In this article, we will explore exactly what automated invoicing is. We also share our 7 step process to automate invoicing. Read on to learn more.
Invoice automation is the use of software to streamline and manage the processing of invoices in a digital format. This technology simplifies the tracking and payment of bills, such as product orders, making financial management more accurate and less time-consuming.
Example: A company uses SAP Concur to automatically capture and process invoice data from product shipments, such as "Product HT56a," ensuring swift payment approvals and accounting accuracy. This automation replaces manual data entry, significantly reducing the time and cost associated with invoice management.
Automation of Invoices is important for a number of reasons, some of the most common reasons include:
Automating invoices minimizes the risk of human error that often occurs with manual data entry. This leads to more accurate billing and fewer discrepancies, which can enhance customer satisfaction and reduce the need for corrections and adjustments later on.
This automation speeds up the billing process by eliminating the need for manual invoice creation and distribution. This allows businesses to send out invoices faster, which can lead to quicker payments and improved cash flow.
By automating the invoicing process, companies can significantly reduce the labor and operational costs associated with manual invoice handling. This automation means fewer resources are spent on repetitive tasks, allowing employees to focus on more strategic activities.
Automated systems easily adapt to increased volumes of invoices without additional resource allocation. This scalability ensures that as the business grows, the invoicing process can keep up without compromising efficiency or accuracy.
Automation helps ensure that invoices are processed in compliance with relevant regulations and standards. It can automatically apply the correct tax rates, handle data securely, and maintain proper records for auditing and reporting purposes.
Prompt and accurate invoicing through automation strengthens vendor confidence and trust. This reliability can lead to better negotiation terms and stronger business partnerships.
Automation systems often include analytics and reporting tools that provide real-time visibility into the invoicing process. This allows businesses to track metrics like payment cycle times and outstanding invoices.
Invoice automation can significantly streamline accounting workflows. Here are some essential tools and technologies that facilitate this process:
Optical Character Recognition (OCR) software converts images of text, such as scanned documents, into machine-encoded text. This tool is critical for automating the extraction of data from paper invoices.
Example: An invoice image featuring "100 units of Model X at $20 each" is scanned. OCR software reads and converts this into editable text, facilitating automatic data entry into the system.
Workflow Automation Software streamlines the process flow from invoice receipt to payment. It reduces manual entry and the possibility of human error by automating tasks based on preset rules.
Example: When an invoice from Vendor A is received, the software automatically routes it for approval to Manager John. Post-approval, it schedules the payment for the due date without manual intervention.
Electronic Data Interchange (EDI) allows the computer-to-computer exchange of business documents in a standard electronic format between business partners. It is a fast and secure method to handle invoices and related documents.
Example: An invoice sent via EDI appears directly in the buyer’s accounts payable system. The data, like "500 units of Widget Z at $15 each," is processed immediately without needing manual input.
Digital Payment Solutions facilitate the direct transfer of funds and make the transaction process more efficient. These tools often integrate with other systems to offer seamless financial operations.
Example: Upon receiving an electronic invoice for 200 units of Product Y at $30 each, the software automatically executes a payment of $6,000 to the supplier’s account on the agreed payment date.
Artificial Intelligence (AI) in invoice processing uses machine learning algorithms to improve the efficiency and accuracy of invoice handling by learning from previous patterns and decisions.
Example: AI tools analyze past transactions, like the frequent ordering of "150 units of Item B at $10 each," and can flag inconsistencies or suggest optimizations for future orders.
Integration Platforms ensure that different business software systems work together seamlessly. They are essential for syncing invoice data across financial, inventory, and customer relationship management systems.
Example: When an invoice for "250 units of Product C at $40 each" is processed, the platform updates inventory levels in real time and adjusts financial records accordingly.
Cloud Storage Services offer secure and scalable options for storing digital invoices and related documentation. They allow easy access and sharing across departments and locations.
Example: Cloud storage enables the accounts team to retrieve and review an invoice for "300 units of Gadget D at $25 each" from anywhere, facilitating remote work and faster approval processes.
Compliance Management Tools help ensure that invoice processing adheres to relevant laws and regulations. They automatically check invoices against compliance criteria to prevent legal issues.
Example: Each time an invoice for "100 units of Software E at $50 each" is processed, the tool verifies tax calculations and compliance with financial reporting standards.
Analytic and Reporting Tools provide insights into the invoicing process, helping businesses to track efficiency, costs, and opportunities for improvement.
Example: These tools compile data from various invoices, like "400 units of Hardware F sold at $35 each," and generate reports on spending patterns and vendor performance.
Mobile Access Solutions allow for the management and approval of invoices via mobile devices, offering flexibility and increasing the speed of processing cycles.
Example: A manager approves an urgent invoice for "350 units of Component G at $45 each" using a mobile app while traveling, ensuring timely payments and maintaining cash flow efficiency.
Use our 7 step invoice automation framework to effectively streamline your billing operations. Simply follow the steps below:
Define the fields required for the invoice, such as product names, quantities, prices, and customer information. This template will standardize data entry for automation.
Example: Imagine you sell 50 units of "Eco-Friendly Water Bottles" at $15 each. Enter these details into the template to generate the invoice automatically.
Establish rules for the automation software to process the data, such as calculating totals, adding taxes, and determining discounts.
Example: If the total exceeds $500, apply a 10% discount. For a sale of 70 "Organic Cotton T-shirts" at $30 each, the system automatically applies the discount.
Link the invoice automation system with an email service to automatically send invoices to customers upon creation.
Example: Once the invoice for 120 "Bamboo Keyboard Stands" at $45 each is generated, it is immediately emailed to the customer.
Use automation to track payments made against invoices and update records accordingly.
Example: When a payment for an invoice of 200 "Solar-Powered Chargers" at $50 each is received, the system updates the invoice status to "Paid."
Configure alerts for overdue invoices or other important events related to the billing process.
Example: If the payment for 30 "LED Desk Lamps" at $75 each is overdue, the system sends a reminder email to the customer.
Ensure the automation system regularly updates to reflect changes in product prices or the introduction of new items.
Example: If the price of "Portable Solar Panels" changes from $100 to $95, the automation system updates this to reflect on all future invoices.
Use the automation system to generate financial reports such as sales by product, total revenue, and accounts receivable.
Example: Monthly, the system calculates and reports that 250 "Reusable Coffee Cups" at $20 each were the top-selling product.
GreenTech Solutions is a pioneering company specializing in eco-friendly technology products. Here's how they implemented our invoice automation process.
GreenTech Solutions crafted invoice templates tailored specifically for their range of products. For instance, they generated invoices including detailed descriptions for 200 units of "Compact Wind Turbines" detailing the energy output capacity and warranty terms.
The company established rules within their automation software to apply volume-based discounts automatically. For example, a purchase of over 100 "High-Efficiency Solar Panels" triggered a 20% discount, directly reflected in the generated invoices.
They linked their invoicing system to their email marketing tools to automate invoice dispatch. When a customer ordered 150 "Eco-Friendly Water Filters," the invoice was automatically sent to their email along with a newsletter featuring new water sustainability products.
GreenTech Solutions set up real-time payment tracking for transactions. For instance, as soon as the payment for 300 "Biodegradable Phone Cases" was confirmed, the system immediately updated the invoice status to "Paid" and adjusted the inventory levels accordingly.
Automated alerts were configured to notify both the finance team and customers of important events. For example, when stock levels for "LED Efficient Lightbulbs" fell below 50 units or a payment was overdue by more than 30 days, the system sent out alerts.
As market conditions changed, GreenTech Solutions frequently updated their product and pricing information. They adjusted the automation system to reflect a price decrease from $45 to $40 for "Recycled Fabric Bags," ensuring all future invoices were accurate.
Monthly automated reports were created to provide insights into sales trends and customer purchasing behaviors. For instance, the system generated a report showing that sales of "Solar-Powered Garden Lights" had increased by 25% over the quarter, providing valuable data for marketing and stock planning.
We hope that you now have a better understanding of what invoice automation is and how to use our 7 step process for invoice automation. If you enjoyed this article, you might also like our article on invoice extraction machine learning or our article on invoice validation.