Pay on Time, Every Time: Streamlining Invoice Workflows with Invoice Automation

In a 2022 survey by PYMNTS.com, 9 out of 10 CFOs reported that their companies had already started their digital transformation or planned to do so. However, with just 52% of invoices received electronically and the rest in paper format, finance businesses still have a long way to go.

A crucial way to start is digitizing the mainstay of financial operations: invoice processing. Existing automation technologies—such as RPA (Robotic Process Automation), IA (Intelligent Automation), and OCR (Optical Character Recognition)—are all well-suited for handling many AP tasks, including invoice processing. As Generative AI and other solutions become more sophisticated, invoice automation capabilities will only improve.

Keen to find out more about the ins and outs of invoice automation and what the future holds for invoice processing? Read on.

Let’s start with the essentials: what’s invoice automation? Put simply, it refers to handing over steps of invoice processing workflows to software. Invoice automation systems are integrated with other business platforms, such as ERP, which instantly extract and update AP information, supporting the transition to digitized accounting. Similar finance automation technologies are commonly applied in payroll, banking, and accounting.

Invoice automation aims to reduce—and ideally replace—the manual effort, leading to lower costs, higher efficiency, improved accuracy, and less employee burnout.

Watch our RPA bot automatically processing an invoice submitted via ClickUp form.

Do traditional invoice processing methods work? Most of the time, they do. Do they work accurately and quickly? Most of the time, they don’t. Here are the most common challenges accounting departments face when dealing with invoices manually:

Invoice IDs, addresses, dates, billing, and vendor details must all be extracted from the invoice and entered into your accounting system. This tedious chore requires hours of daily manual effort and prevents AP specialists from focusing on higher-value tasks.

Time inefficiencies are only half of the story; worst of all, manual invoice processing inevitably leads to human error. These mistakes include duplicate invoices, misplacements, inconsistencies, incorrect payments, etc.

Paper invoices may quickly pile up, and the more there are, the tougher it gets to screen accounting processes for errors and discrepancies continuously. Once invoices are processed, they end up scanned or, in the worst-case scenario, physically stored in files or folders, which makes them difficult to retrieve.

Handling sensitive transactional data manually puts an organization at risk. Manual invoice processing leaves gaps that bad actors may seek to exploit, e.g., by submitting fraudulent bills. Manual auditing may also prove insufficient, potentially leading to non-compliance and severe penalties.

Manual approvals, handovers, version control, and managing past payments all contribute to slower invoice processing workflows. This forces businesses into a vicious cycle of endlessly recruiting additional accountants as the company grows.

All challenges listed above affect the cash flow in and out of your organization. Income bottlenecks can have profound consequences, especially for SMEs or businesses without emergency reserves.

Invoice automation processes are based on traditional AP workflows. After the accounting department receives an invoice, finance specialists match it to the corresponding purchase order. Then, they enter transaction details into the system and submit the invoice for approval.

Automated invoice processing software can assist accountants at all steps of this process. Here are the key components of the automated invoice workflow.

Invoice automation solutions are designed to connect seamlessly with key accounting systems such as ERP. This helps keep all transactional data up to date across the organization and expedites approval and payment processes. The invoice automation platform also integrates with your business communication channels like email, chat, or task management platforms.

Invoices can come in paper and electronic formats and vary in fields or layout. Invoice automation systems use OCR or ML (machine learning) to capture transaction information such as vendor details, invoice numbers, dates, etc. Based on that information, the software converts all invoices into a standardized format for further processing.

The invoice automation system matches the extracted invoice data to POs and bills. If the software detects errors or exceptions, it automatically flags them and submits them for manual review. Since automation significantly reduces the validation process, it enables organizations to implement more efficient—but also more time-consuming—verification measures such as three-way matching.

Invoices that require approval or include exceptions are routed to predefined reviewers. Users define the approval workflow based on the supplier, invoice amount, general ledger code, or other criteria. The invoice is tracked along its way to prevent it from getting lost or sent to the wrong person. Reviewers receive automated notifications about incoming deadlines to ensure timely approval. An invoice can be moved to the next stage only once all discrepancies are corrected.

Some invoice automation platforms have built-in analytics features that monitor invoice processing workflows. Based on the analysis, the system generates insights into process performance, helping organizations identify issues and potential improvements.

A recent study by Forrester revealed that invoice automation can speed up invoice processing by 80% compared to the manual workflow. Increased productivity is just one of the benefits of automated invoicing; here are several more that will convince even the staunchest non-believers:

To inspire you, we’ve collected some stories of companies that elevated their accounting processes to new heights by implementing invoice automation.

Even an international giant like Canon can face AP bottlenecks. Its USA branch was overwhelmed with paperwork, and its current automation invoice automation wasn’t accurate enough to reliably replace human reviewers.

Switching to UiPath’s AI-based invoice automation service, Canon radically reduced the human intervention rate, delegating 90% of invoice processing effort to the software. 4500 invoices are handled automatically each month, saving Canon 6000 hours of employee time each year.

Serving various services to its 250000 members across 400 locations, Central England Co-operative Society is one of the largest independent retailers in the UK. The company wanted to introduce a more regular invoice reconciliation schedule, increasing the frequency from once or twice a year to once every month.

Invoice automation was the only way to achieve that rate without compromising accuracy. The Society opted for Blue Prism’s document processing solution to handle the reconciliation of about 1300 invoices from a broad range of suppliers monthly. If necessary, the process can run daily, with the same accuracy and friction of human effort.

Capita Group, the UK’s primary business process outsourcing company, struggled with inefficient and error-prone manual data entry workflows and insufficient visibility. These challenges elevated the processing cost of a single invoice to £8, which is much more than the generally accepted standard.

By implementing Kofax’s invoice automation system, Capita streamlined data extraction and entry into its SAP, invoice verification and approval, and overall traceability. Capita now uses the system to process more than 400000 invoices annually at just over £2 per invoice cost.

While invoice automation already saves accounting departments thousands of hours, its capabilities will only improve as it integrates emerging technologies. What are they?

AI has been the defining technology of the past couple of years, and it will impact AP processes just as much as any other business activity. From the invoice processing perspective, integrating AI will mean higher accuracy, better extraction regardless of invoice format, and truly intelligent, self-learning fraud detection systems.

As more and more organizations adopt invoice automation, they begin to realize that this is just a stepping stone to overall financial process optimization. In the near future, we can expect automation service providers to offer end-to-end AP/AR solutions that will encompass invoicing, AP collections, and payment processing.

Blockchain-based transaction ledgers offer several benefits: they are safe, tamper-proof, and easily track any changes made to the document. As such, it can potentially address transparency issues, fraud attempts, unauthorized access, and other security concerns.

From budgeting and managing cash flow to avoiding late payment penalties, one cannot understate the importance of accurate payment timeline predictions. By applying ML and large volumes of historical data, predictive analytics will be able to forecast invoice payment times and enhance financial planning reliably.

Accounting teams know it all too well: an urgent invoice is sent for approval to a key manager who’s temporarily unavailable. Integrating mobile applications with automated invoice processing systems will allow stakeholders to review, approve, or reject invoices directly from their smartphones without missing a payment deadline.

Self-service invoice portals are beneficial both for accounting teams, which spend less time on invoice processing and for suppliers, who can take a more active role in ensuring timely payments. More and more companies will launch or improve their supplier platforms to streamline invoicing and promote collaboration with their partners.

Rule-based invoice categorization is definitely faster than human accountants, but it’s not as good at identifying complex textual relationships or determining new patterns. NLP (natural language processing) has the potential to achieve near-human levels of text analysis in edge scenarios, improving classification accuracy while maintaining high processing efficiency.

As the lifeblood of any business, invoicing processes have a far-reaching impact on your organization. As such, automating these workflows holds the potential to enhance its overall operational efficiency.

However, on your journey toward invoice automation, you’ll require the assistance of experienced automation developers and automation advisors. Our experts are here to help you and guide you to complex, end-to-end optimization. Just get in touch!