Organizations that rely on manual processes for capturing invoices, authorizing payment, or entering data into an ERP system face challenges when it comes to remaining competitive. By adopting invoice processing automation, however, they can more flexibly scale to meet increasing or fluctuating invoice volumes, streamline their processes, and reap the rewards of saved time and money.
Here we cover the ins and outs of invoice processing automation, including the technology involved, associated benefits, and some examples of success stories.
What is Invoice Processing Automation?
Invoice processing automation is the use of software to automate the steps in processing and paying an invoice, including invoice capture–the entering of the invoice into the system, invoice approval and matching, payment authorization, and payment execution.
The ultimate goal of automated invoice processing is to streamline how invoices are handled, saving AP staff time, reducing errors associated with manual entry, and making on-time payments. By adopting automation, businesses can handle fluctuating or increasing invoice volumes more easily, avoid bottlenecks, and overcome challenges associated with remote or hybrid work.
Streamlining the Invoice Capture Process
There are many ways invoices can be sent from suppliers, including via mail, email, and supplier portals. For companies looking to process invoices and looking to scale, these various formats can present challenges for AP professionals. These issues can be addressed in the following ways:
- Invoices that come in via email may be routed to a dedicated inbox that triggers an automatic capture and coding process
- Paper invoices received in the mail may be scanned in and then auto-captured
Both paper invoices and invoices coming in via email may have information captured via OCR technology (described in more detail in the next section).
Automation generally also includes syncing invoice data with the ERP system. By having this invoice (and payment) data automatically sync with ERP systems, companies can reduce human error and more easily track invoice payments and payment status. For companies using a solution like MineralTree, this sync with ERPs is bi-directional. Invoices that are entered into the ERP will also sync to MineralTree, and not just the other way around.
Technology Needed for Paying Invoices
Efficient invoice automation requires the right technology. Here we outline key tools needed for seamless processing.
OCR Technology
One of the most time consuming and error-prone parts of invoice processing is the entering of invoice information into the AP system. Physically typing invoice details is slow and it’s easy for an employee to hit a wrong key somewhere along the way. Once an error is in the system, it may not be discovered until much later, requiring additional work to correct it and delaying payment.
This is where optical character recognition (OCR) technology comes in handy. How it works is that a digital camera or optical scanner takes a picture of the invoice. Then it uses sophisticated software to identify text from the image and enter it into the AP system.
As you might guess, this technology is less successful when it comes to interpreting handwriting, but for typed invoices, it works decently well. That said, there can still be errors, especially considering the fact that invoices are not standard across all suppliers. OCR works best when a human is at the helm and able to provide oversight. With MineralTree’s solution, for example, using OCR for invoice capture coupled with human oversight yields 99.5% accuracy.
Automation Platform
By using an AP platform, you can then automate the rest of the steps involved in invoice processing. The right platform enables users to set rules for how to route invoices for approval upon entry. Instead of having to take a physical piece of paper from desk to desk, approval can happen electronically with notification to the approving party sent via email (along with any reminders if there is a delay). Those invoices can then be approved from anywhere and at any time and do not require physical presence in the office.
The same can happen with payment authorization–the platform can request authorization from the right people automatically. Payment can even be initiated through the platform. Depending upon the vendor’s preference, payment may occur via an ACH transaction, via a virtual card payment, or if the vendor still prefers a paper check, which can also be automatically printed and sent as well.
ERP Integration
Using an AP automation platform doesn’t require you to change your ERP system, and it doesn’t mean you have to devote time to entering details from the AP platform into the ERP system. If the platform has ERP integration capabilities, the relevant information can populate your ERP system automatically. With a platform like MineralTree, this sync is bi-directional, allowing the invoices to also sync with MineralTree when entered into the ERP system.
AP Analytics
With the right automation platform, you can ditch the spreadsheets. Analyze real-time data through a user-friendly dashboard to gain a more holistic view of the invoice payment process. AP analytics can track KPIs such as invoice payments and rebates earned, so your team can make better business decisions.
For instance, analytics can be used to analyze invoice amounts in order to set approval thresholds as companies grow. Using AP analytics, companies can also analyze the percent of invoices that exceed certain amounts in order to determine the optimal thresholds for their approval workflows. Another use case is looking at payment history by vendor in order to negotiate extended payment terms, or perhaps an early pay discount.
The Benefits of Automated Invoice Processing
As already mentioned, there are many benefits to automated invoice processing because it is designed to streamline everything from invoice capture to payment initiation. More specifically, the benefits of automated invoice processing include:
Less Human Error:
Computer software is going to do exactly what you tell it to do, consistently each time. For example, a tired employee is more likely to make errors in data entry whereas the technology used to capture invoices doesn’t face the same end-of-day fatigue.
Ability to Scale:
By automating your AP processes, you take much of the workload off the plates of your employees. It becomes much easier to process more invoices as your business grows without having to hire additional personnel, because the extra workload is handled by software instead. In fact, 61% of companies who have implemented an AP automation solution, can process more invoices with the same size team.
Hybrid Work Environment:
Invoices are collected via different methods, such as mail and email. For companies with multiple offices or locations, invoices can be received in different locations. This lack of a centralized, automated system can make it difficult to understand the current status of a single invoice, or the company’s true AP balance at any given time.
Additionally, when invoice processing requires the physical shuffling and transfers of paper documents and the printing and mailing of checks, it’s vital that all of those involved–from the AP team to those who must sign off on approval–be physically present with those papers. This just doesn’t fly in a hybrid work environment. With automation, however, much of the process is handled digitally, meaning those involved can participate from anywhere.
Reduce Manual Processes:
Fewer manual processes leaves less room for error and frees up employees to devote their energy to higher value tasks.
For many businesses growing in size, the increase in invoices does not mean an increase in staff. BrightView Health’s AP process was difficult to scale when it was manual. Each invoice would take 5-7 minutes to process and 65%-80% of these were sent via the mail. When BrightView Health’s total number of invoices rose from 3,000 to 10,000, they knew they had to invest in a solution that would make their process more efficient.
By partnering with MineralTree, BrightView Health was able to reduce their entire AP process to “mere minutes.” Their AP team was able to approach invoice processing in a more automated way. MineralTree’s capabilities to leverage optical character recognition (OCR) in conjunction with human review allowed their team to accurately capture important data from each invoice, even when there were multiple line items.Reducing inefficient processes can help companies scale while reducing errors in the payment process.
Reduce Time to Payment:
When the AP process is streamlined and more efficient, vendors are consistently paid on time. This promotes a positive vendor relationship and can even allow you to capture early payment discounts. Either way, having a more streamlined process and greater visibility into your AP balance allows you to make smarter decisions with respect to your cash flow.
Improve Supplier Relationships
71% of financial leaders noted that their vendor relationships had become more important over the past year. In specific industries such as healthcare, this number is even higher. By automating the payment process, vendors can gain more visibility into the process and are paid faster. Companies, who are looking to improve vendor relationships, should consider automating payments.
Invoice Automation Case Studies
Many businesses and organizations are already realizing the benefits of invoice automation. Here are just a few examples:
Quartzy uses AP Automation for Consistent and Reliable Invoice Processing
Leading life science product distributor Quartzy recently turned to MineralTree for an invoice-to-pay solution to ensure consistent and reliable processing of its large volume of invoices. They provide their consumers with the option to purchase 10 million products from 1,800 brands. Due to the nature of their business, Quartzy works with a lot of suppliers to store, purchase and dropship products.
Now, when invoices are sent to the company’s shared invoice email account, operations team members confirm shipment, and the information is synced with the ERP system. From there, automated PO matching occurs, and the team approves and executes the payments. The whole process is now much faster and more reliable.
cCARE Improves Their Invoice Payment Process Through Automation
In an effort to improve efficiency and real-time visibility into invoice status, California Cancer Associates for Research and Excellence (cCARE) gave MineralTree’s AP automation solution a try. Prior to implementing an AP Automation solution, their accounts payable team was handling 1,000 invoices a month manually. The team would spend 5-6 hours a day entering data, formatting spreadsheets, and processing these invoices. They would make two check runs a week, which would require the team to print checks and bring these to the appropriate individuals for approval.
The result of implementing MineralTree’s platform was a much-improved invoice approval process and an 80% savings in time over previous manual processes. Suppliers are also happier and better informed due to the visibility the platform provides and the faster payment processing times.
Bayard Streamlines their Invoice Payment Process
Bayard, an advertising company that’s been in business for almost a century, needed to update their AP processes to accommodate predicted growth and get rid of paper-centric processes. With the help of MineralTree, not only was Bayard able to adopt a streamlined platform and take advantage of automation, but this adoption enabled a relatively seamless transition to remote work when the COVID-19 pandemic struck.
The Benefits of Processing Invoices with an End-to-End Solution
Some organizations adopt software and technologies that automate parts of the AP process, but not in its entirety, or they may use multiple solutions for an end-to-end result. More ideal, however, is adopting an all-in-one end-to-end solution based on a single platform. This centralizes, simplifies, and streamlines invoice processing much more effectively.
MineralTree’s TotalAP accounts payable automation solution digitizes and automates the entire invoice-to-pay process, allowing your team to scale and support business growth without adding headcount.
Not only does TotalAP handle everything from invoice capture, approval, and payment authorization, but it helps optimize your payment mix to minimize transaction costs and maximize rebates. Our platform also enables visualization of KPIs with analytics capabilities that help you make informed and strategic business decisions. Learn more today by requesting a demo.
