Automated Invoice Processing - the A to Z of AIP

What is Invoice Processing?

Invoice processing is the payment mechanism that ensures appropriate payments and an accurate general ledger.

Invoice processing begins once the accounts payable department (AP) receive an invoice from a supplier or vendor.

Inbound invoices may be delivered digitally or via post. During the process, AP are responsible for executing the following tasks manually or digitally: General ledger coding, Validation, Approval, Compliance, and Payment.

Process specifics vary in line with industry regulations and the firm's size.

Why is Invoice Processing Important?

Optimising invoice processing is often overlooked because it isn't directly tied to profit-generating outcomes.

However, an invoice processing method that is repeatable and regularised promotes a culture of efficiency, reduces accounting errors, capitalises on early payment benefits, and enables automation.

What is Automated Invoice Processing?

Automated invoice processing, or AP automation, introduces AP software and workflow digitisation to f inance departments, removing the necessity for manual intervention.

Automation is powered by digital data and is categorised by the following;

Invoice process automation
Workflow automation
Audit and Reporting Automation

At each automated step, invoices are processed and moved efficiently through workflows as data is extracted and seamlessly transferred into your financial system, ready for payment.

Why Automate Invoice Processing?

Manual Invoice Processing

Time-consuming, inefficient, and error-prone compared to digital solutions.
Requires unnecessary handling and re-keying.
Physically seeking approval can be met with friction and even loss.
Restricts the ability to use information in digital workflows.

Automated Invoice Processing

Increases the speed, accuracy, security, and ROI of the accounts payable department.
Working with machine learning and AI technologies improves the process over time.

Scaling a digitalised process can be done without expending resources. Automation delivers economic returns to scale by efficiently managing inputs while scaling a manual process requires expending resources to grow the physical aspects of the process.

Document control

Document control is a defining trait of management, Centralised access allows total system oversight, increasing confidence.
Moreover, the flow of information and data is traceable, and users are accountable for their actions.

Go Paperless

Leave paper in the past. AIP reduces reliance on paper to execute AP tasks. No more duplication, wasted ink, or single-use paper - commit to reducing your business's carbon footprint.

Audit trail & compliance

Take control of compliance by automatically documenting audit data.
Data is shareable so whether audits are being performed internally or externally by a third party, you can ensure transparency of information.

Remote

Workplace preferences, like the ability to remote, are a deciding factor in acquisition and retention.
By detaching workflows from a physical location, the flow of information is not affected by cultural shifts in workplace preferences.

Increase productivity

OCR extracts invoice data incredibly efficiently, automation redirects labour hours into profit generation.
Once an invoice requires attention users are notified.
Reports track progress and identify bottlenecks, react in realtime to KPIS.
Read more about the productivity benefits of digital workflows

Save costs

Money is saved in labour costs, furthermore AIP doesn't require training to fulfil a complex role.
Manual processing comes with the risk of error and loss. Fines for non-compliance, money sunk correcting errors, and the cost of reproducing lost documents can add up over time.
Repeatably capitalise on early payment benefits and build strong supplier relations.

Scale

Realise returns to scale faster than physical processes
No costs sunk into infrastructure and training.
Automated invoice processing handles the volume and complexity of scale faster, using no additional space.
Digital expansion allows processes to grow independently alongside your business.

How to Automate Invoice Processing

An automation strategy should be designed and implemented with KPIs in mind, outlining your benchmarks and goals is the first step in a successful automation project.

What are the Steps of Automated Invoice Processing?

1. Ideate and Initiate

The initial step is to plan your goals for implementing an Automated Invoice Processing System, and how you are going to measure sucess.

Consider the Cost
Will automation reduce the costs of AP operations? How do costs scale?
Compliance
How are you going to ensure and prove compliance at every stage of invoice processing ?
Resources
Where are resources going to be redirected once automation is adopted? What are the inputs and outputs?
Relationship
Are supplier relationships being improved? Are payments being made faster?
Security
Is data secured and restrictable at every stage in the workflow

2. Digitise and Deliver

Are your invoices already digital? Automation begins with digitisation which can be performed by you or your AIP provider. Or, you could just drag and drop your already digital files into online AIP portals.

Client self service, inbox monitoring or a virtual mailroom service are additional digital enablements that streamline invoice delivery.

3. Formatting

AIP extracts data from your invoices and templates it to a format compatible with your financial system. To do this, the information you want to record needs to be formalised.

Captured information can be output into third party financial systems or managed from the AIP system interface.

4. Workflow

Assign approval routes based on departments or positions. These can be automatically executed using information captured on the invoices, AI based decision making, or by referencing your databases.

5. Improve

Make the most of real time reporting to monitor the success of AIP implementation. Use this information to target holdups and investigate why they happen to work around and resolve.

Optimise Your Invoice Process

Processing begins once an invoice is received, optimisation starts by considering how invoices will be received. An optimised invoice workflow is digital at the point of receiving the invoice.

This method of compartmentalising an automation project to ensure optimisation at every stage is key in executing successful automation of physical processes. By outlining KPI benchmarks, you can track the success of automation and make appropriate changes to maximise efficiency.

Take a look at how to integrate automation in your AP department in our blog post: How to Process Invoices Automatically: 4 Steps for Success

Process Automation

Data Extraction

OCR AI extracts and formats data for compatibility with financial payment systems.

Sometimes, you need a human touch for novel and unique cases. OCR operates to a confidence level . When not 100% confident, a human validates that case a second time. From this interaction, it learns and increases confidence.

GL Coding

AI determines the type of invoice and uses this information to assign the general ledger code by cross-referencing with your CRM database.

Three-Way Matching

Did you get what you ordered? Are you being appropriately charged? Does it match what you received?

Three way matching ensures appropriate payments are made by referencing purchase orders and delivery notes. OCR is employed to match invoices, purchase orders and delivery notes, answering these questions.

Workflow Automation

Approval

Invoices are routed for approval, notifying the approver that they are ready to be seen. Once approved, they are automatically moved on to the next stage in the workflow.

Notification

Once an invoice is received, the workflow begins and automatic notifications are sent informing relevant team members that actions is required.

Retention

Based on the information extracted, the system recognises how long the invoice must be archived based on GDPR legislation. Then notification can be sent once the legal destruction of the document is required.

Workflow automation ensures an organisation's reliable, consistent, and compliant flow of invoice data. It is not limited to the AP department and can integrate with company-wide tasks, such as HR and records management.

Choosing Automated Invoice Processing Software

The services offered through the purchasing or licensing of financial software vary. Some specialise in automating GL coding, matching and capture. Others offer AP automation as part of a digital transformation strategy. Different features require a different budget. Choosing an appropriate solution requires consideration of the following metrics.

Does it scale?

As your volume increases, does the system grow with it? You may face additional costs with some systems, while others offer a discount for increasing quantity.

Is it user-friendly?

Does implementation of the system require specialist training, requiring more cost? Some solutions offer a simple drag-and-drop interface, others complex training requirements to manage system upkeep.

Will your data be secure and ensure compliance?

Is the system audited to ISO 27001 standards and restrictable? At the end of the workflow is data stored compliantly? Is the system supported by the provider or in house by the IT department?

Can you customise?

Some providers aren't flexible, offering one-size-fits. With others, adaptations are supported on the developer side. With some you have the agency to mould the system to your processes, grow, and change it with the evolutions of your operations.

Can it integrate with other digital enablement tools?

Can the solution communicate and transfer data between different digital facets and across departments?

The Advantages of Outsourced Invoice Processing

Outsourcing brings a different set of advantages and a different set of considerations. In many instances, benefits are amplified, and costs are further reduced.

Sending your process, not your invoices, to a digital workplace specialist reduces costs associated with management and IT maintenance, in addition to the costs that would have been saved by automating invoice processing in house.

An experienced information management partner can support integrations with other digital tools while providing round-the-clock access support and security.

Digital Transformation

Automating invoice processing is one element of digital transformation. AIP automates validation, pushes invoices into the financial system, and routes for approval and payment. It can also be a part of a more comprehensive, interdepartmental automation strategy.

Functionality is maximised when used with other digital enablement tools, such as electronic document management, vendor self-service and virtual mailrooms.

AIP workflows remove the need for physical approval requests. Electronic storage solutions improve the flow of information in the workplace by preventing the need for duplicates.

AIP + Virtual Mailrooms.

Virtual mailroom services (VMS) are one digital tool you should consider for AIP integration - when invoices are received, they are digitised, indexed, and fed into an automated invoice processing service.
Virtual Mailroom Services extend to include inbox monitoring, integrating all your inbound invoices into Automatic Processing.

AIP + Electronic Document Management.

Electronic document management systems (EDMS) enable the centralisation and free flow of information - providing one point of access and source of truth for all records. Improving collaboration, compliance, and productivity.
AIP is a natural extension of EDMS completing audit trials on invoices. The more end-to-end digital your documents, the more you amplify your productivity and environmental benefits through your business processes.

Datatron solutions are designed to scale with your business and our bespoke AIP is no different, we operate a pay-per-invoice model, meaning no upfront or hidden costs.

Send us your process, not your invoices.

By outsourcing you remove costs sunk into installing and maintaining AP software, all while freeing staff time.

We pride ourself on the ongoing support and constant development we offer to all our customers.

Get in touch for a free consultation with digital transformation experts, or give us a call today!

Automated Invoice Processing [AIP]

Contents