Glossary Hub / Invoice automation: A guide to automated invoice processing

Invoice automation: A guide to automated invoice processing

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Is your accounting department’s inbox overflowing with invoices? Are your company’s financials a mess at the end of each quarter? Manually creating, delivering, and processing invoices can drain your team’s energy and resources. But you can break free from this archaic cycle and get with the times with invoice automation.

Invoice automation is critical to scaling your financial operations and streamlining your business processes. It can increase your accounting team’s productivity, improve financial clarity, save your business time, and reduce the risk of costly human error.

In this article, we’ll cover the ins and outs of invoice automation, including what to look for in an invoice automation software, and how the right solution can improve agility and efficiency in all areas of your business.

What is invoice automation?

Invoice automation refers to the use of accounting software to streamline the generation, delivery, and processing of invoices. It automates the entire invoice process, from onboarding and creating invoices to processing payments and routing them to the appropriate parties.

The traditional method of manually generating invoices involves entering data, creating paper invoices, checking purchase orders, and then sending and receiving them via mail, fax, or email. This process is inefficient and time-consuming, especially for businesses with growing operations, and it introduces the potential for human mistakes.

Invoice automation, also known as electronic invoicing or e-invoicing, is a digital process that integrates with your enterprise resource planning system (ERP.) It extracts the invoice data, enters the data into your accounts system, and then reviews, approves, and sends out invoices automatically.

Automating invoices allows companies to take a more hands-off approach with their financial processes. It frees up time to focus on more strategic tasks and encourages cross-department collaboration. It creates a seamless experience for vendors, improves cash management, and minimizes the potential for human error. Invoice automation can redefine and accelerate your business processes while still keeping you in control.

A definition of invoice automation, describing it as using technology to generate, process, and manage invoices, reducing manual effort and minimizing errors in billing workflows.

What is the invoice automation process?

With invoice automation you no longer have to perform the tedious tasks of manually creating, filing, and processing invoices. Instead, you can maximize efficiency and improve accuracy.

Automated invoice processing uses optical character recognition (OCR), artificial intelligence (AI), and machine learning (ML) to accelerate your invoice process. Software captures data in your digital account system and converts that data into a text-searchable document. So, supplier name, purchase amount, quantity, and other important data are all available at your fingertips. Invoices are then routed to the appropriate parties for review and approval.

The best invoice automation software includes a project management dashboard with status updates, configurable templates, and customizable workflows depending on your company’s needs. It automatically scans and categorizes invoices, increasing visibility among team members and guaranteeing accurate revenue reporting.

Invoice automation software can also track all stages of the process, from creating and sending out invoices to tracking and receiving payment. It stays on top of late payments, sends out automated reminders, and tracks overall cash flow. This data is important for financial forecasting, so your team can make better strategic decisions.

The system should seamlessly integrate with your company’s unique financial tools and ERP, ensuring there are no duplications within the data. Invoice automation is designed to lighten the load on accounting and finance teams and bring benefits to the whole business.

What are the benefits of invoice automation?

Integrating invoice automation software can benefit both small businesses and large enterprises, improving speed, efficiency, accuracy, and more. Let’s look at some of the top benefits of invoice automation. 

Reduce manual data entry: Pounding the keyboard to enter data while checking over every detail takes a lot of time and potentially introduces mistakes. Automating the invoice process frees up resources for companies to dedicate time and energy to important business operations and strategic decisions, while avoiding costly errors.

Nurture vendor relationships: Invoice automation helps secure long-term and stable relationships with your vendors and suppliers. Guaranteeing accurate, timely, and easy payments benefits the entire financial operation and can even result in early payment discounts as you nurture positive relationships with vendors.

Improve workflows: Invoice automation increases visibility and accessibility within accounting departments and makes invoice processing and tracking more efficient. By centralizing data and records, the team can easily pull and analyze key metrics.

Reduce the risk of fraud: Invoice automation software is designed to adhere to specific regulatory requirements. It can flag discrepancies or identify issues and successfully prevent malpractice, especially for large companies dealing with a high volume of invoices. It also creates an easy-to-follow audit trail.

Process payments efficiently: Automatically scheduling payment is important for your regular vendors or suppliers and can help secure relationships with your clients. Plus, settling payment promptly can lessen your company’s workload, which is great for small businesses with fewer resources and staff.

Oversee cash flow: Invoice automation software is an efficient way to manage and oversee cash flow, especially for enterprises with greater potential for revenue leakage. It ensures your business won’t overdraft or come up short, which means successfully avoiding any late payment fees.

Misconceptions about invoice automation

Is your company hesitant to discard its trusted manual methods? Let’s clear up a few common misconceptions about invoice automation.

Difficult to implement: Ease of integration to your existing systems is important. But good invoice automation software comes with a support team who will perform checks before finalizing integration, which includes running tests on payments and processing. 

High costs: As automation becomes more ubiquitous, cloud-based solutions have become more accessible and affordable. Some automation software has uniquely tailored subscription levels. So, the right tool can match the financial and invoice processing needs of small, medium, or large businesses.

Lengthy training process: A smaller company may feel daunted switching from manual to automatic invoicing. But modern automation tools are intuitive and designed with user-friendly services. Plus, the technology comes with training and support teams to help businesses with integration and daily use.

How to implement invoice automation software into your business

If you decided to say goodbye to manually generated invoices, then it’s time to choose the right invoice automation software. Here are some questions to ask before choosing a solution to ensure a smooth transition into your existing operations.

  • Does the invoice automation software integrate with your current ERP and cloud system? 
  • Can the software capture data from various formats, such as paper, PDFs, and emails?
  • Can the software handle your current workload with the capability to scale?
  • Is it easy to track and locate invoices within the software?
  • Will the software issue payments automatically or does it require specific approvals? 
  • Does the software improve productivity within your current business operations? 
  • Does the software align with your long term business goals? 

It’s important to evaluate and analyze your current invoice processes. Learn what’s working well within your system and identify which areas could be more efficient, so you can implement the right software for your business needs.  The best invoice automation software should be scalable and customizable to grow with your business. You don’t want to implement a new technology that you outgrow in a year or two.

Key features of invoice automation software

Besides being intuitive and easy to use, the right invoice automation software should include some important features.

Fraudulent practice flags 

The software should be able to check against duplications within the system and flag any discrepancies in the financial data. The right invoice automation technology has the power to prevent any payment scams or fraud, and also should grant role-based access to secure the safety of your financial data.

Robust invoice capture 

Your invoice automation software should be able to capture and extract data from all formats, whether scanned paper copies, electronic invoices, or PDFs, so there is no missing or inaccurate data. 

Customizable formats 

Invoice automation technology should have customization options depending on your specific business requirements. Since your business has unique needs and adheres to unique regulations, the software should have customizable features to meet its standards. 

Data analysis capabilities 

Managing KPIs is crucial to success. Tracking and analyzing the data within your invoice processes will help you gather information and make secure financial decisions.

ERP integration 

The invoice automation software should seamlessly integrate with your accounting and finance systems. Communication and sharing of data with other ERP systems is vital to the efficiency of your business.

Best practices for successful invoice automation

After you decide to automate your financial operations, be sure to follow some best practices to get the most out of your solution.

Check for updates: All technology requires continuous updates and system improvements. If you fail to do regular software upgrades, then your automation tool could be missing key safety, processing, and other features.

Institute a training period: As you begin to implement your new software, it’s important to institute a training period for employees. Task a few team members with working with the software’s consultants as they learn how to efficiently use the software. Be sure to allow for ample support to get the tool up and running. 

Specify roles and workflows: A clear delineation of team roles and workflows will help better manage and run the software. Assigning security access to qualified team members will ensure financial safety where needed. Plus, taking the time to institute proper workflow procedures will tailor the invoice automation software to your company’s specific workload.

Examples of invoice automation success

Zuora Billing is an automated solution that helps evolve all areas of your business — from pricing to billing, data analysis and more. The software is designed to help you convert and retain customers, while delivering consistent value. Let’s look at three Zuora customers that benefited from Zuora’s comprehensive invoice processing software.

ConstructConnect: ConstructConnect helps large construction contractors grow their business. As the company began to scale, it required more flexibility within its billing processes to match a growing number of products. Zuora helped ConstructConnect automate its invoice operations, resulting in over 170,000 invoices processed — doubling the small team’s efforts from the year before.

Gainsight: Gainsight centers the customer experience and provides solutions to focus on customer success. Its billing process was entirely manual, which resulted in a high margin of error and audit risk. Zuora helped automate Gainsight’s business processes, resulting in reduced time and effort, fewer mistakes, lower risk, and access to real-time data whenever it was needed.

rankingCoach: rankingCoach helps small businesses better manage their online presence to attract local customers. However, since the company went global, it needed more customizable payment options with more languages and currencies. It was also struggling to manage payments and increase payment success rate. 

Zuora collected data to better understand the reason behind the payment failures. The results? A successful implementation of retry scheduling and fewer service disruptions for rankingCoach customers.

The future of invoice automation

Today’s invoice automation software is just the beginning. Let’s look at a few ways the technology will improve and advance going forward.

Security features: Invoice automation software will continue to add extra layers of security to ensure the safety of sensitive business information. Potential improvements in blockchain technology can ensure invoice authenticity, reducing the risk of scams and fraud.

Better data analysis: As the software improves, so will the technology’s ability to extract, read, and use real-time data. The software will only get better at discovering anomalies in the data and provide insights on payment trends.

More AI integration: AI will continue to inform and drive invoice automation software, optimizing workflows and processing invoices at a faster rate. Plus, the technology should begin to provide insight on financial decisions and offer suggestions for improving processes.

Why your business should implement invoice automation

Taking advantage of an automated solution can help businesses stay competitive and compliant and reduce time and effort. Choosing to remove a long to-do list of invoice processing relieves burdens on your financial team. Instead of spending time on tedious manual work, companies can have the energy and better data insights to make strategic decisions.

Automation is a sensible solution to time-consuming processes that can minimize friction within your business and create opportunities for increased growth. You can decrease the volume of unprocessed invoices and simplify your business operations with invoice automation software. 

It’s time to stop ignoring that pile of unpaid invoices. Streamline your invoice processes with Zuora’s comprehensive billing software to create a more flexible, accurate, and reliable financial operation.

Invoice automation FAQ

How will invoice automation reduce my workload?

Invoice automation reduces time spent on every step of invoice processing. Your team will no longer have to enter manual data, track payments, or ensure an audit trail, along with many other productivity benefits — freeing up resources for more strategic initiatives.

Can invoice automation comply with local tax regulations?

Yes, invoice automation software is designed to be compliant with local tax authorities, guaranteeing your business remains secure and ready for tax season. 

Is invoice automation software safe and secure?

Yes, invoice automation software is built to continuously flag potential scams or fraud within the invoice system, in addition to keeping sensitive information private. Newer technology, like blockchain-based invoices, can add an additional layer to ensure authenticity.

How long does it take to implement invoice automation? 

The time it takes to implement invoice automation software will depend on the volume of invoices and the size of your company. It can range from a few weeks to a few months, so be sure to choose a solution with a team of experts that can help your business get up and running faster.

What are the main benefits of implementing invoice automation?

Invoice automation can help reduce the time spent processing invoices, relieve tasks from financial teams, secure long-term relationships with clients, flag fraud, better manage financials, and improve workflows across departments.