How to automate invoice processing

As your business evolves, you’ll likely find yourself managing more invoices. Old manual workflows for invoice processing may not be as effective, and the stakes for making accurate payments on time may be higher. An efficient accounts payable department is vital for helping your business manage its cash flow efficiently.

However, many employees find themselves caught up in piles of paper invoices and tedious manual data entry. Lengthy approval workflows, manual data capture methods, and outdated accounting systems can ultimately slow your business down.

Even if your business is small, integrating tools to automate invoice approvals and payments can help streamline your business processes and save you time in the long run.

How to automate invoice processing: In summary

• Automated invoice processing uses software to automatically manage and process invoices and payments.

• It helps save your business valuable time and resources, so your employees can focus on less admin-heavy tasks.

• It’s important you choose the right invoice processing tools to suit your business’s needs, and to ensure the software scales with you as you grow.

What is automated invoice processing?

Automated invoice processing uses software to automatically capture, extract, process and approve invoices and payments. It handles data from arrival to archive, and helps reduce manual time spent on admin work, as well as data errors and delivery delays. Overall, it frees up employee time and contributes to more efficient and streamlined workflows.

Meanwhile, manual invoice processing achieves the same goal, but is usually managed manually by the accounts payable team by using specific invoicing systems.

Whether automatic or manual, the process handles the invoice lifecycle, right from receipt to approval or rejection, then onto payment, and finally to archive. It matches invoices to purchase orders and payment terms, ensuring that all vendor invoices are paid correctly and on time.

As your business scales up and the number of invoices you handle increases, you’ll need an efficient workflow for invoice processing. Certain tools can help automate invoice approvals and payments, ensuring you don’t sacrifice quality for quantity. Otherwise, you may risk not paying bills on time, incurring late fees, and annoying your suppliers.

When invoices are correctly processed, businesses can improve their cash flow by getting better payment terms, discounts, or more favourable pricing. For example, some suppliers offer early payment discounts to businesses.

Using automated invoice processing can help you go paperless and make your accounts payable process more efficient and accurate.

Why automate invoice processing?

There are many benefits to automating invoice processing, regardless of how large your business is. From streamlining employee workflows to reducing data errors, let’s explore a few below:

• Time savings: Automation helps free up valuable employee time for other business activities.

• Reduced errors and improved accuracy: The software minimises human error in data entry and calculations, ensuring greater accuracy and helps you comply.

• Faster payment cycles: Accurate and prompt automated invoice processing can lead to better supplier relationships and potential early payment discounts.

• Enhanced cash flow management: Automated processing and extraction help you gain clearer, real-time insights into outgoing funds.

• Cost reduction: The use of tools and software lowers operational costs associated with manual tasks.

• Better visibility and control: Automation tools provide a comprehensive audit trail and improved financial oversight.

How automated invoice processing works

Automated invoice software helps streamline existing manual processes, managing your invoice and payments data and freeing up valuable time. But how exactly does it work?

1. Digital invoice capture: When invoices are received (via email, PDF or a scanned paper document), the software converts them into usable digital formats.

2. Automated data extraction: The software uses Optical Character Recognition (OCR) and AI to extract the key data received, feeding the information directly into the systems and removing the need for manual entry.

3. Validation and matching: The information received is checked to ensure accuracy (for example, whether vendor information and calculations are correct). It’s then compared (matched) against purchase orders (POs) and receipts to ensure further accuracy.

4. Configuring approval workflows: The software can set up automated routing for invoice approvals based on predefined rules and hierarchies. You can adapt and change these rules to best fit your business needs and focuses.

5. Integration with accounting software: Automated processing software facilitates seamless data transfer to your accounting system for accurate record-keeping. This means you don’t have to organise a full process overhaul.

6. Automated payments: The software allows you to schedule and execute payments directly from the platform. So, no more missed deadlines and stronger vendor relationships.

7. Reporting and analytics: The data that the software pulls can be used for financial analysis and performance tracking. AI can identify key information, successes and anomalies that may prove vital for your business.

Tools to automate invoice approvals and payments

There are many different tools to help you automate your invoice approvals and payments—and they might not all come in larger software packages. It’s important to understand and select the tools that are the best fit for your business.

Here are a few examples:

• Dedicated invoice automation platforms. These are all-in-one platforms that provide comprehensive automation tools. For example, QuickBooks offers a robust platform for automated invoices and billing, payment reminders, data capture, and workflow automation.

• Making Tax Digital (MTD) software. Some HMRC-recognised MTD and accounting software facilitates automatic invoice management. This often includes automated invoicing, data capture and storage, and bank account integration. Bridging software also falls within MTD software. This acts as the ‘middleman’ between traditional methods of data management (like Excel sheets) and HMRC’s interface. It helps to automate the management and submission of invoice and tax data if a business wants to continue using traditional methods of data reporting

How to choose the right invoice automation solution

Selecting the right platform and tools for your business’s needs can help make automating invoice processing that much easier. Every organisation is different, so it’s a good idea to consider the following when making your decision:

• Business size and complexity: You’ll need to match the automation solution to the scale of your operations. Think about the size of your accounting team and the average number of invoices you usually process.

• Integration capabilities: Your chosen tools and software will need to be compatible with your existing accounting systems.

• Budget considerations: It’s a good idea to understand pricing models to ensure you’re getting a good return on investment. If you’re a small business with a one-person accounting team, there’s no point in investing in advanced platforms just yet.

• Scalability: With this in mind, you’ll want to evaluate the software’s ability to grow with your business. You may be small now, but with growth comes more invoices to process.

• Required features: Even before starting your research, decide on a few essential functions that you want your chosen software to have (e.g., multi-currency support, multi-entity management, and AI data capture).

• Usability and support: You’ll want to evaluate the platform’s ease of use and availability of customer support. At QuickBooks, we offer a free trial so you can see whether our tools are right for you. You can also cancel anytime. 

FAQs

What are the common challenges of manual invoice processing?

Some common challenges of manual invoice processing include human data errors—for example, typos and miscalculations, slow approval cycles and process bottlenecks. Automated invoice processing provides solutions to these issues, ensuring invoices are processed quickly and without error. This saves valuable employee time while helping to maintain vendor relationships and helps you stay compliant.

Is automated invoice processing secure?

Yes, automated invoice processing platforms are often highly secure. For example, QuickBooks software automatically encrypts data as soon as it’s stored. Our tools use advanced, industry-recognised data encryption and DigiCert^®-secured systems. Plus, every time anyone signs in, they must pass multi-factor authentication measures to gain access to any data.

What are the benefits of automated invoice processing?

The key benefits of automated invoice processing include reducing manual error and inaccurate calculations, speeding up the approval process and automating billing so that payment dates aren’t missed. Automated invoice processing can also save employee admin time, in turn freeing them up for other, more valuable tasks.

We hope you’ve found this article on invoice automation useful. Invoice processing can be complicated and time-consuming: make this process easier by using QuickBooks accounting software.

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