Invoice processing refers to handling a supplier invoice, from its receipt to when it has been posted in the ERP system and is ready for payment. Invoice processing is handled by the accounts payable (AP) department within an organization.
Supplier invoices are often received in a variety of different formats – paper, PDF in email, e-invoice, EDI (electronic data interchange), etc. The invoice data must be digitized and transformed into a standardized format. In some cases accounts payable staff will manually key in data to the finance system. But today, most companies use an accounts payable (AP) solution with automated invoice scanning and invoice data capture functionality. This means the solution will automatically extract the invoice data so that the AP staff can spend their time on more valuable tasks.
The invoice amounts are then coded to the correct G/L (general ledger) account, project, and cost center. Then, the invoice is distributed to the responsible buyer or budget owner for review and invoice approval. With an AP invoice automation solution, the entire invoice processing workflow can be digitized and automated for faster and more efficient invoice processing.
To understand invoice processing meaning, it’s important to learn the different steps of the invoice processing process.
The invoice processing procedure starts with the reception of a supplier invoice via email, snail mail, fax, or automated capture via an accounts payable system.
To process invoices in a digital workflow, the invoice data needs to be extracted and captured in a standardized format.
The accounts payable team is responsible for invoice handling and will then apply accurate coding either manually or automatically using an AP automation solution that is pre-configured with the specific organization’s business rules.
The invoice processing continues with invoice approval. This part of the invoice processing procedure differs depending on the type of invoice: expense invoice or PO-based invoice. For PO-based invoices, invoice processing can be performed without human intervention using automated invoice matching through an AP automation solution.
Once approved, invoices can be processed for payment to their respective suppliers.
After payment, invoices are archived for record retention purposes or potential audits.
Automated invoice processing includes several benefits for your business.
Saves money
Not only does using automated invoice processing reduce errors from manual data entry and processing, but it can also reduce costs by as much as 80% according to a study by the Institute of Financial Operations.
Increases accuracy
You can increase the accuracy of your invoice data by as much as 15%, according to a study by IDC.
Gains efficiency
Because manual steps and manual data entry are eliminated or reduced, the entire AP process becomes exponentially more efficient than manual invoice processing. According to a study by the Hackett Group, organizations that automate their invoice processing can see a 30% reduction in the number of invoices requiring manual intervention.
Creates better visibility
A better AP process through automation allows the business to track and manage invoices better, creating more transparency and visibility.
Makes invoicing more secure
Automated invoice processing software allows you to manage access to documents while protecting valuable information.
Explore the KPIs and benchmarks driving accounts payable departments around the world in this 2023 report from leading analyst firm, Ardent Partners.
Before you implement invoice processing software, it’s important to outline the areas you’d like to improve the most in your business. Ask yourself what problems or pain points within your current accounts payable process need to be addressed and in what order of importance. What specific and measurable objectives or outcomes would you like to address or see after implementing AP software?
Even if it’s the easiest-to-use software, many employees will still have a lot of questions about potential new or updated workflow processes or will appreciate knowing how to get the most use out of the new invoicing software. That’s why you should develop or plan a training program for your employees on how to use the new software.
Just because you think you have the invoice workflow(s) mapped out smoothly, does not mean they will be perfect when applied. A best practice to include is to have users test the software before rolling it out company-wide. Keep your user testing group to a smaller number of people, perhaps managers of departments and maybe one member of their respective teams. This way you can gather feedback on the workflow process and make any necessary adjustments.
According to a study by the Institute of Financial Operations, organizations that automate their invoice processing can see a return on investment in as little as 3-6 months. Any software you bring into a business should have a clear and easily understandable return on investment. But you still have to establish what KPIs (key performance indicators) are most important to your business. Document what the KPIs are, and measure them on a specific cadence to show ROI and ensure the successful adoption and rollout of the software.
When creating your KPIs to show ROI, consider these stats as some useful benchmarks:
25% quicker to process
Aberdeen Group found organizations that use automated invoice processing see a 25% reduction in the time it takes to process an invoice.
20% fewer invoice errors
Hackett Group found that companies who automate their invoice processing can see a 20% reduction in the number of invoice errors.
Cut late payments in half
Paystream Advisors found that organizations who automate their invoice processing can see a 50% reduction in the number of late payments.
Automated invoice processing reduces the risk of data entry errors and also protects against fraud. We estimate it increases the security of your AP process by up to 85%. After the software scans invoices, it can send alerts to the right stakeholders to verify any suspicious activity such as large increases in invoice volume, extreme variations in amounts asked for, or duplicate invoices. In addition, invoice processing software also has built-in security features like encryption and access control to allow different levels of access to employees.
See how your organization can benefit from Medius’ Automated Invoice Processing Solution.
Is your business's payment approval process optimized? Manage accounts payable invoices more efficiently with automated invoice approval workflows and software.
“Switching to Medius has been a game changer for our accounts team, who are now able to process our invoice volumes with greater speed, accuracy, and efficiency by automating manual systems. The team was also impressed by how easy the system is to use and the seamless integration into our existing payment processes. We have established an automated workflow, which has increased visibility and tracking, enabling us to reach a level of unprecedented efficiency!”
Rory Whitman
Accounts Payable and Receivable Manager, White Stuff
Automated invoice processing is invoice processing software that eliminates manual steps by scanning invoices and routing them along a predefined workflow to the appropriate approvers. It reduces errors, saves time, and gets the job done faster so your employees can focus on their core job responsibilities, and not accounts payable.
Automated invoice processing solutions like Medius integrate with any ERP system including common ERPs such as Microsoft Dynamics, Oracle NetSuite, and SAP S/4HANA.
Because you can define who can see what with user permissions, invoice processing software is uniquely more secure than other methods of invoice processing. In addition, it auto flags duplicate invoices, and any potentially fraudulent or suspicious activities are flagged and monitored constantly.
You can have your automated invoice processing software up and running in a few weeks. The length of time it takes to onboard invoice processing software also depends on the internal resources available. Stakeholders will need to gather project information and make key considerations, such as deciding product owners and allotting time for any associated training.
Learn more about how your organization can benefit from Medius’ automated invoice processing solution.
