Are you still processing invoices manually?
If you said yes, you are not alone. A survey a couple of years ago reported that 84% of small businesses relied on manual processes. As you probably know, manually processing invoices is very tedious and labor-intensive. Accounts payable automation software can help your AP It costs $10 to process an invoice with little or no AP automation according to a recent study2. But, it costs $2.07 per invoice with AP automation.
The fact that manual invoice processing is expensive, is probably not news to you. But maybe going to the next step has been a stumbling point for you. That is the reason I am writing this article. I will give you the information you need to determine what you need and pick a system to meet your needs.
What is Invoice Process Automation or Accounts Payable Automation?
Accounts Payable automation is software that streamlines and automates the AP processes. It removes manual tasks. And automates the approval process and reduces data entry errors. Processing invoices are carried out in five main steps.
1. Invoice Capture
Invoices arrive at your office in several formats; paper, electronic, and via portals. You scan and OCR (optical character recognition) the paper invoices to capture the data.
Some documents arrive as electronic invoices. Most of them are PDFs. Your capture software extracts the text from the electronic documents.
You must download invoices delivered on vendor portals.
Capture is one of the most critical steps of the invoice process automation process. The invoice capture software uses zone OCR, pattern matching, machine learning, and artificial intelligence to recognize and capture data from invoices. It captures the vendor name, date, PO number, invoice total, and other important fields of information. And it stores the data for use later in the AP automation process. The format of vendor invoices varies, and this makes capture complicated. And the critical data needed to be captured can be anyplace on the invoice.
Some accounts payable automation software systems can capture line item detail. The number of line items and the layout of the fields varies making this part of the capture complicated.
“Your AP automation workflow reduced the time we spend processing AP invoices by 50%.
I cannot even begin to express how elated I am with this product!!!!!!”
Dee Bradshaw, Community Health Centers, Winter Garden, FL
“I feel much more confident in the process now that there’s less risk of error (because of our Laserfiche AP workflow)”
“They work with us as if they are a part of our Company. The accounts payable workflow they created for us was comprehensive. and well done”.
Thor Nelson, Chief Operating Officer, Aspen Waste
“When I needed an old finance report, I would have to search for it among 30 banker boxes. Now, those reports are available with the click of his mouse. You just can’t imagine how you appreciate that time savings when you’re busy.”
Win Grandstrand, Finance Director, Community Action Partnership of Suburban Hennepin
“I can’t imagine what we would do without Laserfiche. I would never want to go back.”
Bill Ruhlman
CFO, Aspen Waste Systems
Capture Step – Realistic Expectations
It is good to have realistic expectations with the invoice capture software. OCR technology is 80%-95% accurate. Capturing data accurately off of PDFs also has its challenges because there are so many ways to create a PDF. Some methods are better than others. Some methods of creating a PDF also include the text that the PDF represents. If this is high quality, capturing the data is easy and accurate. But if the text is not high quality, getting accurate data is more challenging. And other PDF formats have no text, so the invoice capture software much uses the OCR process to capture data. And since there are so many variations in the layout of the invoices it is nearly impossible to capture invoices with 100% accuracy.
Benefits of A Good Automatic Invoice Capture:
- Cost savings\
- Captures invoice data necessary
- Reduces manual data entry
- Streamline the process of getting invoices paid
- Reduces human error
2. Invoice Verification
You should expect that you will have to manually verify the data. This brings me to the next step in processing invoices, the verification step.
In this step in the invoice processing process, the data extracted from the invoice is validated. This is done by a combination of manual and automated processes. An operator should look at the invoice and verify the data is captured correctly. Also, the AP automation software validates the invoice by querying the accounting software. It verifies if the vendor captured off of the invoice is a valid vendor in your AP system.
If you use a purchase order, it can verify the invoice that matches the PO. In this step, the GL code information is added to the invoice meta-data.
Benefits of Invoice Verification
- Allows errors to be corrected early in the process
- Make sure the wrong vendor doesn’t get paid
- Verify correct amount gets paid
- Check to make sure the invoice matches the purchase order
- Once the invoice is verified, it moves to the next step approval.
- Check for duplicate invoices
3. Invoice Approval
The issue that plagues many companies is invoice approval. They find it difficult to get the appropriate approval for an invoice on time. And the AP department has no visibility. So the accounts payable staff have to contact each person in the approval process to make sure they approve all invoices that need to be paid.
For this reason alone, you should automate your accounts payable process.
Modern AP process automation systems use workflow tools to automate it. Suddenly, your AP department doesn’t have to worry about chasing down approvers. The approval workflow monitors the approval process in real-time and makes sure the AP teams have the approved invoices when they need them
And a good AP automation solution allows you to set up the workflow following your exact approval process. It routes each invoice to the appropriate approvers. This ensures that every invoice follows your exact approval process. And expedites invoices that are not approved in a timely manner.
Also, good workflow products can make sure approvals happen promptly. And when necessary, send reminders to anyone late. If approvers do not respond, the system can escalate invoices to their supervisor.
We use Laserfiche ECM to develop our Intelligent Invoice Capture and Automation solution.
Benefits of Automated Invoice Approval Workflow
- Reduce costs
- Reduces frustration of the AP department
- Speeds up the payment process
- Saves accounting staff time
- Reduces turn over of staff
- Better visibility
Once the workflow is completed the approval process, the invoice is ready for the data entry step.
4. Invoice Data Entry
In this step, data is either entered manually into the accounting software or it is automatically entered by a software integration between the accounts payable automation software and your accounting software (ERP). When you choose to use the automatic method, you eliminate the chance for manual data entry errors and you save an enormous amount of time.
The automation method of data entry uses either a software integration sometime called an API with your accounting software. If no integration or API is available, a CSV file can be created by your AP automation software solution. This CSV can be imported into your accounting system.
A new technology, RPA (robotic process automation), can be used. In this method, the software replicates the keystrokes it would manually take to enter the data into the accounting software.
We have helped many companies to integrate our advanced AP automation solution into their ERP or accounting system. One of the popular accounting software that we integrate with is Abila MIP. We have also Tyler, Accountmate, Quickbooks, Microsoft Great Plains, NetSuite, and many more. Most ERP or accounting software systems give us the ability to automate their accounts payable process and reduce their data entry.
Benefits of Automated Invoice Data Entry
Allows a company to grow without hiring more AP team members
- Save time and resources
- Improve the job satisfaction of your accounts payable professionals
- Reduce turnover in accounting staff
- Reduce manual data entry errors
- Allows accounts payable professionals to do higher-valued work
5. File Completed Invoices
Finally, the last step is to archive the invoice in the proper location. There are several ways that people want their invoices archived. We have often combined the invoice, the PO, and the check into one document. And, stores it in the vendor-paid file by vendor and date. This makes auditing very simple. But, no matter what your filing system looks like, a good workflow system should be able to automatically file your invoices in the proper location in the proper format.
Most solutions that automate accounts payable do a poor job of this, they typically sort the approved invoices as PDFs on the network. These documents are not very secure. A user can easily delete them or inadvertently move them to a different folder. Once that happens, it is difficult to find them. You only have the document name to use to search.
With a solution such as ours, Laserfiche allows you to search on vendor name, vendor number, invoice amount, due date, PO number, and even any text on an invoice such as a serial number.
- Benefits of the Storage of Good Invoice Approval Process System \
- Search by any field of data
- Full-text search – find any invoice using text on the document such as serial number
- More complete security controls
- Reduces the chance of user storing invoices in the wrong location
- Reduced the chance of a user