Invoice data capture may seem like a minor process in the big picture of your company’s operations but the accuracy and timing of its outputs can have a great impact on many of your business processes.
Fast and precise data extraction can help streamline critical functions and simplify complex workflows.
An automated solution can minimize human intervention, freeing up staff to handle higher-value tasks.
The AP process is important to businesses because it involves nearly all your company’s payments outside of payroll.
Regardless of your company’s size, the AP’s main responsibility is to manage invoice processing, approval, and payment.
During the processing stage, AP needs to check the legitimacy of the invoices as well as verify the accuracy of the data captured.
The supplier invoices come in different formats — therefore, the data capture process could prove to be challenging and time-consuming for your AP team.
This can have an impact on accuracy, which needs to be precise to ensure error-free processing.
The Invoice Process
What: The first part of the Accounts Payable (AP) process is receiving an invoice. Once you get an invoice, there’s a specific process that’s crucial to maintaining accurate financial records.
Why: As the process is typically manual and involves more steps, companies might need to think about automating it rather than process invoices manually.
Automation is beneficial because it can improve the visibility, productivity, accuracy and cost-effectiveness of a business’ payments process.
How: In Innovo Invoice’s case, here are the steps an Accounts Payable department needs to follow to process an invoice effectively — and automatically.
Verifying and tracking information
When a company needs to verify a purchase, it first needs to ensure the correct payment is in place and deliver the payment within the agreed terms.
Invoices should include the following information to help the vendor and purchaser track the payments or inventory and update their financial records:
• The date the vendor has created and sent the invoice
• Contact information of both the vendor and the purchaser, particularly billing information and the point of contact
• Purchase details, including product or service details and pricing
• Payment details
Once the AP department verifies that the vendor invoice contains all the correct information, they need to enter the data manually or using an automation tool and book it for accounting purposes.
Manually entering this data can take a lot of time and carries the risk of human error, which can be detrimental to a company’s financial records.
Hence using an automated system can reduce invoice processing costs by 75% to 85% while decreasing processing errors at the same time.
Having the tools you need to process this data also improves access to invoice data, which improves the service to vendors and results in the faster turnaround on payments and better relationships with supplier and vendors.
Forwarding and receiving approval
After the AP department verifies the invoice information, they need to submit the invoice for approval before they can send a payment.
A slow approval process can have significant payment turnaround times and revenue.
Paper invoices can be on a busy employee’s desk for months or get misplaced as it is moved around from desk to desk.
So, by using an automated invoice processing system, AP departments can save time tracking down lost documents or requesting invoice copies from vendors.
These solutions digitally capture the data from paper and invoices in PDF or JPEG formats and put them through a custom-designed workflow that speeds up the approval process. As a result, teams will be reducing and even eliminating the need for paper invoices and lower outgoing costs.
According to IMA, (Institute of Management Accountants), 28% of companies take 10–15 days to process a single invoice. And based on a study by Ardent, best in class performers process a single invoice within 3.5 days while the majority of companies will take 12 days to process a single invoice.
How to calculate your manual invoice processing costs
On top of the time spent processing and booking invoices, finance teams also spend considerable costs to perform these tasks.
You can get a more precise estimate of your own manual invoicing costs by examining the following:
• Total invoice processing time
• Total time spent reviewing invoices
• Total time spent identifying and correcting data entry errors, duplicate payments, etc.
• Storing and shipping costs for physical invoices
• Discounts missed and penalties incurred due to late payment, errors, etc.
• Total hours of work spent by staff performing invoicing duties rather than their assigned functions.
The idea is that by assessing your time and money spent on manual processing, you can determine what needs to be optimized and how.
The benefits that teams will see after moving to automation are real hence instead of spending more time performing admin tasks such as data entry and filing documents, companies will now be able to save time and create seamless work processes.