What makes accounts payable such a difficult area to manage effectively?
A global survey, carried out by OnePoll, found that invoice handling is amongst the top five causes of business administration inefficiency.
For more than two-thirds (67%) of companies, this remains a manual process with finance professionals still having to rely on paper documents and information entered by hand.
It’s a traditional approach which creates an inherently slow and error-prone way of working.
This inefficiency continues to make accounts payable a prime target for fraud, contributing to the 7% of a company’s annual expenditure that’s typically lost to errors and fraud.
This guide looks at why the traditional approach to accounts payable is outdated, and how digital automation is completely transforming the way that invoices are managed - creating a fast, streamlined and secure operation.
How does accounts payable automation work?
While so many of business communications are now handled digitally, invoicing is one area that has remained defiantly stuck in the past. The majority of invoices still arrive either as a paper document or an email attachment.
Either way, all of the relevant information that’s contained in the invoice needs to be manually transferred into a company’s accounting system. It’s this manual process that’s the root cause of the inefficiency.
The more invoices that accounts payable professionals are having to handle, the more administrative time and resources are required to input the information from invoices and manually process payments.
This administrative burden increases the risks of errors being made and with so much time taken up on manual processes, it limits the ability to effectively monitor invoices and to identify fraud.
The benefit that’s delivered by a digital approach is the ability to eliminate this manual process and replace it with an automated solution, removing the need to manually handle invoice documentation.
A digital system such as Webexpenses is able to achieve this automation by the use of smart scanning technology and OCR (Optical Character Recognition).
Here’s how it works:
Invoices sent via email
A dedicated email account is created to which all invoices are sent. When documents are sent to this email, they are automatically ‘read’ by the system.
Invoice text is scanned and the relevant information identified and converted into a digital format. The system is able to identify and populate:
- Invoice headers
- Invoice numbers
- Line items
Around 80% of invoices are able to have their coding defaulted in this way, with no need for any information to be manually entered. The only human intervention that’s required is a quick check everything is OK.
Invoices sent as paper documents
Any invoices that are received in a physical format can be easily scanned into the system and managed digitally. This can be done using a conventional scanner or simply by taking a photo of the invoice with a smartphone camera.
Once the document is in a digital format, it’s processed in exactly the same way as an email attachment. The document text is scanned via OCR and all of the relevant information is identified and stored, without any data having to be manually input.
What are the benefits of an automated process?
Automating accounts payable does more than just improve efficiency, it fundamentally changes the way that invoices are handled. The advantages include:
Faster invoicing process
The most obvious advantage is simply the speed with which invoices are able to be processed. Compared to a traditional approach, it’s estimated that an automated process will deliver an efficiency saving of around 90 per cent.
Faster processing means better relations with clients, customers and suppliers who receive their payments on-time. It also means avoiding any potential financial penalties incurred for late payment.
Reduced human errors
When important payment information is having to be transferred by hand, it’s inevitable that mistakes will be made. The more invoices are handled, the higher these risks become as accounts payable teams struggle to keep up with paperwork.
By automating the extraction of information, it significantly reduces the potential for errors. The time that’s saved allows finance professionals to properly check invoices and identify any potential issues.
Improved approval workflow
The approvals process is greatly improved by the use of an automated system. The software can be set-up so that each invoice is automatically checked and forwarded to the appropriate approver.
Rules can be created so that larger amounts require higher-level checks. The system can also automate notifications and reminders to approvers, helping to shield against the danger of invoices getting ‘lost in the system’.
Better fraud protection
A system such as Webexpenses Invoice Processing features integrated checks to help guard against fraud and errors. When invoices are scanned, the software matches the data against known details of clients and suppliers - including emails and bank details.
The system also checks for any duplicated data. Whenever inconsistencies or suspicious information is identified, an alert is sent to the accounts payable team
The move to an automated system allows invoice related data to be tracked, stored and accessed in ways which are not possible when information has to be manually collated. Combined with integrated reporting tools, it gives accounts payable much-improved management vision.
Each stage of the process is tracked - providing a full audit of approvals and payments. It’s a powerful tool to help ensure compliance, access accurate cash flow data and provide fast, accurate information to suppliers.
Flexible and scalable
A major problem with the traditional approach to invoice management is the lack of scalability caused by a manual process. As a business grows and the number of invoices increases, the admin work rises exponentially.
An automated solution provides the kind of flexibility and scalability that future-proofs a business to handle continued growth. A digital approach allows a system to be configured to meet the specific needs of each company.
Summary: Moving accounts payable forward
The move to automated processing of invoices helps to bring accounts payable into sync with an increasingly digitally connected business and legislative world. By eliminating manual and paper-based processes, it removes one of the barriers to achieving fast and effective financial administration.
With better tools and faster processes, it gives accounts payable teams the opportunity to move their focus from manual and repetitive tasks and towards a more forward-facing approach - improving performance and protecting companies from the risks posed by errors and fraud.