PYMNTS Intelligence: How Invoice Processing Automation Works to Streamline Workflow
As businesses continue their digital transformations in the pandemic’s aftermath, digitization of business-to-business (B2B) processes still has some catching up to do. One of the most crucial of these processes is invoicing. A 2019 report estimated that companies and their business partners exchanged more than 550 billion invoices annually and projected that number to quadruple by 2035. For years, the standard way of handling invoicing required hours of manual labor in a paper-laden process, draining time and resources that employees could better spend on more strategic tasks or customer service. While some larger corporations have invested in electronic invoicing technology, a 2021 study found that 89% of small- and midsized business (SMBs) were still processing paper or PDF invoices.
A recent report revealed that accounts payable (AP) professionals spend nearly one-quarter of their days on tasks that could be automated, including typing invoice data, fixing mistakes and responding to calls and emails about the status of invoices and payments. This inefficiency results in 80% of AP staff adding an extra two hours to each workday. Meanwhile, highly automated AP departments can process eight times as many invoices per full-time employee equivalent as those with little or no automation.
It turns out that automation reduces not only staff workload but also errors and fraud risks. This month, PYMNTS Intelligence takes a close look at the technology behind invoice processing automation and how it streamlines workflow.
The Case for AP Automation
Time, labor, errors and fraud risks form the foundation of the case against manual invoice processing. One recent study determined that lengthy invoice and payment approval processes were AP leaders’ top challenge, cited by 60% of those surveyed, and 31% said these processes involved too much paper. A total of 88% of AP professionals in another report blamed the preponderance of payment errors on manual systems, and two out of three respondents said that long working hours were the result. All this time spent on processing and correcting mistakes led to unacceptable delays, with respondents saying it took an average of 11 days to obtain invoice approval from department heads.
A lack of visibility into manual workflows was also an issue for 71% of respondents, who pointed out the inherent fraud risks of opaque processes. Some 76% of AP professionals said their departments had received at least one fraudulent invoice, and 58% reported having experienced vendor fraud. Notably, 72% of those surveyed said automation would make their companies less susceptible to cyberattacks.
How Automation Works to Streamline Invoicing
Workflow automation can boost productivity by simplifying the entire invoicing process. Robotic process automation (RPA) is the more standard technology involved. This technology imports structured data, processes it using rule-based logic and passes it on to the appropriate personnel via email or messaging platforms. Many accounting apps already automate invoicing and billing this way, establishing robotic workflow automations on email inboxes, for example, so that invoices received in specific formats are automatically processed and sent to billing for approval or denial of payment.
Intelligent workflow automation, by contrast, uses AI to interpret completely unstructured data, finding the relevant information on its own and then processing it and passing it on. Intelligent automation offers a significant advantage over RPA, as roughly 85% of invoicing data is unstructured, according to one report. Solutions that use AI eliminate the need to “teach” platforms how to interpret data files individually and instead use machine learning (ML) to construe new files and identify trends over time. By relying on previous knowledge, these systems can recommend specific ledger codes or approval routes to help save time.
Automating AP functions can improve companies’ bottom lines by as much as $35,000 per year, according to one study. Of those AP professionals who had automated their accounting processes, 74% said they had fewer late payments, and 67% reported no late payments since automating. Eight in 10 reported faster approval times, and 79% said their automated platforms effectively caught and prevented fraud. Some 81% of respondents said that automation made auditing easier, and 71% reported fewer AP errors. Automation decreased labor costs for 89%, and 7 in 10 said that finance and other departments collaborated more productively since AP’s automation. Further, 77% reported that automation improved their relationships with vendors.
Some companies expressed hesitancy to automate AP for a variety of reasons, including security concerns and worries about disrupting the organizational status quo. As evidence continues to mount on its cost-saving and security benefits, AP automation is a choice companies can no longer afford to delay.