Efficient Invoice Processing:
Key Strategies for Success

We'll share expert tips and proven strategies for streamlining your invoice processing for enhanced efficiency and accuracy in your financial operations.
Efficient Invoice Processing visualization

Executive Summary:

This article, "Efficient Invoice Processing: Key Strategies for Success" serves as a comprehensive guide to revolutionizing invoice processing methods.

Readers will learn about each step in the invoice processing cycle, identify common inefficiencies, and explore expert strategies and best practices for streamlining these processes.

Additionally, the role of technology and automation - and especially AI - in transforming invoice processing will be highlighted, showcasing how solutions like CoreIntegrator can significantly enhance efficiency and accuracy in financial operations.

Understanding Invoice Processing

Invoice processing is a fundamental aspect of financial management in any organization, large or small. After all, every company must pay its bills.

It may seem simple, but invoice processing involves several critical steps, each of which plays a vital role in ensuring accuracy in financial operations.

  • Invoice Receipt: The journey of invoice processing begins with the receipt of an invoice.

    This could be through various channels including mail, email, or electronic submission. Many companies receive invoices in a variety of ways.

    But it's essential to establish a standardized process for receiving these invoices to ensure none are missed or overlooked.

  • Invoice Verification and Data Entry: Once an invoice is received, the next step is verification. This involves checking the invoice details against purchase orders or contracts to ensure accuracy.

    Data entry is then done, either manually or through automated systems. Invoice information from the invoice is input into the financial system.

    But data entry extends far beyond entering data from invoices.

    Invoice obligations must be assigned to general ledger (GL) codes. And sometimes a single invoice must be split among several GL codes. Sometimes by expense and sometimes by percentage.

    So, when performed manually, it’s not enough for the data entry person to be someone why can type fast. That person must have a thorough understanding of the company’s GL codes as well as rules around them so they can GL code each and every invoice correctly.

  • Invoice Approval and Discrepancy Resolution: After verification, invoices typically go through an approval process.

    This step may involve multiple managers, departments, branches, or levels of authorization. Depending on the invoice amount or type, invoices might need to be approved sequentially through a number of approvers, or the first manager to approve may be acceptable for approval.

    The point is that different invoices will require different approval processes. Again, it’s up to the AP specialist to understand all of a company’s approval hierarchies and which to assign to each invoice.

    And when approvers in accounts payable find discrepancies between their expectations and what’s on an invoice, resolution mechanisms must be in place. Addressing any mismatches or unrealized expectations in amounts, goods received, or services rendered typically falls back to the AP specialist.

  • Payment Processing: Once approved, the invoice is ready for payment.

    This stage includes scheduling and making payments. But, again, a company will likely have rules around payment methods and timing. While a company may typically pay by electronic transfers, checks, or credit cards, which payment method is used may vary depending on amount and vendor preferences.

    And if paper checks are cut, the AP specialist must know when a single signature is acceptable and when a double signature is required.

  • Record Keeping and Reporting: The final step is maintaining records of all invoices and payments for accounting and auditing purposes. Efficient record-keeping practices are crucial for financial tracking, reporting, and compliance.

    In paper-based systems, this means a room full of filing cabinets.

    But even for companies that have digitized invoices, it means using an ad hoc file system on a file server. And that system is only going to be searchable in rudimentary ways. AP specialists may still spend hours searching for a specific invoice when tasked to do so by an auditor or manager.

    As you can see, each of these steps are straightforward in concept. But each contains complexities that can lead to massive inefficiencies in the accounts payable department.

    So let’s dig deeper into the common challenges associated with these steps and then provide expert strategies for streamlining your invoice processing and implementing an accounts payable system that supports your business and staff.

Invoice processing helps the whole team

Identifying Inefficiencies in Invoice Processing

Inefficient invoice processing can lead to a host of challenges for businesses, impacting both financial health and operational effectiveness. This section will explore common inefficiencies and their consequences.

Manual Data Entry and Handling: Relying on manual processes for entering invoice data is time-consuming and prone to human error.

And it's not just typed data entry errors that are common.

External stakeholders, such as investors, shareholders and creditors, use a company’s financial reporting to evaluate its financial health and creditworthiness. Other external shareholders include regulatory agencies like the IRS and the Securities and Exchange Commission (SEC), which require financial reporting for legal and compliance reasons. Internal stakeholders, such as the company’s CEO and other top managers, use financial reporting to gauge performance and inform decision-making, and as a foundation for building budgets and projections.

So, when an accounts payable (AP) specialist makes a mistake in assigning a GL code or percentages of a GL code, it can have serious consequences for the entire company beyond inaccurate financial records and/or delayed payments.

Inconsistent Invoice Formats and Channels: Handling invoices coming in different formats (paper invoices, email, PDF) and through various channels can be cumbersome and disorganized, leading to mismanagement and loss of crucial documents.

Lost or misplaced invoices that go unpaid lead not only to late payment penalties but will sour relations with vendors. Leading to even bigger problems for your company.

Lengthy Approval Processes: Invoices often require multiple levels of approval, which can be a lengthy and complicated process. Delays in approvals can result in late payments and strained vendor relationships.

Many companies that digitize invoice processing use email to route invoice approvals. But emails can get buried in a manager’s inbox. Or accidentally deleted.

Worse, in a multi-level approval process the Accounts Payable (AP) specialist has no insight into the progress of approvals without keeping detailed notes about each and every invoices. This is not only unrealistic but dangerous – missed payment deadlines are common with this approach to approvals. With a solid invoice processing automation, this won’t happen.

Automating invoice processing is a huge gamechanger here.

Inadequate Discrepancy Handling Mechanisms: Discrepancies between purchase orders or purchasing manager expectations and invoices are not uncommon. Without efficient mechanisms to resolve these discrepancies, resolving conflicts can become time-consuming and can disrupt the payment cycle.

For instance, imagine a scenario where a purchasing manager orders 100 units of a product, but the invoice reflects 110 units. Without a clear, efficient mechanism to resolve such discrepancies, valuable time is spent in back-and-forth communications. Both internally but also between your company and the vendor.

This delays the payment cycle and affects vendor relationships. It also may result in missing interesting early payment discounts which can boost your overall profitability.

Lack of Visibility and Tracking: In traditional invoice processing systems, the lack of transparency throughout the stages can create significant challenges.

This opacity makes it difficult for your accounts payable department to track an invoice's progress, from submission to payment, leading to inefficiencies and potential communication breakdowns between departments or with vendors.

Worse, without clear visibility, identifying bottlenecks or delays is nearly impossible Ultimately, this slows down your financial operations and the overall efficiency of an organization.

With a solid invoice automation software, this is a problem of the past.

Ineffective Record Keeping: Poor record-keeping practices can lead to difficulties in audits and financial reporting, impacting compliance and strategic financial decision-making.

A common note in audit letters of organizations using manual AP processes is the inability of staff to quickly lay hands on specific invoices.

Worse, poor and disorganized record keeping lengthens the time it takes to perform audits and compliance. This not only makes them more expensive, but it also becomes a major time obligation for AP and other finance staff.

As you can see, the invoice processing steps are fraught with pitfalls, land mines, and roadblocks to efficiency.

But these can (and should!) be eliminated! In the next section, we will delve into expert strategies to address and streamline these inefficiencies, enhancing the overall efficiency and accuracy of your invoice processing system.

Here you can find out everything about the necessary invoice processing steps.

An efficient invoice processing

Expert Strategies for Streamlining Invoice Processing

To combat inefficiencies and enhance the effectiveness of invoice processing, businesses should implement the following strategies:

Automated Data Entry: Utilize automated systems for data capture and entry. Tools like OCR (Optical Character Recognition) or a verified data capture service can significantly reduce manual errors and speed up the data entry process for data on invoices.

But beyond invoice data entry, it’s now possible to use robotic process automation AI to automate the internal details around an invoice. This includes automated GL coding as well as percentage allocations across divisions, branches, and other GL details.

This AI actually learns how your company codes invoices for each vendor, service, and/or item, and applies those rules going forward. No more need for AP specialists to memorize all of a company’s GL coding and allocation rules – AI will do it for them!

Standardized Invoice Formats: Encourage or mandate vendors to use a standardized invoice format. This can streamline the receipt and processing of invoices, making the process more efficient.

The good news is that your standard format can be simple PDFs emailed to a specific email address. This is an approach that many vendors have already adopted, so it’s not a heavy lift for anyone involved.

Whether you implement OCR or a verified data capture service, a PDF is sufficient to automate your entire invoice data entry process. And having a specific email address for all invoices you’ll never have to worry about misplaced or lost invoices ever again.

Streamlined Approval Workflow: Establish a clear, streamlined approval workflow with defined roles and responsibilities. Then automate it.

Invoice approvals are just workflows. Decisions about which invoice processing workflow to follow can be based on variables such as invoice amount, department, branch, or any other detail.

Rather than having AP specialists memorize which invoice processing workflow to use in a given circumstance, you can teach an automated system all of these workflows and it will automatically apply those rules to each invoice.

This not only relieves your accounts payable staff of this responsibility, but it also ensures that the correct approval workflow will be used for every invoice and increases the chance of receiving early payment discounts.

Efficient Discrepancy Resolution: Create a robust mechanism for quickly addressing discrepancies.

Again, this can be automated.

For PO-based purchasing, you can use a combination of OCR and AI to match invoices with purchase orders and contracts at the line level. And the system will flag discrepancies for immediate review. Automated PO matching relieves AP staff of the single most difficult, tedious, yet important task they perform. For a human to meticulously match POs to invoices line-by-line is a struggle. AI accomplishes it effortlessly in seconds. A good invoice processing software can save you a lot of work here!

For non-PO invoices, automation provides a platform for approvers to ask questions and present concerns about a specific invoice. The platform tracks the discrepancy and documents the concern as well as actions taken to address it.

Real-time Tracking, Reporting and Record Keeping: Implement systems that provide real-time tracking of invoices and converts that real time tracking into searchable record keeping.

This transparency allows you to better manage pending as well as paid invoices. Advanced software provides real-time analytics and reporting capabilities, offering insights into automated invoice processing performance and financial health.

With AP automation, AP specialists are empowered with total insight into the entire invoice process. And so is the leadership of the accounting department.

They can track an invoice through each stage of invoice processing. They can measure invoice volume, track KPIs, identify approval bottlenecks, and, critically, make sure that every invoice gets paid on time.

This data also translates into digital record keeping and reporting. Records that are searchable by any variable.

With invoice automation, when your auditor wants to see every invoice paid to a particular vendor over a certain amount of money in the first quarter of the year, you will be able to provide both an image of the invoices as well as an entire audit trail of each in seconds.

State of the Art Technology: Staying on top of the latest innovations will keep your invoice process as efficient as possible.

This includes integration with your financial systems. Integration of invoice processing tools with existing financial systems ensures a unified and efficient financial management ecosystem. And as your financial systems evolve and improve, your invoice automation should keep up.

Of course, a cloud-based invoice processing software offer accessibility, scalability, and security, catering to the dynamic needs of modern businesses. Yet some companies are required to use on-premises servers for various reasons. Your invoice process automation needs to be able to do either.

Mobile-enabled solutions allow for remote access and management of automated invoice processing, offering flexibility and ensuring continuity in operations. Managers love being able to approve invoices on any device from anywhere in the world with a single click, for example. But there are many more benefits of automated invoice processing!

The most advanced invoice process automation solutions are offered as a service on a subscription basis. This means they are constantly updated and improved. They add functionality to compliment improvements to integrated financial systems.

Regular Review and Optimization: AP automation system will allow you to continuously review your invoice processing system to identify areas for improvement.

While the software will stay cutting edge through releases and update, it’s up to you to use it to regularly update processes and technologies to keep up with best practices.

Once your Accounts Payable staff is freed from monotonous tasks, they will be free to identify additional opportunities for efficiencies and cost savings. This is where teaming with an experienced AP automation provider will pay dividends. They will let you know about new opportunities to improve your invoice processing learned from other customers.

Just remember, improving overall financial management efficiency is a continuous process that should never end.

A solid invoice processing software helps the team

Technology and Automation in Invoice Processing

Let’s review how technology and automation are revolutionizing invoice processing, offering unparalleled benefits in efficiency, accuracy, and cost-effectiveness.

  • Automated Data Capture:
    Technologies like OCR and AI-powered data extraction automate the capture of invoice data, reducing manual input and errors.

  • Electronic Invoicing (e-Invoicing):
    E-invoicing solutions enable the electronic exchange and processing of invoice data, streamlining the entire process.

  • Automated 3-Way Matching:
    Automated systems can match invoices with purchase orders and receiving reports, flagging discrepancies for review, thus ensuring accuracy and compliance. And they can do it in seconds rather than hours.

  • Digital Workflow Automation:
    Automation tools facilitate a seamless, digital approval workflow, enhancing speed and transparency in the invoice approval process. A good invoice processing software may work like a charm.

  • Real-Time Analytics and Reporting:
    Advanced software provides real-time analytics and reporting capabilities, offering insights into invoice processing performance and financial health.

  • Continuous Innovation and Support:
    Opting for solutions that offer continuous updates and support ensures that businesses stay ahead of technological advancements and best practices in invoice processing.

Implementing these technologies not only streamlines the invoice processing but also provides strategic advantages in terms of operational efficiency, financial visibility, and compliance management.
automated invoice processing are a timesaver

Conclusion and Key Takeaways

In conclusion, here is what you should have learned from this detailed guide on enhancing invoice processing in your organization. Key takeaways include:

  • Understanding Each Step:
    Recognizing the importance of each phase in invoice processing from receipt to record-keeping.

  • Identifying and Addressing Inefficiencies:
    Recognizing common challenges in traditional methods and adopting strategies to overcome them.

  • Implementing Streamlining Strategies:
    Utilizing expert tips for improving efficiency and accuracy in the processing workflow.

  • Embracing Technology and Automation:
    Leveraging the power of automation and advanced software, like CoreIntegrator, to transform invoice processing.

  • Continuous Improvement:
    Regularly reviewing and updating processes and technologies to stay aligned with best practices.

This guide aims to empower finance professionals like yourself with the knowledge and tools to streamline your automated invoice processing, thereby enhancing operational efficiency and financial accuracy to save time and money.

At CoreIntegrator, we have nearly 30 years of experience in making invoice processes more efficient.

We’d be happy to provide you with a free, no obligation review of your current invoice process along with an analysis of how you can make it up to 500 times more efficient.

FAQ Invoice Processing

Invoice processing involves the handling of incoming invoices from receipt to payment. It includes steps such as invoice capture, validation, approval, and payment processing. The goal is to manage payments efficiently, ensure accuracy, and maintain records for financial reporting and compliance.

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