How to optimize the invoicing process
The way in which invoices are processed can make a major difference to both buyer and supplier. Read on to learn how to optimize your invoicing process.
All too often, the invoicing process is fraught with difficulty, from inefficient manual processes to the risk of human error. But with an effective electronic invoicing or invoice automation solution in place, companies can streamline this process and reduce the risks. Read on to learn what the invoicing process is, what challenges it poses, and how you can optimize it.
What is the invoicing process?
Before we can talk about how to optimize it, it’s useful to first outline what exactly we mean by the invoicing process. While the exact details may vary from company to company, the manual invoicing process generally follows these steps:
- A paper or digital invoice is received from a supplier, outlining the costs due for goods or services delivered
- The invoice is sent or assigned to the relevant member of the AP department for processing
- The data contained within the invoice is manually entered into accounting software or filed in a paper invoice system
- The invoice goes through the manual internal approval process to ensure that it’s relevant and accurate
- Payment is scheduled or made immediately to the supplier, ending the invoicing process
That’s a lot of steps for what initially seems like a relatively simple process, and when scaled up to enterprise level, the invoicing process consumes a lot of time and effort. What’s more, each individual step of the process that involves human input represents a potential point of error. Accordingly, there are plenty of challenges to consider when you’re trying to optimize it.
Invoice processing challenges
For suppliers especially, the invoicing process is often associated with challenges. For one thing, sending a paper invoice costs time and money, while invoices sent via email still run the risk of error and delay. Furthermore, if an invoice is lost or delayed, suppliers may have to spend precious time raising queries, or may even have to reissue that invoice.
Invoice processing also presents some challenges for the buyer. Getting a supplier’s invoice into the accounting or ERP system might sound like a simple task, but in practice, this tends to be inefficient and manually intensive. Suppliers may send their invoices using a range of different channels, from physical mail to PDF invoices sent by email, resulting in diverse operational challenges. And in many cases, manual data entry is used to get the necessary details into the buyer’s system – an exercise which is both time consuming and prone to human error.
Optimizing the invoicing process
Fortunately, many of these challenges can be overcome by deliberately and thoughtfully setting out to optimize your internal invoicing process. The following are all methods you can use to improve the efficiency and accuracy of the way you process invoices, resulting in a smoother, less manually intensive, and more error-proof invoicing process.
If you still rely on a manual paper-based invoicing system, going paperless by digitizing the entire invoicing process is the logical first step when it comes to optimization. Without taking this step, your ability to streamline and optimize the process is extremely limited. There are essentially two methods to going fully paperless – either convince your suppliers to switch to e-invoicing or establish a method for digitizing paper invoices yourself through invoice scanning.
Reduce human input
As great as your AP department is, they’re only human. And that means they’re prone to making mistakes, which is the last thing you want in an otherwise well-optimized invoicing process. Human input is involved in every step of the typical manual invoicing process, from the requirement for the supplier to send the invoice in the first place to the final payment made by the buyer. Reducing that input by automating every step can result in increased reliability and decreased costs.
Integrate invoice processing with your ERP
The invoicing process is just one part of regular business operation, and it relates and intersects with other processes like cash forecasting and supplier management. Accordingly, there are often benefits that can be reaped from integrating your invoice processing system with any other processes that are handled from within an ERP, creating a single platform that can be used to gain operational intelligence and achieve cross-departmental efficiencies.
Establish and track KPIs
Finally, establishing and tracking invoice processing KPIs is one of the simplest methods you can use to improve optimization. KPIs will give you an indication of how efficiently the entire process is running and should also provide insights into what steps in the process are falling short. By establishing KPIs, including invoice automation KPIs, and then regularly auditing your invoicing process to inspect and resolve inefficiencies, you can gradually move towards a more optimized system.
Invoice automation is the solution
That might sound like a lot to take on at once, but the bulk of the value to be gained from optimizing the invoicing process can essentially be earned with a single solution – invoice automation software.
An invoice automation solution can enable you to significantly reduce human input, massively improve invoice processing accuracy, and seamlessly integrate the invoicing process with the rest of your ERP. And best of all, it doesn’t require any significant changes to your suppliers’ behavior.
In the past, it has been difficult to create a solution that can achieve this effectively. While traditional Optical Character Recognition (OCR) can go some way towards capturing invoice data automatically, OCR only tends to be successful if the right information is in exactly the right place in the invoice file – so in practice, manual intervention is often needed to correct any errors.
A more sophisticated approach announced by Taulia in 2019 is Cognitive Invoicing, an AI-based solution developed by engineering teams from Taulia and Google, which combines Taulia’s intelligent platform with Google’s Document Understanding AI.
The solution can parse invoices in any format, including both machine-generated and scanned image PDFs, and extract the necessary data. Meanwhile, a cloud-based resolution process has been created to address any situations where information may be missing from the file. That means no matter what approach to invoicing your suppliers take, invoice automation can be used to optimize your involvement in the process.
Implementing a new invoicing process
A new invoice program can bring numerous benefits, from cost reductions to time savings. But before you can unlock the benefits of these efficiencies, the chosen solution needs to be implemented effectively and consistently across your supplier base.
First and foremost, that means communicating the benefits of the new system to suppliers clearly. It’s also essential to keep suppliers informed about how the new program will work – and different companies may approach this in different ways. For example, you might communicate the message en masse to low volume suppliers, while speaking individually to high volume suppliers.
Whatever the chosen approach, it’s important to make sure suppliers understand the new invoicing process, including what the timelines will be and who they should contact with any queries. Companies also need to have a clear policy in place to address any instances of non-compliance from suppliers, as well as agreeing any waivers to the policy in advance.
That said, introducing a new invoicing solution doesn’t have to be a time-consuming exercise. In April 2020, with businesses forced to close shared service centers due to the Covid-19 crisis, Taulia launched Rapid Start Invoicing, which can be implemented in only seven days. By enabling suppliers to start submitting invoices electronically, the solution has allowed businesses to continue processing invoices on time, despite the disruption caused by the pandemic.
Optimize your invoicing process with Taulia
For companies looking to automate the capture of suppliers’ invoice data, there are several routes available. Whatever the chosen approach, a solution that automates the invoicing process can reduce the time taken to approve supplier invoices – and this, in turn, means that suppliers will have more time to take advantage of opportunities to access early payment on their invoices via a dynamic discounting or supply chain finance program.
For buyers, this can bring financial benefits. By offering a dynamic discounting solution to their suppliers, companies can gain attractive risk-free returns on their own excess cash – and the higher the level of supplier adoption, the greater the benefits of the program will be for both buyer and supplier.
By automating invoice processing, companies can therefore not only improve their relationships with suppliers, but also reap AP automation’s benefits, including capturing lost opportunities for early payment discounts. In some cases, the resulting savings can cover the costs of the invoice automation exercise – and even help turn accounts payable into a profit center.
For more information about how Taulia can help you to optimize your own invoicing process through unlocking the many benefits of automation, get in touch with us today.