Invoice processing is a critical process in every business’s finance function. Invoice processing involves a lot of data checking and manual effort, which is very time-consuming. Multiple tiers in the approval process also impacted the accounts payable days and resulted in low supplier trust for many organizations. It is not just about automating invoice processing but also setting up a unified approvals process that will bring down these issues in invoice processing. Transparency and cohesiveness throughout the process can save a lot of manual effort and improve trust with the stakeholders involved. Let us dig deep into the details of automated invoice processing in this blog.
Steps involved in Automated Invoice Processing
Receiving and accepting the invoice
For any organization, this is the first step in invoice processing for the AP department. When you receive the goods from the supplier, they create an invoice with all the details. The generated invoice will be shared via different channels, such as email.
The AP department has to check all the details, such as bill number, quantity of goods, date of delivery, payment details, etc., to initiate the processing. After verifying the details, they are entered into an ERP system like SAP or any other accounting system.
Data Entry
This is the trickiest step if you choose manual invoice processing. There is a big scope for errors, and mistakes might cost the accounting department way too much.
In automated invoice processing, organizations can leverage Optical Character Recognition (OCR) technology to scan the invoices generated in PDF, images, and other formats. Organizations can also leverage AI-powered assistants and deep learning models to extract information automatically as per defined workflows and enable the entire process seamlessly.
Three-way Matching
This is the control measure in the entire process, and it corresponds to checking the details from the Purchase Order, Delivery Receipt, and Invoice. In the manual process, the AP team checks all the details in the three of them to proceed with further processing. If the details do not match it has to be resent to the supplier for verification.
AP automation can be done with automation tools like Power Automate. Organizations can verify these details by setting up workflows and triggering actions automatically.
Approving the payment
This has to be a centralized process, triggering the individuals to take action. Setting up a unified approval system with tools like Power Automate will bring more transparency to the process. Any member of the AP team can check the status of the invoice with just a reference number so as to reduce delays in processing.
Processing the payment
In a manual system, once the AP team has all the approvals, payments are initiated through wire transfers, account payments, or card payments. Because of the approvals within the organization and the Accounts Payable department, there may be delays in payment processing. With AP automation and a unified approvals system, payments can be automatically triggered with the workflows in Power Automate. You can also send notifications to relevant teams about the payment status.
Challenges with manual invoice processing
Accounts Payable teams encounter a different set of challenges every time. However, these are the most common challenges related to invoice processing.
Payment delays
Despite many changes in the AP team, many organizations still have paper-based invoices. Because of this, there is a lot of back and forth within the finance function to move the invoice for approval. This, in turn, may lead to longer invoice processing timelines.
Longer invoice processing timelines lead to payment delays, thereby affecting the suppliers’ cash flow and relationship with them.
Fraud risk
Most organizations risk around 5% of their revenue to fraud every year. The accounts payable function is a sensitive function for organizations when it comes to fraud. Fraudulent payments, manipulation of finance statements, and cash distortion can happen within the Accounts payable function.
Cyberattacks and phishing have become critical for every business function, and finance is more vulnerable to them. Setting up security measures and controls within the AP automation systems can help protect them from these.
Matching errors
Three-way matching, as discussed in the steps in invoice processing, is an important process. In the manual process, there is more room for errors, leading to incorrect invoices. At times, AP teams issue the invoice without the goods being delivered.
Missed invoices
There is a huge room for paper invoices being lost in the cumbersome process. Payment cannot be issued without finding the invoice. This affects the payment cycles and the processing times which in turn can affect suppliers’ cash flow.
Incorrect payments
Double payments or payment mismatch is another biggest issue from manual invoice processing. A small data entry error may lead to double payment for the supplier or the AP department paying more or less than the invoice amount. This may lead to friction between both the parties and trust issues. We can solve this problem with automated invoice processing.
Enabling Unified Approvals in Invoice Processing within SAP
Many organizations leverage SAP as it has robust functionality for Finance, procurement, supply chain, and many more. The AP department can integrate their SAP ERP with Power Automate to enhance efficiency in invoice processing. Organizations can integrate Power Automate with SAP ERP to automatically upload the invoices received through email and other channels within no time.
The prebuilt models in AI Builder can help organizations extract the data from invoices, validate the data, and set the notifications needed for unified approvals within SAP ERP.
In case organizations have complex processes, you can customize the data validation models to meet your needs and enhance the processing timelines. Power Automate not only enables seamless extraction of data from the invoices but also helps to set the alerts required for teams to process the invoice. Overall, it will enable a unified approvals system to bring more transparency and efficiency to invoice processing.
Are you looking to enable unified approvals in invoice processing within SAP ERP? Our team is here to help. Our experts offer free consultation to assess your current processes and identify opportunities to unlock efficiency. Reach out to us to schedule a call with Saxon’s experts.
