Optimize Your Invoice Processing: A Guide to Reducing Costs and Shortening Time

Manual invoice processing is inefficient and costly, involving excessive labor hours, late fees, and strained supplier relationships. Many organizations still rely on paper invoices and decentralized workflows that lead to long approval cycles.

This guide provides techniques to optimize the invoicing procedure through automation, reducing turnaround times from receipt to payment. Tactics covered include e-invoicing adoption, optical character recognition, digitized approval workflows, process analytics, and electronic payments.

Transitioning to streamlined electronic invoice handling via reliable invoice management systems like IQInvoice, delivers tangible rewards, namely cost reductions, improved working capital, averted late penalties, and enhanced vendor satisfaction from faster settlements.  

The True Cost of Manual Invoice Processing 

Before assessing such solutions, organizations must calculate their current invoice processing costs across these five dimensions:

1.Direct Labor Expenses

Employees handling invoices manually takes significant time. The more invoices, the more headcount is involved. Labor is likely your largest processing expense. Benchmark yours: 

– Number of AP clerks needed to handle daily/monthly invoice volumes

– Total hours required for key steps – receipt, data entry, workflow routing, approvals, exceptions handling, payments

– Full-time equivalent (FTE) costs based on employee hourly wages and any overtime

2.Transactional Costs 

Many companies still depend on paper invoices sent via mail. Printing, sorting, mailing, and archival costs add up. Checks issued manually also have direct print and postage expenses.

3.Scanning and Data Entry

While paper still dominates, e-invoicing is rising. However, PDFs and emails need manual downloading, labeling, data entry, and uploading into systems. These tedious tasks carry a price tag as well. 

4.Lost Discounts and Late Fees

Delayed processing leads to missed early payment discounts and late approval penalties. Lost discount capture directly reduces margins while late fees directly increase expenses.

5.IT Systems and Accounting 

Lengthy processing requires more robust accounting systems and staff to maintain data, generate reports, handle exceptions, field supplier inquiries, and fix errors. IT infrastructure and personnel cannot be overlooked.

Pitfalls of Decentralized, Manual Invoice Handling 

1.Excessive Touches and Slower Turnaround 

In decentralized workflows, clerks must manually route paper invoices for project code classification, department approvals, accounting reviews, CFO signatures, and final payments. Lots of hand-offs slow overall turnaround.

2.Greater Risk of Invoice Duplication Errors 

With poor visibility into invoices once they leave an employee’s desk, copies may be generated or the same invoice coded differently. This causes accidental double payments and write-offs, if caught too late.  

3.Limited Reporting and Tracking Capabilities

As invoices traverse different physical inboxes, their exact status is unknown without manually contacting each handler. Such opacity disables real-time tracking and forecasting of liabilities.

4.Costly Dispute Resolution with Vendors

Buyers lack rapid visibility when payments are delayed or processing complexities arise with specific suppliers. Researching status history across siloed systems strains vendor relations. Extended and constant inquiries via phone, email, text are common.

Transitioning to Electronic Invoice Processing

New automation technologies evolved due to paper’s inefficiency, enabling dramatic performance gains:

1.Streamlining Invoice Submission 

Getting suppliers to adopt standardized electronic invoice templates or data formats pays dividends. Automated validations check for accuracy and errors upfront. Issues are addressed before submission acceptance.

2.Automating Data Capture via OCR

Optical and intelligent character recognition (OCR and ICR) instantly scans paper and PDF invoices and lifts key details like amount due, payment terms, and billing codes into workflows. This skips laborious data entry tasks riddled with errors. Accuracy also rises.

3.Programming Routing Paths and Approval Cycles 

Instead of employees emailing invoices to managers or spreadsheets tracking statuses, platforms like IQInvoice have predefined workflow steps. Invoice amounts or departments digitally determine approvers. Path automation provides structure.

4.Embedding Business Rules for Exceptions

Beyond routes and approvers, automated controls like duplicate invoice detection or three-way purchase order match avoid common exceptions. With AI, new rules easily augment processes before human involvement.

5.Enabling Digital Sign-Offs and Funds Release 

Rather than slow paper signatures and check issuances, e-signature authorizations paired with electronic payments via ACH or wire speed conclusion. All substantiating paperwork is attached in system audit trails.

6.Monitoring with Process Analytics

Digital dashboards track invoices from inception to archival via key process metrics and bottlenecks in real-time visibility. This substitutes for employee status inquiries across fragmented systems.

The Bottom-Line Results from AP Automation

Here are some amazing bottom-line results from AP Automation that inspire medium and large enterprises to automate their vendor invoice management system: 

1.Hard-Cost Savings

The most direct payoff is reducing transactional process costs:

– 50-60% or higher drops in labor expense  

– 70%+ savings in paper/printing/postage 

– Elimination of type-and-mail costs

– Lower IT systems fees 

2.Treasury and Working Capital Benefits

Just-in-time payments and discount capturing optimizes cash flow:

– 20-30% discounts on early payments

– Averting late penalties or interest costs

– Improving supplier payment terms over time

Key Takeaway

Optimizing invoice processing presents a compelling business case when factoring hard-cost savings and working capital benefits. However, extracting the full value requires purpose-built automation. Generic OCR tools only solve part of document handling while one-off workflows fail to provide end-to-end improvements across approval steps. 

Rather, platforms like IQInvoice Vendor Invoice Management deliver integrated invoice capture, approval workflow, and payment modules tailored for AP success. Its pre-configured dashboard analyzes cycle times, discount capture rates, disputes, resource utilization, and more to showcase bottom-line impacts over time. With role-based and mobile access, it provides needed visibility across the organization with rapid ROI. 

Ask for a demo today to quantify the potential performance gains for your own AP group. Moving from antiquated paper bills and email forwarding to intelligent e-invoicing services marks the path toward leaner, faster order-to-settlement.

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