the business can maintain excellent credit standing with suppliers and maintain a good reputation with the government.

Vendors sometimes offer additional discounts to incentivize organizations relying on vendors to pay them on time.

3. Cut back on unnecessary spending

Automating repetitive tasks such as filing, retrieving records, and other clerical tasks can help companies save a considerable amount of time and money in terms of labor costs. 

Using this software:

• Office supplies can be reduced
• Waste can be diminished
• Money spent on wasteful items can be saved

A study has shown that the cost of paper invoices can range between $12 and $30, whereas automated invoices can be as low as $3.50. While the business bears most of the expenses associated with paper and labor, it must also cover storage costs. There is a risk that the physical invoice will be lost, meaning that AP will have to repeat the whole process, incurring a double expense.

In addition to double-checking the data entry and automating the calculations, invoice software prevents costly mistakes.

4. Integrate systems

A software solution for invoice processing that integrates with existing processes can provide employees with a universal interface to access all the information they need. For example, the AP team can integrate its invoice solution with its billing, inventory ordering, and accounting software. In this manner, employees do not have to spend time on manual data entry, saving them time and money.

5. Fraud prevention

Invoice fraud is a serious problem that affects many businesses, namely when someone possesses a supplier to receive funds from the business. Several large corporations, such as Google and Facebook, have suffered the consequences of invoice fraud, which cost them more than $100 million. 

These organizations could survive these hits as they were stable enough to withstand them, but not every business can afford to lose such a crucial asset.

Tips for Invoice Management

The cash flow of small businesses is crucial for their survival since they need to preserve capital as much as possible. If invoices are not paid on time, budgeting and other financial planning can be negatively impacted. 

An effective invoice process ensures timely, accurate payments, so companies must establish one as soon as possible.

1. Make billing easier

Several small businesses mistake automated billing solutions for billing systems of larger corporations when they are, in fact, much more affordable and easier to use. Paper invoices always have the risk of losing or making a mistake, and fraud may also occur. Moreover, traditional invoices are time-consuming to prepare, require several employees, and require tracking.

Billing software, on the other hand, ensures that invoices are received electronically and in a timely manner by storing and transferring them. Advanced solutions may even perform a double check on data in real time to ensure that there are no mistyped or error invoices.

2. Create invoice checklists

When businesses in the field use invoice software, they are prompted to enter critical information for invoice classification like

• Customer’s name
• Invoice number  
• Date
• Date of payment, incremental payments
• Representative of sales
• Order for a product

3. Set up a timeline for invoices

Generally, large projects are billed in increments rather than in full. The process can be carried out on a weekly, bimonthly, or quarterly basis to maintain cash flow. Managing payment plans when there are multiple projects on different schedules can present a challenge. So, to ensure payments are processed and supplier expectations are met, businesses should create a billing schedule.

4. Monitor the efficiency of the accounts payable department

The Account Payable department must monitor the implementation of the invoicing process to ensure that bills are being recorded and filed properly. In an efficient system, invoices are automatically sent after a sale, approvals are triggered, and agreement terms are regularly reviewed.

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Start Implementing Invoice Automation Software in Your Business 

Keeping your vendor relationships strong requires that your accounts payable department ensures that your financial obligations are paid on time. Even so, manual invoice processing is inefficient and subject to error, and your company risks losing invoices, missing payments, or even being cheated.

With invoicing software, you can automate workflows integrated with your accounting software. With enterprise-grade software that has hardened security, digital signature support, audit trails, and more, you can take advantage of the latest technology at a reasonable price.