Looking to increase agility and efficiency in 2023 and beyond? If so, prioritizing invoice processing is a smart move. By streamlining this process, you can benefit from timely payments, fewer errors, and improved financial performance.
In this article, we will explore the dynamics of invoice processing in accounts payable (AP). We’ll discuss manual vs. automated solutions, the cost of processing an invoice, invoice management software, and more.
Invoice processing involves receiving, reviewing, and approving vendor invoices for payment. In the past, it was a manual and labor-intensive task that was prone to errors and delays. However, advancements in technology have transformed this process, making it more efficient and accurate.

Manually processing invoices requires entering invoice details by hand, dealing with physical documents, and using manual approval workflows. While a manual process may work for businesses with few supplier invoices, it is time-consuming, error-prone, and requires extensive staff resources.
Automated invoice processing, on the other hand, uses software with optical character recognition (OCR) technology. This technology automates data entry by extracting information from invoices and auto-filling the appropriate fields in the accounting system. Automated workflows ensure invoices follow a predefined approval process. This reduces errors and speeds up payment.
According to Levvel Research, the average cost to manually process a single invoice can be as much as $15 US. These costs can quickly add up with manual invoice processing, particularly for businesses that handle a large volume of invoices.

Automated invoice processing significantly reduces these costs. On average, businesses save $13 for each invoice processed through automation. For companies that process 500 invoices per month, that amounts to an annual savings of $78,000.

Invoice management software automates and streamlines the process of managing invoices in an organization's accounts payable department. It helps businesses handle the entire lifecycle of an invoice efficiently while minimizing errors, reducing manual work, and improving overall efficiency.
Key features that invoice management software typically includes:

- Invoice capture: Collects invoice data from various sources, such as scanned paper invoices, email attachments, or electronic invoices.
- Data extraction: Uses OCR technology to extract data from invoices, including vendor details, invoice numbers, due dates, line items, and amounts.
- Workflow automation: Streamlines the invoice approval process by automatically sending invoices to the right people for review and approval.
- Invoice matching: Compares invoice data against purchase orders to ensure accuracy and resolve any discrepancies before payment.
- Coding and categorization: Simplifies invoice tracking and analysis by organizing them based on specific accounts, cost centers, or projects.
- Vendor management: Maintains a centralized database of vendors, storing relevant information such as contact details, payment terms, and history.
- Payment processing: Processes electronic payments by integrating with payment systems. This includes issuing checks, initiating bank transfers, and generating electronic payment files.
- Reporting and analytics: Generates reports to monitor invoice metrics, processing time, approval bottlenecks, and payment status for data-driven decision-making.
- Integration capabilities: Integrates with other accounting systems, enterprise resource planning (ERP) systems, and financial management tools to streamline data transfer and eliminate redundant data entry.
Invoice tracking involves monitoring the progress of invoices and ensuring they are received, reviewed, approved, and paid within set timelines.
Manually tracking invoices can be challenging, as invoices can get lost, misplaced, or delayed in transit. This can result in late payments, damaged supplier relationships, and additional administrative burdens.
AP automation solutions simplify invoice tracking by providing real-time visibility into the status of each invoice. Businesses can track invoices at every stage, from receipt of incoming invoices to approval and payment, ensuring transparency and accountability. Automated reminders and notifications help prevent delays and ensure timely action in the invoice processing workflow.
Manual approval processes often involve paper-based trails, physical signatures, and lengthy turnaround times. This not only slows down the payment cycle but also increases the chances of errors and compliance issues.
Invoice approval software streamlines and accelerates the approval process. It does this by automating workflows and routing invoices to the designated stakeholders for review and approval. It allows for electronic signatures, automated routing, and customizable approval hierarchies. This expedites approvals, reduces processing time, and ensures adherence to policies.
Invoice capture software, powered by OCR technology, plays a pivotal role in automated AP invoice processing. OCR technology scans and extracts invoice data, including vendor details, invoice numbers, line items, and amounts. This eliminates the need for manual data entry and reduces the risk of human error.
OCR technology handles invoices in various formats, including paper, PDF, and electronic formats. It accurately reads and interprets data, enhancing capture efficiency and reliability. By automating data capture, businesses can improve accuracy, reduce processing time, and enhance data visibility for better decision-making.
The environmental impact of invoice processing is crucial in today's environmentally conscious world. Paper-based invoicing contributes to deforestation, energy consumption, waste generation, and carbon emissions.
E-invoicing offers a more sustainable alternative. By transitioning to electronic invoicing, businesses can minimize paper usage, reduce carbon emissions from transportation, and promote a greener business environment. E-invoicing also facilitates faster processing, reduces errors, and enhances data security.
Automating invoice processing through OCR technology, invoice capture software, and approval software significantly improves accuracy, reduces processing time, and enhances financial visibility. Businesses can streamline operations, reduce costs, and foster strong relationships with suppliers. With e-invoicing, organizations can contribute to a more sustainable future while reaping the benefits of enhanced efficiency and reduced environmental impact. Now is the time to make the move to AP automation.