Automation reduces the cost of invoice processing and helps in streamlined cash flow management

By Mr. Srivatsan Santhanam

In the dynamic realm of business, companies are constantly seeking ways to optimize invoice processes and improve efficiency. However, there is one aspect that frequently escapes attention – manual invoice processing. Although it may appear to be a mundane task, the reality is that outdated invoice processing method can have unexpected and costly consequences for businesses. Manual invoice processing entails concealed expenses that deplete resources, impede productivity, and adversely affect an organization’s financial performance. The burdensome approval process, instances of exceptions, errors, amplified audit costs, and absence of process accountability all collectively contribute to the overall fiscal strain.

Automation can greatly improve invoice processing by streamlining and accelerating the entire workflow of AP processing. Here are some ways automation can greatly help redefine manual invoice processing fucntions:

1. Data Extraction: Automated invoice processing systems uses Optical Character Recognition (OCR) technology infused with advanced AI technology methods to extract relevant information from invoices, such as vendor details, invoice numbers, dates, line items, and amounts. This eliminates the need for manual data entry, reducing errors and saving time.
2. Invoice Validation: Automation can validate invoices against predefined rules and criteria to ensure accuracy and compliance. For example, it can verify the vendor’s details like vendor address, pin code, validate vendor against export control & trade sanction list, validate the invoice amount, check for duplicate invoices, and compare against purchase orders or contracts.
3. Workflow Automation: Automation can route invoices through predefined approval workflows based on rules and business logic. It can automatically send invoices to the appropriate approvers, select intelligent substitutes in case a workflow is srtuck for long time, escalate overdue invoices, and provide notifications for exceptions or discrepancies.
4. Exception Handling: Automated systems can flag and handle exceptions efficiently. For instance, if an invoice doesn’t match the predefined criteria or requires additional verification, the system can route it to a designated team member for review while continuing with the processing of other invoices.
5. Faster Payment Processing: Automation can expedite payment processing by triggering payments based on predefined rules or payment terms. This ensures timely payment and avoids late payment penalties.
6. Data Analytics and Reporting: Automation provides opportunities for data analysis and reporting. By capturing and analyzing invoice data, organizations can gain insights into spending patterns, vendor performance, and optimization opportunities.

Here are 4 business outcome automation helps to overcomes high AP costs:

Streamlines processes to improve efficiency:

Automation reduces the cost of invoice processing and disbursements by providing a single platform, login, and interface for managing all spend. Automation enables businesses of all sizes to electronically process invoices received in multiple formats (email, mobile, or supplier portal), at any location. Invoice data is digitized and automatically extracted, validated, routed for approval, and centrally archived. This eliminates the costs of handling, routing, storing, and retrieving paper documents, and keying invoice and payables data. Nearly all invoice data can be extracted automatically without human operator intervention. Digital workflows also allow for several levels of approval, complex coding, and allocations across departments.

Consolidating all invoice data in a single system eliminates the expense of managing content across a variety of databases, systems, and physical storage locations and also helps reduce paper waste. AP automation provides complete audit trails, rich invoice data, visibility into invoice and payment status, and direct links between POs, invoices and payments. Some solutions also automate the reconciliation of bank statements and accounts with data from the AP platform.

Improves cash flow visibility:

Automation puts smart cash flow insights at the fingertips of the people of any organization. Decisionmakers can access in near-real time, a range of metrics required for cash management, including on-time payment percentage, AP value and volumes, and payment metrics. The insights from an automated AP solution provide greater assurance when it is best to release cash (potentially reducing borrowing costs and opening the door to capture more early pay discounts) and help executives make fast, better-informed investment decisions. For instance, insights into cash flow can be used to formulate the value of early pay discounts. All this enables a business to manage its working capital, cash flow, and Day’s Payable Outstanding (DPO) with greater accuracy and precision. Having instant access to invoice data also enables AP departments to respond to ever-increasing demands for reporting from different corners of the enterprise, without the need to hire additional staff.

Strengthens controls and compliance:

Automation safeguards sensitive financial information through configurable roles-based access and interface controls. The technology also creates complete audit trails of all system activities and provides administrators with near real-time visibility. Similarly, digitizing approval and exceptions workflows with automation eliminates the chance that documents will be lost, misfiled, or stolen. Automation ensures compliance across contracts, processes, regulations, and supplier strategies. Departments that have automated also can easily adhere to legal and internal document retention policies by eliminating the costly risk of deleting or altering an invoice prematurely. Audits can even be provided with view-only access to the system, eliminating the need for buyers to physically collect and photocopy documents requested for review by auditors.

Automation mitigates the risk of payment fraud by restricting the ability to approve invoices and initiate payments to authorized individuals. Automation also enables businesses to reconcile their transactions in real-time, increasing the chances of spotting fraudulent payments more quickly. Additionally, AP automation can facilitate the positive pay process with a buyer’s bank. And electronic payments such as ACH and card are less prone to fraud than paper checks.

Delivers more accurate and near real-time data for better spend management:

AP automation and integration with travel and expense in a single platform empower businesses to gain visibility into employee spend and optimize spending. Automation also provides businesses with insights into category and supplier spending, budget variances, unapproved or “maverick” spending, order-cycle times, and the number of transactions that are processed straight-through, without human operator intervention. The spending and patterns revealed by these insights can provide a company’s sourcing team with leverage for contract negotiations. Managers can use these insights to act sooner to address overspending and managing spending with a single platform reduces overhead and makes it easier to train staff. All this helps businesses better manage spending, reduce the cost of purchases, ensure contract compliance, and strengthen their supply chain.

Conclusion

Businesses cannot afford to be held back by the inefficiency, uncertainty, and risk of manual and semiautomated AP processes. Automation in products like SAP Concur Invoice enables AP departments to significantly reduce the cost of invoice processing, disbursements and transparency while reducing costs and processing time. It enables organizations to streamline their financial operations and improve cash flow management.

(The author is Mr. Srivatsan Santhanam, Vice President, Spend Engineering, SAP Labs India , and the views expressed in this article are his own)