Exploring Invoice Automation: What It Means for Your Business

Read time: 9 mins
Exploring Invoice Automation: What It Means for Your Business

Have you ever considered how much time, money, and effort your business loses to manual invoicing? Imagine trying to fill a bathtub with water, but the tub has holes in it, and, plot twist, you’re using a tablespoon. 

There’s a better way: plug the metaphorical holes of your operation and transform the invoicing process into a streamlined, efficient, and largely hands-off operation. 

The best solution to invoice processing? Invoice automation. 

In this blog we’ll explore what it is, how it works, and how it can benefit your business.

In this blog: 

What is invoice automation?

Invoice automation is a technology solution that automates the process of generating, sending, and managing invoices. It eliminates a pivotal chunk of manual data entry and processing, which brings a variety of benefits, like:

  • Relieving your AP team to focus on growth strategies
  • Optimizing cash flow
  • Enhancing supplier relationships
  • Spotting fraudulent activities 

Understanding the invoice automation process

Here's a step-by-step outline of how the automation process typically unfolds from the moment an invoice is received until payment is processed: 

Receipt of invoice

Invoices can arrive in various formats, including paper, email, and electronic submissions. Through Optical Character Recognition (OCR), digital capture tools, and integration tools, the information is extracted automatically and directly imported into the system. 

Data extraction and validation

Using OCR and AI, key information (think vendor details, amounts, dates, and line items) is extracted from the invoice. Then, the system validates the extracted data against purchase orders (POs) and contracts stored in the system. The best part? AI and machine learning algorithms help improve accuracy over time.

Invoice matching and approval

The system matches invoices to the corresponding purchase orders and receipt of goods or services — a process known as three-way matching. There are a few matching options, so you can learn about the different types offered to best fit your business needs. When the invoice matches all criteria, it moves forward in the workflow. If discrepancies are found, they are flagged and the invoice is automatically routed to the assigned person or department for review. 

Payment processing

Once the invoice is approved, it’s ready for payment. The system schedules the payment based on the vendor’s terms and the company’s payment policies, optimizing for cash flow. Once payments are executed, the system updates the financial records accordingly, marking invoices as paid and recording the transaction details. 

Digital archiving and reporting

Completed invoices are stored in a digital archive, making it easy to retrieve them for audits, reporting, or analysis. The automation system provides analytics and reporting capabilities, offering insights into spending patterns, vendor performance, and opportunities for further process optimizations. 

Benefits of invoice automation for businesses

Invoice automation has proven benefits for improved efficiency, accuracy, vendor relationships, and more — but can it also help the bottom line? Here’s what your company can expect when you switch from manual to automated invoicing. 

Save time and money while boosting strategy 

On paper, automation drastically reduces the time required to process invoices, and it lives up to the claim in practice. By automating routine tasks and reducing manual labor, companies can process invoices faster and more accurately, saving valuable time, money, and brain power.

When your AP team isn’t tied up manually inputting invoices, they’ll be free to dig into the details of contracts — renegotiating prices and seeing strategic opportunities for deals with suppliers. In other words, you’re getting the intelligence you wouldn’t have otherwise. 

Minimize errors and maximize visibility

Wouldn’t it be sweet to easily spot processing behavior that falls outside of your company’s norm? Manual invoicing is prone to human error like duplicate payments, incorrect amounts or tax codes, and even being lost. Automation minimizes errors with accurate digital capturing and validation of data, which ensures invoices are correct and on time.

Automation also gives you and your suppliers real-time visibility into the status of invoices and payments. This transparency helps with efforts like forecasting cash flow and making informed decisions while monitoring suppliers from a risk perspective. Say ‘au revoir’ to having to ring up your vendor partners and strike up that awkward or heated conversation. 

Improve cash flow management

The goal is to drive your invoicing team to make the average processing time as low as possible. Invoice automation gives you better control over your payment cycles which means taking advantage of early payment discounts and avoiding late payment penalties. 

Create stronger supplier relationships

Nothing brightens a vendor’s day like timely and accurate payments. By ensuring that invoices are processed and paid promptly with automation, you’ll lay a strong foundation to improve negotiations, terms, and pricing with vendors. Plus, some automation systems like Coupa offer enhanced visibility for suppliers, so they can log in and see where their invoice and payment are in the process at any time. 

Enhance compliance 

It’s the best way to spot fraudulent activities on both the supplier and the employer side. It ensures compliance with regulatory requirements and B2B mandates, while maintaining accurate and auditable records. Plus, digital systems deliver enhanced security features to protect sensitive financial information. 

What to look for in an invoice automation software solution

To discover the best invoice automation system for your company, there are key things to look for beyond the basics. First, you’ll want to make sure the tool has integration capabilities with your company’s existing Enterprise Resource Planning (ERP) system.

Coupa, for example, follows a light-touch approach and can integrate with most ERP systems like SAP, Oracle, and NetSuite, ensuring that financial records are updated in real time and reducing the need for manual data entry. Opt for a tool that allows for direct integration with your banking systems for efficient processing.

Next, look for a dedication to compliance and, especially if you’re a large company, an extensive, global supplier network.

The system should support compliance with tax laws and financial regulations by ensuring accurate financial reporting and facilitating audit trails. It should also implement robust security measures to protect sensitive financial data. For example, Coupa’s Compliance as a Service (CaaS) offering provides compliance efficiency while reducing risk.  

One last feature to distinguish the good from the great is customization (Coupa’s configuration approach allows for 12 million+ permutations). Based on the predefined rules you create individually or generally within the software, the system automatically reviews and routes invoices — sending notifications or escalating invoices that require attention to the right personnel or team.

For instance, let’s say a supplier added 20% onto your bill, falling outside of the tolerance you set. With Coupa, your system will be as alert and customized as you need, so risks are at a level you deem acceptable. Anything that sits outside of the norm will be flagged, and Coupa delivers AI-driven real-time tracking. Plus, thresholds are easily adapted, so you can redefine your limits as needed.

There’s power and peace of mind in being able to see where all of your invoices are at any point in time. On a basic level, visibility allows you to understand which have yet to be touched, which are in process, which have been flagged, and which are complete. With Coupa, you have advanced visibility tools that distinguish important details, like how many contracts have early payment discounts.

Best practices for implementing an invoice automation system

Implementing an invoice automation system doesn’t have to be complicated. Some software solutions companies make implementation easier than others. Start by finding the trouble spots and your company’s pain points. Take a few minutes to map out your current processes and systems. Ask yourself: 

  • “How many invoices go missing and how much time is spent resolving lost invoice issues?” 
  • “How many emails does it take to get an approval?” 
  • “How much do you spend on late payments and bank transfer fees?”

Next, set clear improvement goals. Check your AP processes against key performance indicators (KPIs) of similar companies that have already transformed and transitioned from manual to automatic invoice processing.

Coupa makes this easy by giving you thorough and actionable insights on the averages in your industry. These benchmarks will be critical in setting improvement goals and provide a framework for you to communicate to the broader organization the value you and your team are creating.

As you swan-dive into automating your process, here are two more tips we recommend:

Eliminate paper

Paperless invoicing eliminates manual, error-prone work and can contribute to wider organizational ESG goals. Drive supplier adoption by making electronic invoicing fast, easy, and flexible. 

Don’t settle for a band-aid solution

Consider the entire AP process to ensure your new system can address all of your targeted processes and performance improvements. Find a solution that can scale as the company grows or needs change. 

Why choose Coupa for invoice automation

For best-in-class automation, join the thousands of companies that trust Coupa for their invoice and AP solutions. From significant savings in time, efficiency, and cost to replacing financial unpredictability with full visibility, Coupa stands out for its ability to deliver results for its customers. Take Molina Healthcare, for example. The company increased AP efficiency by 250% with Coupa. Sonoco, the world’s largest producer of composite cans and tubes, gained clarity for complete procurement and AP visibility with Coupa, saving a significant amount. 

Modernize your invoicing process with AI-driven automation 

Discover how Coupa can help