How to speed up your invoice processing workflow with AP software
There are many obstacles that cause delays in invoice processing workflow. AP software with AI is finally here to speed up the invoice processing workflow.
January 20, 2022
6 min read
Digitizing your accounting functions is no longer optional for businesses who want to remain competitive and build sustainable lifetime customer value. According to PYMNTS’ Strategic Role of the CFO report, 96 percent of CFOs say the main reason for digitizing and AP software with AI is to benefit customers and vendors.
The history of invoice processing workflows
Accounting automation is a main component in digitization efforts. It’s been around since the 1880s when William Burroughs invented the adding machine. You might be thinking the first version of a calculator doesn’t fit into the modern definition of automation. Indeed, the adding machine didn’t have memory, but it did allow accountants to do faster arithmetic. When you think about the basic meaning of accounting automation, it is boiled down to using AP software to complete accounting tasks with higher accuracy and efficiency, which is exactly what the adding machine did.
Fast forward a century later to the first spreadsheet software in the late 1970s, then two decades later the first ERP system was launched by former IBM engineers in 1992 for enterprise-level manufacturers in Germany. Quickbooks entered the market in 1998, making computerized bookkeeping mainstream for small businesses to access.
“Automation may be a good thing, but don’t forget that it began with Frankenstein.” -Anonymous
These early softwares catapulted the innovation of accounting automation tools to become what they are today. Within the accounting world, many functions have been experimented with, improved and automated on their own as byproducts of different software like Quickbooks and ERP systems. An example of a specific accounts payable function is invoice processing, a critical part of the whole accounting cycle. Due to the tedious nature of invoice processing, accounts payable professionals have been greatly underserved by technology. Without efficient invoice processing workflows, errors happen often and bills aren’t paid, which can damage a company's reputation internally and externally.
Fortunately, there are new technologies like artificial intelligence that can act as your co-pilot, autonomously managing 95% of tedious accounts payable data entry.
What is invoice processing?
Before we get into how invoice processing can become faster and autonomously managed, let’s define key areas. Invoice processing is the full cycle of receiving a supplier invoice, paying it, and recording it in the general ledger. There are multiple steps in between including: receiving the invoice, approving it, determining a payment date, completing the payment, then entering the invoice into the general ledger (an AP entry).
Outdated invoice processing is time consuming, costly, and inaccurate
Though AP software has been an integral part of improving invoice processing, 30% of AP professionals say they work at companies that struggle to efficiently process invoices, according to recent PYMNTS research. Accounts payable invoicing errors ultimately disrupt a business cash flow, affecting the bottom line.
What causes invoice processing WORKFLOW struggles?
In The Digital Shift report, PYMNTS reported that 25 percent of AP professionals said duplicate invoices or payments create noticeable pain points in manual AP operations. Something as simple as receiving a second notice for a bill and trying to determine if it has already been paid can quickly turn into a lengthy time-eating detour.
Manual AP entry
Manual entry leads to high turnover rate for accounts payable staff due to their frustrations with several aspects. Paper-based processes and in-person document approvals are the most tedious tasks, but AP struggles caused by manual AP entry also include a slower process, lost documents, fewer discounts, and poor supplier relationships. AP professionals are bound to their office when these manual processes aren’t digitized, which does not offer much flexibility for the deserving party.
Purchase order matching is an important part of the invoice processing workflow as the original purchase order needs to be verified and cross referenced to the actual invoice. Manual PO matching is very error prone and time consuming.
Invoices can be lost in many ways from the common “lost in the mail” excuse to the invoice getting lost in the approvers email inbox or on their desk if it’s a paper invoice. This can cause late payments or extra time on the AP professional or vendor to chase down the invoice.
As new accountants are hired, there is a ramp up time for them to become familiar with your company’s particular process and reporting. New hires may not know the chart of accounts, which makes them slower and second guess themselves.
Multiple approvers & routing to the right person
Companies typically require invoice approval from between two to five people based on department, amount, customer, class, location amount, vendor. The more approvers required, the longer it can take for the invoice to be approved. If the invoice approval request is lost in one person’s inbox or sent to the wrong approver, the whole AP workflow is halted.
Automation has its caveats
There are countless options for companies to choose from when on the search for the right accouting automation software. Not all of these AP softwares are created equally and due diligence is key when choosing the right one. Implementation of automation has increased speed for companies across the globe, but broadly has not met the efficiency needs or expectations of CFOs.
Even with automation, many of the AP struggles mentioned above are still causing issues and data discrepancies. A recent IFOL report found in the same year, pain points of AP departments evolved as companies adopt some level of automation. They have gone from manual processes and paper documents being the key challenges to invoice exceptions causing delays. Invoice exceptions difficulties are caused by rules and template based automation. Now that companies are adopting automation, IFOL reports, “There has been an increase from 36% to 41% for businesses who are intending to change their AP automation solution within the next 12 months, indicating a potential desire for solutions with more leading-edge features and capabilities.”
Robotic process automation (RPA) is one of the de facto automation choices for finance teams. RPA technologies have helped businesses reach better efficiency levels than they had before, but one main pitfall is lack of scalability. Other limitations include lack of cognition, inability to read unstructured data, and lack of ability to adapt to changes (invoice exceptions). A recent Gartner study found that RPA and workflow automation remains vital, but “to reap the benefits of automation and drive significant results, CFOs now need to focus on additional technologies (including chatbots, artificial intelligence, and machine learning) that cover increasingly complex, dynamic processes requiring human judgment.”
How to make invoice processing faster with Autonomous Accounting
Due to the pitfalls of automation or lack thereof, 69.8% of AP professionals want to innovate accounts payables to save time and 37% want to innovate to reduce payment errors. Artificial intelligence can provide predictive reasoning to make decisions about an invoice after seconds of ingestion.
Autonomous invoice processing can help save time and reduce errors by using artificial intelligence to run the accounting process from beginning to end, essentially mimicking human decision-making. It removes room for error by intelligently selecting invoices and expenses that meet a certain confidence level, then enters them automatically, and sends them to approvers without requiring any data entry or classification review beforehand.
Benefits of a faster invoice processing workflow?
Avoid late payment penalties
Qualify for early payment discounts
Visibility of spending
Saving employees time and money
Labor cost optimization - ability to reallocate back-office resources
Faster approval process
The future of accounting is AI
We believe in giving finance professionals the tools they need to make everyday operations simpler and more intelligent. From processing invoices to data predictions, our system is here to give you the bandwidth you need to complete those more meaningful tasks in your day-to-day.
If you haven’t figured it out by now, we are disrupting the world of accounting by challenging the status quo. We may just be the group of game-changers and innovators that you didn’t know you’d be so happy to meet.
Are you ready to eliminate mundane tasks and expedite your invoice processing times with AI?