If you run a small business, you don’t want to drown in the sea of invoices and manual data extraction. “I’m fed up… I could spend this time doing something else,” you probably think. If so, we’ll show you the benefits of automated invoice processing today.
And if you’re dreaming of a simpler way to manage your business finances, automation is exactly what you need. Let’s dive into details to see how intelligent document processing tools can pull you out of the paperwork chaos.
What is Automated Invoice Processing?
Thanks to advancements in AI and machine learning, you can use tools that do automated invoice processing. These tools extract data automatically from invoices (and other documents). As a result, you can move past manual data entry, enhancing efficiency, reducing errors, and expediting financial workflows for businesses.
Automating invoices not only refers to extracting data from docs but also classifying, splitting pages and sending this data further to other pieces of software. Usually, automated invoice processing is useful for accounting departments, but as an SMB owner, you can benefit from it, too.
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 see a practical example of Company A and Company B.
A new invoice has been received by the team. 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. Modern OCR technologies are supported by AI, which enables them to tackle many challenges of image-to-text extraction, including low-quality resolution of printed text or noisy backgrounds.
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. Data extraction tools also deal 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.
What is Manual Invoice Processing?
On the other hand, manual invoice processing is a traditional approach where your team (or you) manually enter data into systems without automated technologies. This method is time-consuming, prone to errors, and can impede workflow efficiency.
Let’s see what a manual workflow looks like.
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.
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, the bigger the company, the more headcount it requires. So if both businesses are growing, 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 SMBs and start-ups would have serious issues with cash flow.
Let’s summarize automated and manual invoicing in a tabular form, for clarity.
Manual vs. Automated Invoice Data Extraction Comparison
This is a comparison table that summarizes key differences between manual and automated invoice data extraction.
| Aspect | Manual Invoice Data Entry | Automated Invoice Data Extraction |
| Time Efficiency | Time-consuming: Requires manual entry and data verification (around 5 minutes per invoice). | Time-saving: Rapid extraction and processing of data without manual input (around 10 seconds per invoice). |
| Accuracy | Prone to errors: Human error can lead to inaccuracies in data entry and prolonged processing time. | High accuracy: Automated systems use algorithms that can learn from previous mistakes (continual learning). |
| Costs | Labor-intensive: Requires human resources for data entry from paper invoices. | Cost-effective: Initial setup costs, but long-term savings in labor costs. |
| Scalability | Limited scalability: Manual processes may struggle with volume. | Highly scalable: Can handle a large volume of invoices without difficulty. |
| Processing Speed | Slow processing: Dependent on the speed of manual data entry. | Rapid processing: Automated systems can process multiple invoices quickly. |
| Data Security | Prone to security risks: Human errors and unauthorized access. | Enhanced security: Automated systems often have robust data security measures. |
| Error Handling | Manual error resolution: Requires manual identification and correction. | Automated error handling: Systems can automatically identify and correct errors. |
| Integration with Software | Limited integration: Manual data entry may not integrate seamlessly with other software. | Integration capabilities: Automated systems can integrate with various accounting and ERP software. |
| Learning Curve | Low learning curve: Minimal training is required for manual data entry. | Initial learning curve: Requires training to set up and understand automated systems. |
| Audit Trail | Limited audit trail: Difficult to track changes and history. | Enhanced audit trail: Automated systems often provide detailed logs and history. |
| Flexibility | Limited flexibility: Manual processes may struggle with diverse invoice formats. | High flexibility: Automated systems can adapt to various invoice formats. |
| Invoice Data Extraction Cost | Higher labor costs: Dependent on manual labor, leading to higher costs. | Lower labor costs: Automation reduces the need for extensive manual labor. |
If you already feel like testing automated invoice processing is your thing, you can try the Alphamoon tool for free with the first 20 documents.
11 Business Benefits Of Automated Invoice Processing
Since the process is clear, let’s move to the crucial part of the benefits of invoice automation.
Here’s the summary of all the business benefits of processing invoices automatically:
- Cost Reduction
- Time Savings and Improved Cash Flow Management
- Improved Accuracy and Error Detection
- Real-time Data Access
- Reduction of Paperwork and Establishment of an Audit Trail
- Integrations with Other Systems and Strengthened Vendor Relationships
- Accelerated Invoice Turnaround Time
- Data Analytics and Insights
- Enhanced Productivity
- Security and Compliance
- Ability to Scale Business Operations Without the Need for Additional Hiring
1. Cost Reduction
It’s crucial for small businesses to save money, especially during tough economic times.
Consider this: investing in new invoice processing software may seem like a cost, but it can actually help you save on labor and overhead expenses. Let’s break down the numbers.
| Manual Processing Cost | Automated Processing Cost |
| Cost of Manual Invoice Processing: If it takes 5 to 10 minutes to process one invoice manually, let’s assume an average of 7.5 minutes per invoice. Total Time (hours) = Number of Invoices x Time per Invoice Total Time (hours) = 150 invoices x 7.5 minutes = 1125 minutes = 18.75 hours Cost of Manual Processing: Given that the invoice processing person earns €15 per hour Cost of Manual Processing = 18.75 × €15 = €281.25 | Cost of Alphamoon for 150 Invoices: In the pay-as-you-go option, processing one document costs €0.4. Cost of using Alphamoon = 150 × €0.4 = €60 Cost of Monthly Subscription: The monthly subscription cost is €49, and it includes 250 pages. In this case, it’s more beneficial for you to subscribe to the platform and pay monthly €49 instead of €60. |
| Cost Reduction (on the pay-as-you-go) = €281.25 − €60 = €221.25 saved Cost Reduction (on subscription) = €281.25 − €49 = €232.25 saved In a yearly overview, your business can save up to €2787 (€232.25 x 12 months) considering you have to process 150 invoices every month. Of course, remember that you need a person who will use the automation tool (or it will be you), but still, it won’t require more than a couple of hours a month. | |
2. Time Savings and Improved Cash Flow Management
Time in business, besides money, is another key factor.
If you can save 10% of your weekly time on doing mundane stuff and dedicate this time to a more important task, you have already optimized a lot in your workflows. Not convinced?
Look, if you work 40 hours and you save 10% of your time every week, it’s 4 hours of saved time. As the year has 52 weeks, automation saves you 208 hours yearly. And that’s cool and impressive.
Thanks to IDP tools, your business can significantly reduce the time required for these tasks. This time-saving advantage enhances overall productivity and makes invoice processing faster.
Think about how to allocate these 208 hours a year because that’s a lot of time. You can focus more on:
- Building strategy and making decisions
- Evaluate current business processes and identify areas for improvement
- Nurture relationships with partners and prospects
- Refine marketing actions and brainstorm new ideas for the future
- Allocate time to research and development
- Invest in training programs for your employees
As you see there are many options to use this time better than manually plow through documents and say, a manual invoice approval process or in general keeping track of invoices.
3. Improved Accuracy and Error Detection
Besides costs, there is another key thing: the quality of extracted data and the correctness of invoice processing in general.
We have heard many stories from our customers about how frustrating errors in invoice processing are. A misplaced decimal point, a mistyped digit, or an overlooked detail can disrupt the entire financial system. The repercussions range from delayed payments to irate suppliers and potential financial discrepancies.
Your frustration can reach a peak when you realize that you spent the time on repetitive, error-prone tasks instead of doing more strategic financial analysis and contributing to the company’s growth
Not cool at all, right?
Automated invoice processing takes this pain out of the equation (almost 100%). Because IDP tools work like magic on invoices, the extracted data’s accuracy is near 100%.
Because of this, you can rest assured that the data a tool extracts from your documents is correct and ready for further transfers to other systems.
4. Real-time Data Access
For any business, quick access to data is key. Sometimes you have to verify the invoice number or check the correctness of an invoice amount.
Intelligent document processing tools give you data at hand, and you can do anything you want with this data.
This means exporting, extracting more data from docs, or sending them to a specific system – you all have it.
It’s better to have all the data in a digital form so you can find the needed info in seconds instead of going through a huge pile of docs.
5. Reduction of Paperwork and Establishment of an Audit Trail
Automated invoice processing equals a significant reduction in paperwork and the establishment of a robust audit trail.
By digitizing the invoicing workflow, your business can minimize reliance on physical storage and streamline paper-handling processes. This enhances operational efficiency and contributes to a greener, more sustainable environment.
Additionally, the automated system meticulously records every step of the invoicing process, creating a transparent and easily accessible audit trail.
This feature proves invaluable during audits, ensuring regulatory compliance and facilitating swift, accurate responses to inquiries.
The transition to automated invoice processing brings a dual benefit of environmental responsibility and enhanced financial accountability.
6. Integrations with Other Systems and Strengthened Vendor Relationships
The thing with invoice data extraction is that this data is valuable only if you can send it for further processing or analysis. Right?
Well, that’s why automated invoice processing tools offer integrations with ERP, accounting, or other systems. It allows for streamlining financial workflows, sticking to payment deadlines, and generally keeping your docs organized.
This, in turn, results in one more but super important thing – better relationships with your partners and vendors. How comes?
Well, if your invoice processing works well, vendors benefit from quicker payments, improved accuracy, and enhanced transparency. Thanks to the lack of late payments, you nurture a relationship with, say, your semi-finished product providers or partners.
7. Accelerated Invoice Turnaround Time
Where most SMBs struggle is the part of invoice processing that refers to manual data entry. Analyzing each invoice, copying pieces of information, and pasting it into the accounting software or ERP can take hours if not days.
Automated invoice processing permanently decreases the time spent on data extraction because this step is fully automated. Intelligent document processing tools based on AI and machine learning allow you to process hundreds of invoices daily.
8. Data Analytics and Insights
Automated invoice processing gives you loads of business data stored in one place. Most IDP tools allow you to export extracted data into tools like Google Sheets or Excel.
This gives you the possibility to get real-time visibility into spending patterns. Say you’d like to track expenditures efficiently. Thanks to getting all the data from your 150 invoices in one spreadsheet, you can:
- See a detailed breakdown of expenditures, categorizing costs such as supplies, services, and utilities
- Get into information about vendor payments, identifying trends and negotiating favorable terms
- Analyze payment timelines, streamlining cash flow management (e.g. by filtering upcoming due dates)
- Detect peak spending time to prepare the business for more expenses and plan for seasonal fluctuations
As a result, you get better at allocating resources, minimizing unnecessary expenses, and making your business financially more healthy.
9. Enhanced Productivity
This one is simple. You can focus on higher-value activities if you or your employees don’t have to spend time on mundane, repetitive, and boring tasks.
And we don’t know anyone who’d prefer to review invoices and get data from them manually. But we know many people who enjoy creative tasks, new research studies, or sometimes, just a coffee break to recharge their batteries.
10. Data Security and Compliance
Let’s start with security. As data breaches happen, even as a small business, keeping your data safe is better. Especially that invoices contain confidential information. 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.
Invoices also reflect the current state of your business in various ways. That is why simplifying the accounts payables process also increases the security of your financial documents.
Another thing is GDPR in Europe, CCPA in California, and LGPD in Brazil. As data protection regulations have specific requirements, this topic becomes more important than ever, even for smaller players.
As a rule of thumb, for your business, it’s better to choose an IDP tool that’s compliant with your local privacy laws. As overseas data transfer is controversial, it’s comforting to know that your document data is stored in Europe.
11. Ability to Scale Business Operations Without the Need for Additional Hiring
Invoice processing workflow automation lets your business scale.
Automating invoice processing is like having a super-fast assistant. It makes things quicker, so you’re not stuck doing paperwork forever. And the cool part? You don’t have to hire extra people when your business gets busier and needs to handle more invoices (from 150 to 500, for example).
It’s just a smoother ride without the necessity to hire more people. So we’re sure to say that automation makes your work life easier and helps your business grow without making a big dent in your wallet.
Take Advantage of Using Invoice Processing Automation to Build a Better Company
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.
Let’s recap the findings we’ve discussed in this article:
- Automated invoice processing refers to platforms that enable accounting 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
And if you want to check all the benefits of automated invoice processing by yourself, create Alphamoon account today and get free docs to process for the good start.
