Four Benefits of Invoice Automation

Four Benefits of Invoice Automation

When you hear the term “invoice management” what comes to mind? Dull, repetitive, slow, manual? What about “invoice automation”? Exciting, streamlined, fast, automated? Maybe not exciting, but the others are definitely part of an efficient and effective invoice process.

Invoice automation is about automating the predictable and repeatable activities. If your accounts payable (AP) invoice process isn’t automated, it should be; it just makes sense (cents?). In this Insights blog, I’ll go over four benefits of invoice automation. Each benefit we’ll talk about is a predictable and repeatable activity. The four activities, for the most part, make up the [predictable and repeatable] invoice process.

What are the Four Benefits of Invoice Automation?

Clearly there are more than four benefits of automating your invoice process. What I’ll focus on are four key activities in the invoice process. I’ll explain how each, when implemented properly, adds business value by reducing costs and increasing efficiency. The four key benefits are:

  1. Import automation
  2. Field recognition and capture
  3. System integration
  4. Approval automation

What ties these four activities together? As mentioned earlier, it is workflow. It goes without saying that a flexible workflow tool is a must for a complete solution.

Now let’s look at each activity in detail.

Import Automation

Do your vendors email you invoices directly? Do you have a dedicated email address like “accounts-payable@****.com”? If you do, then you’re half-way there. How? Well many document management tools can monitor a dedicated email address and import invoice attachments automatically. No need for a person to check an email mailbox every so often. Or drag and drop the invoices somewhere, and then archive the email “just in case”.

Let’s clarify what I mean by import automation. At a basic level it’s all about getting invoices from a vendor and filing in a content management system automatically. That’s right, without a lot of manual intervention.

For example, if you get the same kind of invoice from the same vendor each month then you should use an automated process. That process will recognize the vendor and file it in the correct folder in your content management system. Sometimes you’ll need manual intervention, like when you add a new vendor, but manual should be the exception not the [business] rule.

Field Recognition and Capture

Re-keying is bad. Not only does it take time, but it also introduces mistakes. You’re thinking “but I have OCR, so I don’t have re-keying mistakes”…Well, it still takes time, and copy-and-paste is not foolproof. The answer? Automated field recognition and capture. Yes, software that goes beyond OCR and also recognizes the field types. The technology is here. And it works.

But how does it work? Companies like Rossum use artificial intelligence (AI) to recognize patterns. For example, “Invoice: ” or “Invoice No.” or similar is typically paired up with number/letter combinations. The AI reasons, with some level of confidence, that the number/letter part of the paring wherever it is on the invoice is the invoice number. The AI will do this same pattern recognition for other parts of the invoice, like addresses, subtotals, taxes, and totals, due dates, and terms (eg, 2/10 Net 30).

How accurate is it? Very. Why? It gets trained by you! When you first implement a field recognition and capture tool, it will have some “out of the box” training. However, it learns when you provide feedback.

For example, if you have a vendor that places your customer number next to the invoice number—and both have 8 digits—you “train” the AI to recognize the invoice number, which maybe is always the second number, or always starts with ‘000’. You do that training for all of the fields you want to capture and send to your accounting or ERP system…automatically.

System Integration

Field recognition and capture is most effective when your document management system is integrated with your ERP or accounting software. We’re not talking about the days of batch processing where the two systems sync up in an hour or even (“gasp!”) overnight. Rather, it’s all about real-time processing.

Real-time processing keeps the information (ie, metadata) in both system in sync, much like enterprise file sync and share (EFSS) services like Dropbox, OneDrive or Google Drive keep files in sync between computers. For example, when you add a vendor in your document management system, it should be added to your accounting system automatically—and vice-versa. Don’t duplicate, replicate!

The difference between EFSS and real-time processing is the word “processing”. When information is synchronized in real time between two business systems, it can (and should) trigger workflows, like approvals or payments (for more on approval, read the next section).

Approval Automation

The invoice approval process is an accounting function that hasn’t really changed much in 100 years. Although paper invoices have largely been replaced by “electronic” ones, there is still paper and electronic is often a PDF. The approval process itself is basically the same for paper or faux-paper (ie, PDF):

StepInvoice approval process
1Open mail / email
2Reconcile invoice against PO and receiving report (3-way match)
3Place invoices in a physical / virtual inbox for approval
4Approve invoices for payment
5File in a physical / virtual filing cabinet
6Authorize payment to vendors

So how should it work? Approval automation is the natural conclusion to the three previously discussed activities. After you’ve imported (import automation) and captured key details (field recognition and capture) and reconciled (via system integration), you can automate approvals.

Approval automation is built around business rules and controls. Business rules state things like “every invoice over $10,000 must be approved by two managers” and business rules can (and, of course, should) be incorporated into workflows. Controls ensure appropriate separation of duties (eg, the same person can’t initiate a PO, approve an invoice AND authorize payment…).

These rules and controls can be designed around and incorporated into workflows. Using groups for permissions (who can approve what), escalations for exceptions (amounts above a threshold), and reminders for upcoming and overdue tasks, a properly implemented approval process increases the efficiency and consistency of the AP approval process.

Things to Consider for Invoice Automation

Remember, computers are very fast when dealing with absolutes: Always, never, must, must not, over $10,000 and so on. These repeatable absolutes are the basis for the four benefits of invoice automation we’ve discussed. Of course, all of this automation must consider your company’s policies, procedures, business rules, and internal and compensating controls. After all you need to keep management, and the internal and external auditors happy.

So remember, for invoice automation to be most efficient, you should automate your predictable and repeatable activities. And don’t forget, your solution must be able to incorporate your business rules and controls (policies and procedures). Happy bill paying!

Want more information about Ovitas invoice automation solutions? Check out some of the key benefits ELO can offer. Any other questions? Contact us—we’ll help you automate your invoice process.