By implementing automated invoice processing, companies can reduce costs related to error-prone accounts payables workflows, and avoid rising operational costs. But there are other benefits of invoice automation that you’ll find explained in this article. Let’s dive in!
Did you ever wonder when were the first invoices made?
Probably not, because this type of financial document has been around forever – or that’s what seems to be the case.
Historians date prototypes of invoices – that is clay slabs or rocks with carved numbers, symbols, drawings, or names – back to the times of Mesopotamia. In fact, the earliest notion goes all the way to 2900 BCE.
The above is, obviously, just a fun fact; However, history proves that documents that established trade agreements between two parties are embedded in the history of civilization.
Where the money went, documents followed.
The modern design of an invoice is the result of the change that happened in the world of business. You might recall the vintage templates, being all decorous and fancy.
Like this one.
The reason for this rich ornamentation was the function of an invoice. Not only was it a trade document, but also a powerful marketing tool.
Modern invoices serve a narrowed-down purpose and are primarily used by accounts payables (AP in short) teams or small business owners. The core function didn’t change at all – it still is a document that confirms trade between two sides, with the agreed-upon sum that is to be transferred.
Given the volume of invoices that even a medium-size company deals with today, document workflows can become very complex – that’s where automated invoice processing comes in handy.
What is automated invoice processing?
Instead of manual invoices – a traditional way of entering invoice data, creating paper documents, and so on – automated invoice processing refers to solutions that assist accounts payables teams in receiving, classifying, and conducting any further operations on these documents. Invoice automation helps with data extraction, streamlining workflows, and approving new or changed documents faster.
Furthermore, invoice automation is often part of a bigger transformation in the team and a shift from traditional bookkeeping to an automated accounting system.
Let’s consider a basic workflow of an invoice.
Invoices are sent from Company A to company B. The accounts payables team at Company B receives the document and scans the physical invoice unless it is provided in a digital form already.
AP team then analyzes the invoices and manually processes data entries in the invoice – amount to be paid, the correctness of taxes, amount of products delivered, addresses, dates, etc. It’s a prone-to-error, long process.
After the invoice is approved, the team fills the data into the ERP system, so that Company B stores all financial information in one, integrated system. Understandably, huge companies require a significant headcount to deal with accounts payables. So, if Company A and Company B are large enterprises, both teams have plenty on their plate – the process drags on.
At the end of the process, Company B wires the amount to be paid to Company A.
Such a process done manually takes days.
There’s a reason why most companies insist on longer payment deadlines – 30, 60, or even 120 days from the issue date. If all invoices were to be paid in 7 business days, most large companies and start-ups would have serious issues with cash flow.
How does automated invoice processing speed up the work?
There are several kinds of invoice automation tools available on the market. The key categorization is:
- rule-based invoice automation solutions
- intelligent invoice automation solutions
We’ll focus on the latter case of AI-based invoice automation – the most advanced kind of such solution.
Let’s go back to the example of Company A and Company B.
A new invoice is received by the AP team, which traditionally would need to manually process it. After the invoice appears in the digital accounting system, the document is scanned as part of the OCR (Optical Character Recognition) process. The platform reads the text, tables, and the context of the document content.
The next step is data extraction – an automated way of reading particular data pieces from the document and creating a structured view of this data. The tool also deals with invoice matching – a process of finding a corresponding number of Purchase orders to match the received invoice.
Pieces of information that can be extracted include:
- Seller’s name
- Seller’s address
- Bank account number
- Amount to be paid
- and so on.
Instead of manual invoice processing, the AP specialist benefits from a much faster workflow.
The best data extractions tools – such as Alphamoon – are based on AI that supports each step in the process. In comparison with rule-based tools, Alphamoon extracts data from any layout of the invoice and various types of files too.
Additionally, Alphamoon incorporates natural language processing and deep learning techniques to provide the highest levels of accuracy in machine data extraction.
Business Benefits Of Automated Invoice Processing
Since the process is clear, let’s move to the crucial part of the benefits of invoice automation.
1. Quicker turnover of documents
Where most AP teams struggle is the part of invoice processing that refers to manual data entry. Analyzing each invoice and copying pieces of information and pasting it into the accounting software or ERP can take hours, if not days (in terms of large volumes in particular).
Automated invoice processing permanently decreases the time spent on data extraction because this step is fully automated. In addition, tools that incorporate intelligent document processing are based on machine learning.
Hence, the more invoices your team processes, the more efficient the platform will become.
2. A higher degree of security of your financial documents
Invoices reflect the current state of your business in various ways. The insights regarding your contractors, or wages paid to employees on B2B contracts, aren’t necessarily the kind of information you’d like to disclose to, let’s say, your competition.
That is why simplifying the accounts payables process also increases the security of your financial documents.
3. Reduced processing time
Invoice automation can save you up to 70% of processing time.
The main goal of automated invoice processing is to minimize the laborious work required to complete the procure-to-pay cycle.
Employees can approve invoices much faster, and release payments on time. Furthermore, relying on AI-based platforms can positively impact the approval ladder.
Instead of a few people drawn into the approval process, you’ll need one employee to validate extracted data and then accept it.
4. Alignment with sustainability mission/values
Sustainability is no longer the hot scoop of the start-up world.
While consumers pressure companies to be more considerate about the environment, some businesses expect the same from their contractors.
With invoice automation up and running, you no longer need to receive physical documents or make scans that consume paper and electricity.
Even Dwight Schrute from The Office would approve this message of going paperless for the sake of a better future for the planet.
5. Gaining valuable insights from structured data
Planning your future spending and assessing the healthiness of your business will be easier thanks to automated invoice processing.
You’ll gain valuable insights into your cash flows, which allows your business teams to plan future spending, model revenue streams, and engineer better growth strategies.
Also, Machine learning empowers your teams to harness data about your customers – what are the client segments based on the amounts they pay. Thanks to such data you may see the first signals of a shift in the market that may be the result of new entrants or a cheaper alternative to your services.
6. Modern technology gets better as it learns
Do you recall your first encounter with math at school?
To most humans, math requires hours of solving equations and problems to become fluent.
The principle of machine learning is that every algorithm needs input to learn itself. Just like humans, AI becomes sharper and quicker with time and practice. There are various ways to train AI, but the need for large databases is common for all kinds of automation.
The above guarantees that the investment in invoice automation pays off in the long-term perspective (aside from short-term benefits). Less time spent on manual work can lead to optimizations found elsewhere.
7. A shift of focus among your employees
Among the most brilliant time-saving inventions of humankind is the printing press devised by Johannes Gutenberg. This technology has led to a series of dramatic social and cultural changes. Easier access to books and printed word has largely helped with illiteracy and spreading political and general knowledge.
Following the steps of Gutenberg, automation improves productivity because employees benefit from AI assistance in mundane tasks. More time can be dedicated to intellectual challenges that generate business value.
Your team’s morale also depends on the growth opportunities your company offers, and the more tedious tasks aren’t automated, the bigger the talent churn will be.
Things get even worse for small businesses.
A worrying finding warns that the so-called SOHOs (small business owners) tend to spend 30% of their working time on unprofitable administration tasks, including invoices processing.
8. Fewer errors in invoice processing
People make mistakes at work all the time, and for many reasons or due to many factors. Being pressed against time, working in stressful conditions, or not getting enough sleep – are just examples of what influences an employee’s performance.
Now, some errors can be disastrously costly.
Reconciliation can take days, and forgetting about a particular invoice might result in a breach of contract. None of which you’d want for your company.
And while some companies intentionally pay invoices later than expected to keep their cash flow breathing, that’s a strategy that goes south in most cases.
Automated invoice processing helps to prevent those mistakes and delays. Most mistakes happen during manual data entry.
When this part of the process is automated, your team can correct or transform the extracted field, and move to other tasks. Such a function is included in Alphamoon’s platform, where a dedicated person can correct data entries that the AI marks as “uncertain”.
9. No need to hire more people even when growing
Did you ever hear the term human-centered AI?
Sci-fi films and books tend to propel thinking that modern technologies exist and expand to take away our jobs and eventually obliterate human civilization. Those catastrophic visions sell incredibly well – i.e. Matrix (1999) and its popularity – but have little common sense.
The reality in the business world is that AI centers on assisting and improving the work of humans. By lifting the weight of repeatable, often tedious tasks, AI enables companies to tap into their true potential.
From a purely business perspective, invoice automation can help you keep your AP team’s headcount at the same level even when your company’s turnover grows. The growing volume of invoices won’t overwhelm the AI-based platform, and it adds very little time to the schedule of your employees too.
10. Tapping into modern technologies including AI OCR and AI-based data extraction
On a more general note, invoice automation helps to foster forward-thinking in your company’s conduct.
By limiting the manual work that’s easy to outsource to machine learning and artificial intelligence, you’re uncapping the true potential of your teams.
Alphamoon – Intelligent Document Processing platform for Invoice Automation
Let’s recap the findings we’ve discussed in this article:
- Automated Invoice Processing refers to platforms that enable accounts payables teams to process financial documents much faster, and with significantly fewer errors.
- Invoice automation helps to shorten the time required to process a single invoice
- Businesses can benefit from increased security of their documents, as well as better control over headcount
- Extracting data automatically leads to positive ROI, better insights and knowledge from documents, and fewer human-made errors made in the process
- Payments made on time guarantee better relationships with contractors
- Automated invoice processing can be the first step in increasing a company’s technological advancement
Alphamoon can help you achieve all of the above goals thanks to our invoice automation platform. With Alphamoon, you’ll have access to:
- Up to 98% of data extraction accuracy from invoices
- The leading solution for table extraction
- One platform to store and process your invoices
- A secure, cloud-based system