Why automating invoice processing is a smart move
Automated invoice processing offers touchless processing and regulatory compliance, leads to incredible strategic results and skyrockets your growth potential. 80% of C-suite executives believe that automated invoice processing gives them a competitive advantage. This confidence in invoice automation comes from proven benefits like reduced cycle times and increased process visibility.
Invoice automation reduces processing costs by almost 29% - Association for Image & Information Management
Your tried and tested manual invoicing error-prone, outdated, chaos-causing and results in ineffective accounting mechanisms and minuscule improvements. But, equipping your accounts payable team with power of automation can help you smartly address these issues. Technically, automated invoicing or e-invoicing uses robotic process automation (RPA) to facilitate seamless data extraction, accurate data entry and storage. In a few clicks, the payment process can be completed securely with a way-high accuracy. The need for redundant checks is eliminated, which greatly optimizes time and cost.
While we take a deeper dive into why e-invoicing is essential to boost your operational performance and improve your credibility, first let’s have a quick look at some of the difficult-to-handle manual invoicing challenges.
Paper invoicing and its challenges
- Accounting systems cannot be speedily populated with data, since data is manually extracted from hard copies.
- Invoice processing is vulnerable to manual errors, especially when they come from disparate sources in high volumes.
- Turnaround time - from 7 days to several weeks - is a nightmare and leads to payment delays, penalties, no scope for negotiating discounts, and erosion of the confidence in the stakeholders.
- Invoice-PO mismatch is not easy to address as it requires scanning through all documents, leading to elongated period-end closing durations.
What makes automating invoice processing a smart move
Automation-enablement comes with multiple value-added propositions and is a key to success when it comes to re-engineering invoice processing.
Accounts payable automation saves an estimated average of 16 dollars per invoice. - Business Finance magazine
Here are some cost-justifying and convincing reasons in detail explaining why invoice automation is crucial:
1. Optimized invoice processing cycle
Manual invoice processing proves cost-intensive with expenses incurred towards employee payments and bulk paper requirements. Implementing automation throughout the processes gives a way to a truly streamlined invoice processing journey:
One of Canada’s largest retailers - having 200 vendors and regularly required to handle 120+ hundred invoices - optimized its invoice processing by implementing automation. Apart from witnessing streamlined document classification and invoice filling, it experienced a remarkable 95% of improvement in invoice data entry.
- The digital filing system makes it quite easy for Finance and Accounts teams to search and find the intended invoices, rather than rummaging through bulk of paper documents.
- Erstwhile time-consuming act of tracking down misfiled documents, fixing errors and recreating host documents is eliminated, and the time thus saved can be utilized for bettering processes.
- Automated mechanisms ensure that crucial junctions - vulnerable to errors - are securely managed, so that discrepancies do not creep in the documents.
- Digital document routing and re-engineered approval mechanisms ensure not just faster but also highly secured passing of invoices.
- In terms of costs, e-invoicing straightaway eliminates printing and mailing expenses, and on-time payments prevents interests and late fees. Furthermore, technology enhances operator productivity, and labor cost is also reduced. The optimized expenses can be diverted towards bringing new talent, implementing technological innovation, as well as conceptualizing better offerings.
- Manual data entry efficiency is improved by intelligent character recognition (ICR) tools like optical character recognition (OCR), which automatically indexes and captures data from scanned invoices, significantly reducing data gathering time.
- Digital document processing allows stakeholders to obtain output documents in desired compatible formats, as various protocols demand.
2. Enhanced regulatory compliance
As one of the key components for providing evidence of tax and payment compliances, invoice is the most important asset to ensuring audit success. Automation leaves no scope for invoice mismanagement and helps chart a growth journey to acquiring certifications, achieving better rankings and getting industry recognized credentials.
e-invoicing optimizes tax compliance costs by around 37-39% - Billentis
- Intelligent validation facilitated automatic matching reduces time to reconcile purchase orders (POs) against invoices, streamlining month-end accounts activities.
- Discrepancies can be identified and addressed through generation of on-demand reports, as enabled by access to digital invoice repository. This prevents last-moment hassles and disruption, and preparedness allows staff to set positive impression in the minds of auditors – beneficial especially in external audits.
- e-reporting allows evaluation of veracity of annual business transactions with a greater efficiency, and process to validate legal mandates is accelerated, leading to creation of a better invoice clearance model.
- Flexibility to easily track audit trails and robust control processes helps stakeholders to prevent data loss and leakage, allowing better adherence to regulations.
- Data is directly integrated into digital storage, and e-archives not only streamline various processing steps, but also align the processes correctly along requisite authorization rules.
3. Better and strengthened vendor relationships
More vendors associated to your business mean more periodical invoices that must be processed accurately to prevent loss of trust amongst your business partners. Here’s how automation works as a relationship improving agent.
Electronic invoicing could prevent late payment in as much as 39% of invoices and prevent worsening of vendor relationships. - Tungsten Network & the Institute of Finance & Management
- Automation of invoice processing empower vendors to interact with finance teams, giving them real-time access to check payment status, update information and add more invoices. The automated invoice process framework creates win-win situation; by saving coordination overheads for the finance department and allowing vendors to have a better experience.
- Payment deadlines are automatically tracked, and financial penalties become a thing of the past. Furthermore, auto-update procedures prevent occurrences of duplicate payments.
- Digital tracking of accounts payable gives quick visibility into the entire cash flow and allows you to check pending invoices nearing delay thresholds.
- Continuous long-term record of in-time payments gives organizations an opportunity to negotiate costs and terms, and secure discounts. Not only are expenses saved but incentives brought by timely processing facilitate extra savings.
- Faster turnaround times leads to creation of trust in internal as well as external stakeholders, leading to enhanced reputation of the organization.
4. Efficient preventive control
Fraud monitoring, detection and prevention are essential to ensuring successful financial operations. Ever mounting invoice data, stringent payment deadlines, and the onus of maintaining long-term relationships with vendors creates pressure on staff, who can easily commit errors, with intentional manipulations for personal benefits not to be ignored. Automated mechanisms come with answers to these issues, as they:
- Minimize human intervention in handling preventive mechanisms - user access is limited to authorized functions.
- Invalid, doubtful, spurious, and manipulated invoices are flagged for reporting and verification from concerned authorities.
- Alerts are set against suspicious transactions such as intentional invoice duplication and tampering.
- Custom tolerances allow stakeholders to ascertain if invoice is rightly going through the processing journey. Process visibility to external stakeholders prevents attempts to secure fraudulent payments.
- Enabling accounts payable function with automation is the most reliant way of securing standards such as SSAE-16 and HIPAA compliance, because robust artificial intelligence (AI)-based technologies provide extensive security mechanisms for true protection of internal as well as external data, strengthening your overall cybersecurity efforts.
- Auto-scheduling of periodic recurring payments, with verification through one-time-password over email or message on cell phone gives notifications for every initiated transaction that cannot be completed without correct credentials.
- Advanced technologies like biometric facial recognition, which are slowly making their roadways into invoice processing, will eliminate probable risk factors and provide enhanced security to sensitive data in accounting and finance activities.
5. Accurate budgeting and forecasting
Invoices are a direct input to budget - the most time-consuming activity in any business. This is because they give access to amounts of funds that were disbursed during a given financial cycle. As against manual approaches, automated procedures streamline forecasting of budgetary allocations. Let’s see how invoice automation scripts successful budget management:
- Automated mechanisms don’t require finance personnel to manipulate Excel sheets or apply guesswork, as decision-makers are exposed to multiple what ifs, based on which they can initiate processing of purchase orders (POs) with precise amounts.
- Incorporated business intelligence gives C-level executives access to dashboards containing structured reports, the metrics from which allow accurate planning and resource scaling.
- Rolling forecasts can be made in much less time as compared to non-automated process.
- Customized alerts either in form of cumulative invoice amount or number of invoices crossed allow accounts and finance departments to start initiating budgetary planning.
- Intelligent timely processing of invoices prevents deviations from planned course and gives confidence to stakeholders that they have perfect forecasts.
- Auto-invoice improving budgetary allocation also paves way for enhanced capacity planning and utilization.
6. Improved exceptional handling
48% of businesses consider handling exceptions as the top accounts payable problem. - 2015 Ardent Partners Business Survey
Invoice exception handling is one challenging task that demands separate attention from accounts department in a non-automated process. Billentis suggests that in manual invoicing 20-30% of invoices are treated for exceptions. Offering accountants rescue from these inconsistencies, automation yields benefits for the organization by leveraging leaner and better exception handling workflows. This is facilitated as:
- Visibility into spend allows quick spotting and identification of errors, as frauds are prevented from becoming unmanageable problems.
- Auto-checks fast identify missing entries in important fields like purchase order (PO) number, tax registration number, company ID etc.
- POs aren’t closed unless and until they satisfy requisite closing criteria – item description, quantities, amount thresholds, mandatory field values etc. – as set by auto-closing mechanism.
- Auto-verification validates vendor registration at the beginning of every new cycle, and digital connectivity allows rapid vendor registration renewal.
- Auto-accounts payable processes create roadways for unhindered and improved communication amongst involved parties, which allows driving multi-way matching.
- Since there’s no scope for improper accruals as well as incorrectly reported expenses, cash flows are prevented getting subjected to risks.
Digital invoice management services are fast emerging. They offer exceptional auto-exception resolution work-flows and deploy machine learning algorithms to ensure 100% straight through processing and invoice-PO matching.
7. Business-critical tasks receive increased focus
Scrambling with invoices in manual processing can leave your accountants tired; and not only entire operational productivity is hampered but their expected involvement in strategic initiatives doesn’t become possible. Automation helps achieve the basic aim of optimization, and the saved time and efforts can be devoted to core progressions. Here are more insights.
- Finance team members can brainstorm on bettering financial control policies and improving budgetary forecasts.
- Financial analytics to derive valuable insights from cash-flow can be made a part of concerned team members role.
- Employees can be made accountable for customer success, with revamped initiatives leading to enhanced internal and external stakeholder satisfaction.
IOFM’s 2018 Future of Accounts Payable Study survey showed that 51% of accounts payable practitioners believe that they will adopt automation in invoice processing by 2021. So, not taking the advantage of robotic process automation (RPA) now means you are keeping yourself in the backseat in the competition.
Digital transformation in invoice processing is no longer a lucrative option rather it has become an imperative. Capitalizing on technological resources through e-invoicing can allow you gain sustainable competitive advantage and help best manage fast changing stakeholder expectations.
When faced with a lack of technical resources for automating accounting cycles, search for and engage with a qualified outsourcing provider. Professional invoice processing service providers are experts in context-based implementations and allow fullest exploitation of artificial intelligence (AI) powered technologies.
This was posted in Bdaily's Members' News section by Hi-Tech BPO .
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