Invoice processing is a business activity in which employees manage incoming invoices, from the time they’re received till they’re paid and recorded in the company’s finance system and the general ledger. The accounts payable (AP) department is responsible for invoice processing.
Invoices are received by businesses in various forms, including paper invoices, PDFs, electronic documents, or electronic invoices. The invoice has to be scanned first, and data must be recorded before being entered into the system. The entire series of steps is what’s known as invoice processing, and is usually done with the help of software.
Since it’s such a crucial aspect of running a business, invoice processing often takes priority. If invoices are not processed and cleared in a timely manner, it could derail the company’s growth plans and create a cascading effect that damages the company’s bottom line.
Here’s the general workflow for processing invoices:
Manually processing invoices is tedious, time-consuming, and prone to data entry errors. It’s also incredibly costly, increasing the company’s operational budgets significantly.
Automating invoice processing is generally more beneficial. Here are some of the benefits that it offers.
The time taken for processing invoices is greatly reduced when the entire process is automated. It allows companies to quickly and efficiently process invoices from vendors.
Since invoices are processed on time, companies can eliminate late fees, which they would otherwise incur if payments aren’t made to vendors on time. This also improves relationships with vendors as a whole, and the company might be able to take advantage of early-payment discounts.
Manual data entry and invoice processing is repetitive and time-consuming. It’s also a low-level activity, which affects morale throughout the AP department. By automating this process, you can free up your AP teams to focus more on business-critical tasks.
All invoices that are received can be processed using optical character recognition (OCR). This ensures that the relevant data is captured and fed into the system, allowing AP departments to go completely paperless. Not only is it ecologically friendly, but it also simplifies search and recall.
Automated invoice processing allows organizations to establish and track KPIs. This allows finance leaders and department heads to gauge the performance of AP departments, and also review all invoice-related activities.
In case a bottleneck is detected, those in charge can quickly take action and make adjustments to the process.
Since everything is digitized and entered into the system, it creates a comprehensive audit trail, which is ideal for companies that are subject to internal or external audits.
The SoftCo Accounts Payable Automation software is the ideal choice for organizations that want to automate invoice processing. The solution is ideal for managing both non-PO and PO invoices, and it offers 2 and 3-way matching as well. Users can define automated approval workflows to ensure invoices are processed and routed for approvals quickly. Since all vendor data is captured automatically, there’s very minimal human input, which also mitigates the risk of transcription error.