Masters India

What is Invoice Processing? Definition, Steps, Invoice Processing Automation with OCR Software

Juhi Dubey
Juhi Dubey at August 20, 2023

Invoice Processing implicates the process of getting an invoice from a supplier, approving it, establishing a remittance date, paying the invoice, and then registering it in the general ledger. It is an important element of operating a corporation in accounts payable.

When vendor invoices are not delivered on a given duration, it can interrupt your income stream of services, supplies, and raw materials and sabotage your supplier connections. One or two skipped payments may be ignored, but the constant delay will hurt your company.

Appreciations for betterment in technology, excuses like “the checks are in the mail” just don’t cut it anymore when it arrives at invoice processing. Your suppliers comprehend that most establishments operate automated systems to obtain and document their invoices and place those reports in the payment channel. When your suppliers don’t receive on-time payments, they will take action to save their balance sheets.

Invoice Processing

Invoice processing is a business function executed by the accounts payable department that consists of a sequence of steps for managing vendor or supplier invoices from received to payment and registered in the general ledger. Invoice processing can be now automated through software and is commonly required as automated invoice processing or invoice automation for quick. An invoice processing flowchart is a structured manual describing the steps for how accounts payable is to process dealer invoices.

Difficulties of Traditional Invoicing Process:

There were difficulties faced in the traditional process of invoicing. Take a glance at the following:

  1. Manual data entry - Manual data entry was used in the traditional invoicing process, which increased the risk of errors and inconsistencies. 
  2. Humans relied on workflow-the process was heavily dependent on the commands of humans, which caused a lot of difficulties and errors. 
  3. The impact on the environment-traditional invoicing process was previously done on paper, which contributed to the unnecessary wastage of natural resources. 
  4. Limited accessibility - Traditional invoices were restricted to locations which used to create a lot of hindrances for quick movement or remote collaboration. 
  5. Less data utilization - the traditional invoices were not able to derive the potential insights which are now done from the digital transaction data.

Here Are the Stages for Invoice Processing:

  1. Capture, data of Invoice by using Invoice OCR Software
  2. Cross-check and validate the extracted data, then create an invoice, add general ledger (GL) code if you follow, and match supporting documents such as an acquisition order or delivery permit whichever is required.
  3. Transmit invoices to certified approvers for Approval.
  4. After the final Approve invoice will get submitted to the finance department automatically.
  5. Process invoices for compensation via simple payment procedures such as checks, ACH, or wire transfers.
  6. Archive invoices and payment details in the GL and for future audit purposes.

The Benefits of Automated Invoice Processing

  1. Automated invoice processing software is used in the accounts payable department to facilitate invoice processes.
  2. Automated invoice processing software associated with AP Automation. Through Automation, invoices gain more control over internal processing operations such as speedy approval, and payment on time.
  3. These automated invoice processing systems assist accounts payable teams to automate the capture and process of an invoice for authorization to automatically assign approvers and make invoices into financial systems for payment.

Invoice Processing automation through OCR Solution Save Time, Money, and Efforts

In actuality, invoice processing is of several smaller operations, some of which will need the human touch such as supporting a cost or verifying for precision. While others are grown for automation like data capture and invoice authorization workflows.

With that said, let’s break out some of the AP processes that are ideal for automation and provide some facts about how and why. An invoice processing flowchart can even permit you to recognize and remove inefficiencies.

Receiving Invoices

If you haven’t executed AP automation for invoice processing yet, there’s a good chance you have invoices arriving from all over the place. From various departments and mediums—snail mail, faxed, email image extensions, and electronically. We probably don’t have to inform you how much time your team uses to gather, manage, and scan invoices and how tedious the procedure is, so we’ll say this rather. 

Data Capture and Extraction

If you have your invoices reaching in electronically — awesome! AP automation software is uniquely applied to help capture and extract that information without human intervention or support. That’s correct; your team doesn’t have to key in data or information anymore manually. Manual data entry is not only boring for your team, but it’s also time-consuming and inclined to typos and human mistakes. On the other hand, software that’s prepared to read and comprehend the data on an invoice is positively authentic and almost immediately after learning your processes. 

General Ledger Coding

Since you’re already working with software to pull data from your invoices, why not contain it coded as reasonable? With API integration, your AP automation platform will be synchronized with your financial scheme to manage your invoices and automatically code them with your general ledger accounts or statements.

Three-Way Matching

Invoice validation is a massive obligation for the AP division—this is how we evade duplicating and defrauding payments. Nevertheless, when approving invoices manually, assurances become time intensive, and three-way matching can be incomprehensible for invoices missing data such as PO numbers.

Routing and Approvals Invoice Processing Software

With an AP mechanization medium, the design aligns with your invoice processing authorization workflows and all AP has to do is review any suggestions and ensure. Moreover, in circumstances where an individual quits the business or is on family leave, it’s quite effortless to add/remove approvers. Once routed for acceptance by AP, the invoice is transmitted to the relevant approver(s) and in the correct order. Utilizing mechanization for routing authorizations, including follow-up information, can dramatically decrease the duration it carries to get an invoice authorized. 

Submitting for Payment

The entire reason we do what we do in AP is to ensure invoices are both accurate and vendors receive payment. This carries no diminutive amount of action, given the number of steps, accounts payable scam prevention rules in place, and the number of people interested throughout the invoice processing lifecycle.

Invoice Processing Automation

Manual or paper documentation invoice processing is time-consuming, expensive, and mistake-prone. Level Research calculates that 50% of establishments have yet to automate their accounts payable functions, also 24% scan and email their invoices, and 23% rely on manual methods. 

By Automating the Invoice Processing, Estimation Groups Can:

  1. Invariably process seller invoices quickly and more efficiently.
  2. Evade losing invoices and the demand to explore to the merchandisers for a copy of those documents.
  3. Eliminate delinquent payments that vendors assess when bills are paid at a given time.
  4. Take advantage of early payment discounts that many retailers offer in trade for disbursing bills within 10-15 days of receipt.
  5. Eliminate manual data re-entry across numerous systems that take a long time, manpower, and effort.
  6. Support good supplier connections in a world where the next consumer is one screen tap or mouse click away.
  7. Keep the supply chain pushing by ensuring vendors settle timely and materials/supplies are flowing into your business as expected.
  8. Concentrate on better important assignments that are central to the business’s success (versus repetitive data-entry tasks).

Invoice Processing Automation Software

Automated invoice processing software authorizes corporations to carry a more “hands-off” procedure to accounts payable control. It furthermore supports complimentary accounting groups to concentrate on more substantial duties. Key software functionality includes standardized coding, automated approval workflows, and dashboards that show which vendors have been paid, what invoices are set for payment, and which still need to be approved. Some invoice processing mechanization outlets integrate instantly with ERP platforms, which helps increase the precision and promptness of expenditures. By facilitating the accounts payable procedure, these software platforms enable businesses to enhance cash management and speed up the financial close process.

Your Invoice Processing Software Guide 

In this guide, we examine how invoice processing automation instruments allow Accounts Payable (AP) divisions to preserve their existing workflows and how AP technology facilitates their current invoice processes. If you’re examining to simplify your Accounts Payable division and save time and money for both your community and your AP team, here’s your straightforward invoice processing guide:

Paperless Invoice Processing

Honestly, if you’re not ready to go paperless for processing invoices, your capacity to facilitate your AP operation will be restricted. Proceeding paperless begins with the invoices you receive from your sellers, but if they’re reluctant to send electronic invoices (e-invoices), you have two choices. The first is to persuade your sellers to invoice electronically by filling out all the advantages. The second is to scan seller invoices into your AP automation technique. 

Centralize Your Data and Processes

The attractiveness of a paperless AP function (above saving trees) is that once everything is digital, invoices are shifted into actionable data for automation workflows, integration abilities, and cooperative contact on top of the invoice. 

For example, suppose Quickbooks accounts for payable mechanization. Let’s articulate you have an invoice in your procedure that requires validation. If the purchase ordering (PO) can be dragged from your integrated accounting system, your invoice automation software will assist match your invoice data to the PO to ensure it’s valid. Accordingly, provide your approvers with adequate documentation to make a quicker determination by itself.  

But if your data, records, and mechanisms all live in various systems and can’t be merged. You’re going to be attached to duplicate efforts and manually keying in data to confirm your invoices can be accounted for and processed. Once everything is beneath the identical roof, you can make the AP spell happen. 

Establish (And Track!) KPI’s

If you’re proceeding to take steps to enhance your invoice processes with the intent to simplify your AP division, you reasonably darn well measure your efforts! The good information is that if you’re tracking the two best approaches detailed above, indicating KPIs evolves comfortably. Paperless systems follow everything and make timestamps for when activities happen. This leaves an audit trail that is effortlessly searchable via Developed Search and Reporting. Audit trails produce more accountability and management by logging all actions in the middle feed so all users are on the identical page, and actions are auditable if required for consideration at a later time.

Another way to follow KPIs is via reporting functionality known in an Invoice Management Dashboard, which furnishes a bird's-eye perspective into all invoice-related activities and laggards.

Make Invoice Communications Easy

Have you ever held that horrible sensation that you’ve already obtained authorization for a bill but just can’t seem to see the evidence? Or worse, you’ve received information about an invoice that causes you to doubt its legality, but again, can’t locate the documentation. 

Searching through emails, texts, and voicemails is not only a time-consuming and frustrating occasion, but it’s also completely unpredictable. 

If you’re heading to hold discussions regarding an invoice in your association. You want to make sure that all those transmissions take place in an easy-to-use and prominent location that can be referenced subsequently. This is also obtainable in the middle feed noted above, where all invoice transmissions are centralized from comments and queries to answers. This not only creates invoice communications manageable since every invoice is provided with context, but it also assists with accountability. 

The Inquisition to Improve AP Invoice Processing Efficiency by Using Technology

In today's current business climate, it's not just sales, marketing, or functionality but looking for the best choices when it comes to technology stacks. Financial divisions are also among business departments exploring the best automated invoice processing software to add more authority over their internal processes in remote existence. In addition to simplifying invoice capture and coding, financial leaders believe functionality such as authorization routing with context, while preserving their current process even if their workforce is distributed. 

Since accounts payable isn’t an earnings center, departments examine other methods to deliver value and the key to counting value is to become more efficient, which suggests preserving time and lowering managing expenses.

AP automation is a fantastic method to save both time and funds. But for AP groups, efficiency represents something different and that’s cutting down on the backlog of invoices for real-time visibility into cash flow, decreasing mistakes, and eliminating redundant manual assignments via technology.

You Can Try Out These OCR APIs to Automate the Data Extraction

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