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Big datasets can make tiny bottlenecks
If you’ve ever done manual data entry, you know how monotonous and repetitive it is. So it’s not surprising that people start making mistakes. In fact, the human error rate while doing manual data entry can range from 0.5%, all the way up to 4%. While that may not sound like much, data entry errors cost businesses about $600 billion annually.
When your company is working with large datasets, this level of error puts a massive weight on accounting teams, forcing them to re-enter invoices correctly, re-authorize those invoices, and then re-submit them for payment. Over time, even just a few mistakes can put a huge damper on the entire company’s cash flow.
But it doesn’t have to be this way. Automated invoice processing can streamline your accounts payable process and avoid costly, time-consuming mistakes. This piece will discuss the pitfalls of manual processing, define automated invoice processing, and discuss its benefits.
What's automated invoice processing?
Automated invoice processing is an electronic workflow in which invoice data is extracted, organized, and sent to your accounts payable system. Without automation, invoicing processes can take hours. AP teams have to enter invoice data into an Enterprise Resource Planning (ERP) system manually, print out or create digital invoices, and physically send or email those invoices, with several verification steps in between. On the other hand, automated invoice processing can manage purchase orders, match prices, input data, and transfer digital payment, all without any human involvement, making AP fast, accurate, and efficient.
The pitfalls of manual invoice processing
What if you have a speedy accounts payable team? Do you really need automation? The short answer is yes. The potential for error in a manual process is simply too great to ignore. So let’s walk through a traditional, manual invoice process to demonstrate just how inefficient and error-prone it can be.
1. Receive invoices from vendors
In a manual invoicing process, invoices can come in various formats 一 PDFs, emails, handwritten receipts — you name it. Without automation, employees have to track down each invoice in whatever format it arrives and manually input the data into an ERP or other accounts payable system. Besides being time-consuming, this process is also highly susceptible to error.
2. Matching the invoices
After receiving and cataloging invoices, accounting teams have to match invoices with purchase orders (PO). The most common way to do this is what’s called a “three-way match,” or making sure the amount listed on the PO is consistent with what’s listed on the invoice and the packing slip or receipt. Unfortunately, physically examining all three documents and ensuring they match is a time-intensive process. And although a three-way match might lessen the chances of error, there’s still a possibility of making expensive mistakes.
3. Create and file copies of the invoices
Once invoices have been received and matched, accounting teams make and file copies for accounting procedures that take place at quarter or year-end. This means each invoice needs to be scanned or physically filed away. If there’s a high volume, creating and filing copies can take forever, and forgetting to make just one copy or filing an invoice inappropriately can lead to reconciling headaches down the road.
4. Get invoice payment approval
Organizations have predetermined procedures that outline who must approve invoices before they are paid. Approvals might vary depending on the type of invoice (software versus services), the department budget the money is coming out of (marketing versus engineering), or the amount on the invoice (below or above a certain amount). The way approvals are obtained can vary as well. For example, some approvers may prefer to approve invoices over email while others want to review and approve paper copies. Keeping track of all these approvals makes for a complex, lengthy accounts payable process that can quickly turn into substantial late fees.
5. Making payments
With approvals in tow, invoices are finally ready to be paid. However, to process payment, accounting employees must remember to press send on every single digital payment. That, or write physical checks. Executing this step manually significantly increases the potential for error and inflates the AP lifecycle, and payment confirmation can take weeks.
The benefits of automated invoice processing
Now that we’ve highlighted the major drawbacks of manual invoice processing, let’s dive into how much of a difference automated invoice processing can make. Here are just a few of its many benefits:
- Reduction of errors. A fully automated process decreases the number of steps in the invoice process. With automation in the loop, scanning physical invoices and receiving electronic invoices happen automatically, as does data extraction, storage, and filing. Fewer steps equates to less errors for your business and more time savings for your employees.
- Easier communication. Workflow software allows accounting staff to communicate with vendors easily. Within an automated invoice processing platform, vendors can answer or ask questions. Systems like Impira integrate with Gmail and Slack to send accounting staff alerts in real-time, resolving inquiries faster and building vendor trust.
- Seamless scalability. Most companies have a busy season where it’s tough to stay on top of invoices. Periods of elevated activity can be especially tough for staff to manage if they’re already stretched thin at high-growth startups. Automation software can scale up to meet your needs, alleviating pressure on your employees and saving you the time and money you would’ve spent recruiting and training new staff.
- Centralized data. Automated platforms extract data directly from invoices and immediately store them in an integrated centralized database. If staff members ever have to look up or verify information, they no longer have to sift through various physical and digital file folders 一 the data is all in one place. And with robust search capabilities, finding the information they need is a breeze.
- Improved security. Automation software like Impira has built-in security and compliance guardrails to guarantee you’re following proper protocols. These safety measures are particularly useful for companies who have to comply with HIPAA, GDPR, and/or CCPA regulations.
- Track your KPIs and expenses. Keeping your invoice process in tip-top shape enables your finance teams to better forecast department budgets and track KPIs like time to approve and render payments. In addition, automated workflow systems provide more accountability, help you control your spending, and surface any remaining blockers in your workflow.
How Impira Can Help
Accounting employees have been dealing with tedious, bottleneck-ridden invoice processing for years. Collecting invoices, scanning them, entering data, matching, filing, and actually paying the invoices is an enormous hassle, not to mention a potential liability. No human can carry out this process thousands of times without making a mistake, and even one issue can have detrimental consequences on your vendor relationships and business overall.
But with the rise of modern technology, accounting teams can automate much of the invoicing process. And with built-in accountability and scalability, workflow software leaves your employees more time to devote to strategic projects rather than getting bogged down in rote tasks. Plus, your vendors will appreciate the faster turnaround time and streamlined communication.
That said, not all invoice processing software is created equal. There are many OCR platforms on the market these days, but they can only do so much. You need a comprehensive solution that goes beyond simple OCR, like Impira.
By combining OCR with Artificial Intelligence (AI) and Automated Machine Learning (AutoML), Impira offers more accurate data extraction. Not only that, the Impira platform is no-code, which means you can start extracting data within minutes instead of weeks. And with auto-generated matches, a REST API that can connect to virtually any file, and built-in security measures, Impira can address nearly any invoice processing-related use case.
The best part is that you can try Impira for free, so sign up for your free trial today.