Once invoices are approved for payment in an automated system, they are passed directly to the financial system for payment scheduling based on the usual factors such as due date and discount date. The good news is that they get to that point far sooner than they typically do with manual invoice processing. That means cash management policies can be exercised as desired and savings from available discounts can be realized. This also eliminates errors that can potentially be introduced by re-keying.
In an automated system, the status of invoices is always known and accessible electronically. That makes it possible to give suppliers self-service enquiry capabilities via a secure supplier portal. Not only does this significantly reduce the enquiry-handling load on the AP department, it also gives suppliers piece of mind and the feeling that your organization is “easy to do business with”. That and the time you save them when they don’t need to chase late payments may well come into play when future purchases or contracts are negotiated.
Don’t under-estimate the percentage points that can be shaved from your overall purchase costs over time.
Reporting and analysis
Last but not least, an automated invoice processing system enables all kinds of reporting and analysis that is simply not possible when invoices are handled manually. Invoices are electronically captured, validated and coded. Because it’s done sooner, financial managers have much better visibility of near-term cash requirements, enabling better management of working capital. Because it’s done more thoroughly and accurately, procurement has better information for spend analysis, contract negotiations, and supplier relationship management.
In addition to these main elements of automation, there are a few important underlying attributes that are essential to making your invoice processing system effective:
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- A highly flexible filing system - Invoice records and associated information such as scanned documents will need to be viewed and processed in many different ways throughout their lifecycle. The ability to look up, organize, sort, and filter this information according to the criteria that is important to your organization is key to overall productivity.
- An open architecture - In order to introduce the type of “invoice processing engine” described above without the need to replace existing financial and purchasing systems, the software needs to be designed in a way that enables it to easily access or import information from your existing systems.
- An intuitive user interface - Even though some of the inner workings of your invoice automation may be quite sophisticated, the system needs to be easy to understand and use by your AP personnel and others. For instance, 3-way matching may involve as many as 20-30 different tests. The system needs to make discrepancies easy to interpret and should provide the ability to take appropriate action with just a click or two. An intuitive user interface design is key to the productivity of individuals.