Why is invoice processing so expensive?

In most AP departments, supplier invoices can be received in paper or electronic format by anyone, anywhere in the enterprise, including a branch office, centralized mailroom, finance department or a purchaser.  The invoices are then reviewed and forwarded (usually via inter-office mail) for approval and coding. 

Much of the invoice approval process resides in the heads of seasoned, trusted employees who can go on vacation, go on maternity leave, quit or become sick, significantly delaying workflows.  Any exceptions are chased through the organization. 

Once invoices are approved, invoice data is keyed into an enterprise resource planning (ERP) platform or other line of business system and the invoice is scheduled for payment and physically filed.  Supplier inquiries and management and audit requests for reports and access to documents typically require manual document retrieval.

All this manual invoice processing results in costly and error-prone keying of invoice information, lost or misplaced invoices, long approval and exception resolution cycles (which result in late fees and missed discounts), compliance and security risks, high paper storage and retrieval costs, delays uploading data on approved invoices to downstream systems, time-consuming supplier inquiries regarding invoice and payment status and difficulty implementing operational best practices.

Invoice processing also consumes the time of accounts payable managers.  Accounts payable managers spend a greater percentage of their time on transaction processing (36 percent) than on managing staff (34 percent), reviewing reports (21 percent) or planning (9 percent), IOFM reports.

As a result, accounts payable earned a dubious trifecta in an IOFM survey of controllers: it topped the lists as the most time-consuming, laborious, and paper-intensive finance and administration function, ahead of burdensome activities such as accounts receivable, payroll, tax, and audit and reporting.  In fact, accounts payable received nearly twice as many votes from controllers as the most time- and labor-intensive finance and administration function than the next highest-ranked function.

AP automation solutions and invoice processing software reduce the cost of receiving, approving and posting invoices to an ERP.

Automated AP processing solutions achieve these benefits by combining seven fundamental capabilities:

1. Scan paper invoices:  Paper invoices are converted to digital format with an AP automation solution.

2. Capture electronic invoices:  AP automation solutions capture electronic invoices such as e-mail invoices (including PDF attachments), FTP file uploads and invoices that arrive via a supplier portal, in their native format. Accounts payable automation software also receives invoices that suppliers created by converting (or “flipping”) purchase orders that buyers delivered through their online portal.

3. Aggregate invoices onto a single platform:  Leading accounts payable automation solutions aggregate all invoices onto a single, secure platform, streamlining invoice approval processes and eliminating data silos. Once invoices are aggregated, invoice processing software provides organizations with total visibility into the status of processes, documents and content, as well as compliance requirements.

4. Extract and validate invoice data:  As invoices are captured, AP automation solutions extract and validate relevant invoice data against information residing in the buyer’s ERP application or other system of record. Invoices then are matched against purchase orders and/or proof-of-delivery documents.  Matched invoices are posted directly to the buyer’s ERP application by the invoice processing software.

5. Route documents based on pre-established rules:  Any invoices that require review or approval are electronically routed to processes, databases or systems and/or exceptions handling based on pre-configured business rules. Users can define and manage workflows based on their business rules as well as the requirements for the invoice type or supplier. Invoice processing automation also enables buyers and sellers to collaborate online to resolve exceptions.

6. Integrate with systems of record:  The best AP automations solutions seamlessly post invoices and related information to the buyer’s ERP or other financial systems to accelerate posting and streamline research.  Invoice processing software can integrate with leading ERPs such as SAP, Oracle, NetSuite, Infor, Sage, PeopleSoft and more.

7. Real-time reporting:  Automated accounts payable solutions provide real-time visibility into the status of invoices. Dashboards in an AP automation solution display configurable charts and threshold options to empower users to manage operations, cash, spend and risks and to adapt to changing business conditions.