Are you tired of losing early payment discounts?
How long does it take to process an invoice for you? Is it more than a week?
What if we tell you, it can be cut to 3-4 days maximum?
As a small company, it must be tough for you to manage all the business tasks and keep up with invoice processing without a dedicated accounts payable department. And everyone wants to avail the early payment discounts, hence they avoid any late payment.
So, to save your business a lot of money and time, you should process invoices using invoice processing automation software.
And today we are here to talk about the automated accounting system. We will cover all your questions starting from the basic introduction to benefits, cost, and time consumption of using invoice processing automation software.
Table of Content
What is Invoice Processing?
Invoice processing is nothing but the handling of invoices right from receiving to paying the invoice. Every company has its own route and workflow to process the invoices.
However, if we talk about the AP industry standards, there are a few common steps of the process.
So, for better understanding, let’s discuss each invoice processing step with more details.
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What are the Invoice Processing Steps?
The first step in invoice processing is to receive an invoice and verify it. This includes the basic cross-checking of the invoice date and the vendor.
The purchaser verifies the vendor invoices with the purchase order and delivery receipts. Once the invoice document is verified, the accounts payable clerk sorts the invoice into different categories. For example, by invoice date, due date, vendor, type of transaction, or by the department.
The invoice categorization helps in sorting invoices and smoothening the invoice processing. This process may take time as it is generally done manually.
Invoice Data Extraction
Once the invoice document is verified and sorted, the invoice information is fed into the system either manually or by general ledger coding.
If done manually, the accounts payable clerk enters the invoice data, such as the invoice date, vendor, invoice amount, and due date to the system. This method is slow and has room for human error.
Whereas, the alternative is the AP automation software. Using general ledger coding of an AP automation software, the accurate data is directly fetched by the system in less than a minute. All the accounts payable clerk has to do is scan the invoice and import it into the invoice processing software.
The AP automation software converts the scanned image into a researchable document. Once it is converted, it is programmed to find the necessary fields and fetch the information. You can manage and customize the fields that the software imports.
Tip: Make sure to include the following fields to fetch:
- PO number
- Date of purchase
- Invoice date
- Due date
- Accounts payable
- Payment method
The invoice approval process is one of the most crucial steps in invoice processing. This is done to avoid fraudulent and duplicate payments.
After the invoice has been put into the system, it waits for the approval process to finish. The invoice is sent to the authorized person (generally the manager/the person who made the purchase order). The person approves the invoice and forwards it to the accounts department to make the payment.
This is easier than said. In the real-life scenario, it is quite common that invoices get misplaced, or just be another paper in the unprocessed document pile. And in many cases, the accounts payable department may even miss errors in the invoice which ends up being detrimental to the company finances.
Therefore, by making the entire process digitally, the AP automation software takes care of it effectively. The invoice processing software automates the cross-checking of data and makes sure not even the tiniest detail goes unnoticed. Moreover, as it works digitally, it is impossible to misplace an invoice.
Once the authority has approved the invoice, it is sent to the accountant to finally make the invoice payment.
The accountant checks the invoice payment information, such as accounts payable, method of payment, and payment terms and conditions. The accountant also checks the account balance of the vendor. If the purchasing company has already made a partial payment, deposit, or surplus amount in the previous bill. And pay the dues accordingly.
If done manually this makes the accountant go from one ledger to another. It takes a lot of time and energy. To avoid such waste of resources, invoice processing automation systems are the best solution.
Archive Transaction Information
The invoicing process does not end at the invoice payment. Archiving the transaction information is a crucial step in the process. Archiving information like bank transfers, checks, and payment receipts serve many purposes from generating financial statements, tracking expenses, or for reference during the tax season.
Now storing piles of paperwork demands storage space and maintenance. And no matter how well-organized your invoice storage is, it takes a lot of time and energy to take out an invoice from two years ago for reference and put it back.
Whereas, an accounts payable automation software archives unlimited invoices and brings out any of them in just a single click. Moreover, it sorts the invoices via multiple categories at the same time.
What is the Average Time to Process an Invoice?
As discussed, invoice processing comprises five complex steps. Thus, the time to process an invoice depends on various factors, such as the invoice type, invoice amount, payment method, capacity of the AP department, and finally the work culture of the company.
However, efficiently working AP teams take 3-4 working days on average. On the other hand, it wouldn’t be surprising if medium to small-scale companies with limited resources takes as long as 17 days.
Having said that, every company, small or large, has the scope of improving its invoice processing time if they use invoicing software —InvoiceOwl.
Talking about InvoiceOwl, the software is being used by 10K+ businesses. It not only makes repetitive manual tasks easier for you but automates most of the invoicing tasks so that you do not have to do them in the first place.
What are the Benefits of Invoice Processing Using Automation Software?
Apart from everything, time-saving is the biggest benefit of invoice processing using automation software.
Ever heard “time is money”?
By automating the invoice processing, you get the job done in less than half of the time it would take manually.
If you process invoices using the AP automation system, you can save time in every stage of the process. It verifies the invoice within seconds and asks for approval. Moreover, automation shrinks the room for human errors and indirectly saves time to correct the mistakes.
Entire AP Department Under One “Cloud”
The accounts payable automation software brings in all the AP teams under one roof. The AP clerk, the AP manager, and other authorized personnel can work on the same platform without interrupting each other’s workflow. It lets multiple authorities access the same invoice document simultaneously promoting workplace collaboration.
Furthermore, the accounts payable automation software stores all the essential information in a central database. It makes finding supporting documents and previous invoices easy. The company does not have to spend on logistics for keeping and maintaining all the paper stacks. Hence, it boosts efficiency tenfold.
Personalized Invoicing Process
The invoicing process slightly differs from company to company. It has tons of elements depending on company size and business niche.
The AP Automation system lets you process invoices as per your customized invoicing process. If you want vendor invoices to be approved by multiple approval steps or want to put a cap on invoicing authority of employees, the AP automation process routs the invoice accordingly.
Moreover, it lets you pick the fields to capture data from, in the invoice. This streamlines the workflow and avoids unnecessary information from using up space.
It is tough to keep track of all the paper and electronic invoices being sent to you from left and right. When dealing with all those invoices manually, some errors are bound to occur. If not anything,
Sometimes, even a “fat finger” error in invoice processing costs you a fortune. Hence, accuracy is the benefit that lures many customers to use an automation system.
Since the latest AI trends in AP automation software eliminate most of the human touchpoints in invoice processing, it reduces the chances of human errors. This is one of the benefits that most companies process invoices using automation software.
If you are spotting an error even after using the AP automation system, it must be from the vendor’s side in most cases.
Invoice processing is the process that needs to be transparent. Therefore, the AP automation system lets you keep track of the real-time invoice process status. This lets you keep track of all the paid and unpaid invoices too.
Moreover, as it archives all the processed invoices, you can refer to, monitor, or audit any invoice from the past. All you have to do is run a search word (for example vendor name) and you will find all the related invoices in the search results.
How Much Does it Cost to Process An Invoice?
The cost to process an invoice is highly subjective. It depends on the workflow of the organization. Thus, putting a fixed figure would not be right. However, according to a study by experts, companies can spend somewhat between $12-$30 per invoice.
This cost can be brought down up to $3.50 on average if the company leverages an appropriate invoice processing software.
What is invoice processing used for?
Invoice processing is used for invoice payment. This process makes sure you pay all the accounts payable in due time avoiding fraudulent payments and double payments.
What are the steps for invoice processing?
Invoice processing consists of five fundamental steps, which are:
- Invoice verification
- Invoice data extraction
- Invoice approval
- Invoice payment
- Archive transaction information
What is invoice processing software?
An invoice processing software is a software that automates invoice payments. It helps you make invoice payments quicker by completing mundane repetitive tasks automatically and digitizing invoice databases.
What is automated invoice processing?
Automated invoice processing is using software to take care of all the invoice processing steps. It narrows the scope of human errors and helps process an invoice as quickly as possible.
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After understanding the various steps and challenges of Invoice Processing, we know it is a tricky, complex, and most of all a time-intensive process. Therefore, it is highly advisable to utilize AP automation software and pay your dues precisely and punctually.
We hope this blog has helped you to learn a new thing about invoice processing. For more such knowledge-enhancing blogs about invoicing ideas, tips, and advice, keep in touch with the InvoiceOwl blog section.