5 Signs you Need to Automate your Invoice Processing

After years of false starts, accounts payable departments are making transformation a top priority.

Accounts payable departments say standardizing invoice approval, posting, and deploying AP automation software are their top budgetary priorities for the next three years. This priority tops labor-intensive approaches to process improvement such as hiring additional staff and upskilling existing personnel.

That’s according to research from the Institute of Finance and Management’s (IOFM).

What is AP automation?

An AP automation system leverages advanced technologies to post a high percentage of invoices straight-through.  For example, intelligent data capture, robotic process automation (RPA), and machine learning. Dynamic workflows, a supplier portal, and business intelligence also contribute to faster posting of invoices.

Accounts payable robots (or “bots”) log into an e-mail box, FTP site or online supplier portal to retrieve invoices for processing.  Suppliers can also use a self-service online portal to submit invoices electronically. The portal is built into an invoice processing platform and can “flip” purchase orders (POs) into electronic invoices.  The result is that all accounts payables processes are centralized onto a single platform.

AP automation software uses optical character recognition (OCR), e-mail invoice extraction, robotic process automation (RPA), machine learning (MA) and proprietary technology to extract and verify data from each invoice according to pre-defined business rules.  Invoice data is guaranteed 99.95% accurate and then matched against a PO.  Matched invoices are seamlessly uploaded to any ERP application, including SAP, Oracle, PeopleSoft, NetSuite, Sage, and Infor.  Additionally, the best AP automation solutions also integrate with supplier billing systems to deliver detailed remittance data.

Unmatched invoices, or those without a PO, are digitally routed for approval based on configurable business rules.  If any data required for approval is missing from an invoice (such as a PO number), an AP automation solution sends an e-mail to the supplier’s billing department.  The supplier then clicks a link, inputs the required information and re-submits the invoice.  The data input by the supplier is validated in real-time, eliminating the possibility of back-and-forth e-mails.

The result is less friction across the accounts payable lifecycle – including payments to suppliers.

Don’t risk falling behind your peers in accounts payable and putting your business at a disadvantage to its competitors.

Here are five tell-signs that it’s time to automate your AP and invoice processing:

1. Long invoice approval cycles.

Only 4 percent of businesses surveyed by IOFM pay all their invoices on time.  Worse, 6 percent of businesses pay less than half their supplier invoices on time.  Long approval cycles result in late-payment penalties, supplier inquiries regarding invoice status, strained supplier relationships and missed early payment discounts.  One reason most AP departments cannot pay more supplier invoices on time is due to their manual and semi-automated processes.  Automation eliminates many of the time-consuming tasks associated with approving and posting invoices.

In addition, invoices from any delivery channel, and in any format, are received, digitized and aggregated into single platform.  Intelligent data capture technology automatically extracts and validates supplier, header and line-item data from invoices received as paper or electronically.  Invoices then are matched with purchase orders.  Invoices that require approval or exceptions handling are digitally routed based on pre-configured business workflows. This prevents invoices from becoming lost, misfiled or “stuck” on the desk of an approver who is out of office.  Top-performing accounts payable departments process PO-based invoices 29 percent faster than their peers. And they process non-PO-based invoices 33 percent faster than their peers, The Hackett Group says.

2. High invoice processing costs.

Manual tasks drive up the cost of any task, and processing invoices is no exception.  Automation eliminates the manual processes that make accounts payable processing one of the most expensive finance and administration functions, including keying, matching invoices with purchase orders, tracking down purchasers, routing invoices for approval, making back-and-forth phone calls and e-mails to resolve exceptions, filing and retrieving invoices, preparing reports and gathering information for auditors.  That’s why accounts payable departments with a high level of automation spend less than one-fourth as much as their peers with little or no automation to process a single invoice, per IOFM.

3. Too many duplicate invoices/payments.

Thirty-nine percent of businesses report that duplicate payments and over-payments represent more than 1 percent of their payments.  A good rule of thumb is that a duplicate payment rate over 0.5 percent indicates weak controls. Or that the master vendor file needs a good weeding out, per IOFM’s AP Department Benchmark and Analysis.

Manual invoice processes increase the chance of errors because of mis-keyed information, and no validation of invoices or invoice data.  Automation improves accuracy by validating invoice data early in the process against information in downstream systems, providing fast online access to supporting data, detecting duplicate invoices, facilitating collaboration between suppliers and internal stakeholders and identifying problem suppliers.

 4. Low staff productivity.

Manually processing invoices is labor-intensive work.  To illustrate, invoice data must be manually keyed and validated, invoices must be matched with purchase orders, purchasers must be tracked down, invoices must be physically routed or mailed for approval, purchasers often have to be reminded to approve invoices, exceptions require back-and-forth e-mails and phone calls, invoice data must be keyed into an ERP platform, invoices must be filed, and invoices must be reconciled with payments.  Some businesses even hand stamp or photocopy invoices as they are processed.

All these manual tasks consume staff time and keep them from high-value activities such as data analysis, supplier management and vendor master cleanup.  Invoice processing automation eliminates many of these manual tasks.  Accounts payable departments with a high level of automation process more than 11 times as many invoices per full-time equivalent (FTE) as their peers with little or no automation, per IOFM.

5. Missed early payment discounts.

Most accounts payable departments capture less than 21 percent of all early payment discount offers, IOFM reports.  The root of the problem at most businesses is that it takes so long to approve an invoice that the window has slammed shut on any meaningful early payment discount.  Don’t leave money on the table.  Automation speeds invoice approval and exceptions workflows.

Businesses that take advantage of just a discount term of 1/10 net 30 earn an annualized 18 percent return.  IOFM’s AP Department Benchmarking & Analysis finds that moving to higher levels of automation clears the way for businesses to pay more supplier invoices within the discount period.

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Edenred Pay, an Edenred Company, is the global leader in invoice-to-pay automation. Our integrated platform connects businesses with suppliers, ERPs, banks, FinTechs, and payment rails to automate, optimize, and monetize the entire B2B payments lifecycle – from invoice receipt through payment reconciliation. Edenred Pay’s efficient, integrated solutions create a frictionless process and help deliver value to the enterprise by enhancing visibility and monetizing AP.

Visit www.edenredpay.com or contact us to learn more.