How to Slash Invoice Processing Time Dramatically
Accounts Payable is a department that's critical to the success of any business - they're the unsung heroes who make sure all the bills get paid on time! But if a payment is missed, the company could be on the hook for penalties, and if invoices aren't processed promptly, it can damage relationships with suppliers and vendors. Yikes!
Accurate and timely invoice processing avoids compliance issues and penalties and helps you take advantage of early payment discounts.
As your business scales, your accounting department processes an ever-increasing volume of invoices from suppliers, vendors, partners and more. A heavy load of tedious invoice matching and validation on AP teams can result in costly errors and delays in payments.
Do you still use costly, error-prone manual processes to capture, route, and approve invoices?
RDS offers a mix of document conversion services and AP automation tools to slash invoice processing time drastically.
In this article, we look at steps you can take to automate invoice processing, reducing time spent on manual tasks, saving costs, minimizing human errors, and improving cash flow.
What is invoice processing time?
Invoice processing involves a complex cycle of receiving an invoice from a supplier, matching it against a PO, sending it to designated approvers, establishing a remittance date, paying the invoice amount, and then recording it in the general ledger.
If the invoice does not match the PO or is not approved, the invoice is sent back to the supplier for changes, and the whole cycle starts again. The time taken for the entire cycle is referred to as invoice processing time.
In a global survey conducted by IFOL (The Institute of Financial Operations and Leadership), 68% of respondents admitted they still manually key in invoices into their ERP or accounting software. In addition, 56% said they spend over ten hours a week manually processing invoices and supplier payments. 22% of the respondents said that one of their top invoice processing challenges was the time spent processing invoice exceptions, causing delays.
The survey indicates that when there is a high number of invoices, manual processes in AP become time-consuming and pose challenges.
But first, let's look at typical manual invoice processing workflows in order to understand how automation solves AP processing challenges.
What are the main steps in invoice processing?
The typical workflow for manual invoice processing looks something like this:
#STEP 1: A vendor sends an invoice to your company's AP department.
#STEP 2: Your AP team receives the invoice and matches it manually to the PO and delivery note or shipping receipt. This step takes a considerable amount of time and is also prone to manual error.
#STEP 3: The designated manager reviews and approves the invoice. Sometimes, for large values, your AP team may seek additional approvals from upper management (depending on your internal AP policies).
#STEP 4: Once your AP department receives approval for an invoice, they proceed with payment to the vendor via established channels such as check, bank transfer or online payment.
#STEP 5: Your AP team manually reconciles and records all completed payments in the general ledger.
Any bottlenecks at any stage of this process can lead to delays in paying vendors.
For example, if the approving manager is traveling or on leave, the paper-based approval process is held up.
Besides, during manual processing, errors and misplaced invoices can prove expensive to the organization.
How do you perform a 3-way match for invoice processing?
A three-way matching process protects the business from unnecessarily losing money in incorrect invoice payments.
It involves three components that must be matched:
1) The original purchase order, which shows the quantity of items requested and the contractually agreed-upon price.
2) The delivery note or shipment receipt generated by the warehousing or logistics team, which shows the quantity of the items delivered by the vendor.
3) The invoice, as supplied by the vendor, which contains the quantity supplied, the approved rate, and the total amount payable.
All the information that these documents must be a 100%-match before you validate the invoice and send it for approval.
Manual 3-way matching is a time-consuming process and leaves room for manual errors.
How can I reduce my invoice processing time?
RDS helps you leverage automation for efficient invoice processing, optimizing your AP team's time and efforts and reducing the cost of processing.
Without an efficient invoice processing workflow, bills won't get paid on time. Missed or delayed payments damage your relationship with suppliers and can cause interruptions in services or goods delivery. Worse, repeated errors and delays create a bad reputation for the company in the market, and you may find it difficult to get credit or build relationships with top suppliers.
AP automation software simplifies AP workflows and redefines and optimizes AP processes. It extracts relevant data from the invoices, posts the information directly to your ERP or accounting applications, and automatically routes the digital invoice for approval. Approvers receive the invoices, and the automated system sends out reminders at regular intervals.
RDS recommends and deploys OpenText Intelligent Capture to provide an efficient and accurate invoice capture process.
It automatically finds and extracts critical data from scanned or digital invoices and validates it using predefined rules. Any data that doesn't pass the validation is sent to an AP staff member for confirmation. In addition, the system uses machine learning to learn how corrections are made—enhancing the system's intelligence and ensuring it can automatically take the appropriate steps the next time it encounters that situation.
When you use automated invoice processing, the workflow will look something like this:
#STEP 1: Receive digital invoices from vendors. If your vendors send invoices in paper format, there is an additional step to scan paper invoices and extract relevant data. But from here, automation takes over to simplify the workflow. A 3-way matching is automatically initiated to validate invoice details against a PO and delivery note.
#STEP 2: The digital invoice is automatically routed to the designated approvers based on pre-set rules. The approving managers can approve the invoice at the click of a button from any device, anywhere, at any time.
#STEP 3: Your AP team is notified of the approval and processes payment via the appropriate payment method. This triggers the digital invoice record to be automatically archived along with the payment details—creating an audit trail that simplifies AP records management.
The benefits of paperless invoice processing
Automating the invoice approval process has several benefits:
Automated data capture is faster and more accurate.
Automatic invoice matching and validation improve your AP team's accuracy.
It eliminates data entry and increases the efficiency of AP staff.
Process vendor invoices faster and eliminate late fees or penalties and take advantage of early payment discounts.
Improve relationships with suppliers with timely payment.
No more lost or misplaced paper invoices!
Make financial reporting and tracking easy, ensure compliance, and reduce errors and stress during financial audits.
Lowered risk of AP fraud
Achieve lower processing cost per invoice.
Better visibility of payable liabilities for stakeholders.
RDS: Your partners in AP automation to reduce invoice processing time
RDS helps you eliminate paper invoices and manual processing of invoice data.
Our document scanning bureau converts any paper invoices to digital ones.
We use OpenText Intelligent Capture to ingest invoices and extract and validate data automatically.
We deploy AppEnhancer, an AP automation software that helps AP teams to automate tedious tasks.
No more cumbersome PO matching or tedious approvals processes! AppEnhancer seamlessly integrates with your existing ERP or accounting systems to improve invoice processing performance in real-time.
Connect with RDS for an end-to-end automated invoice processing solution and watch your invoice processing time reduce dramatically.