Manual vs Automated Invoice Processing

Delivery of products/services and payment are two pillars of any business process. That’s what makes an invoice one of the most important business documents as invoice helps you validate products/services delivery and payment modules.  Since businesses can’t ignore such a crucial document, they dedicate enough resources, time, and money to invoice processing. As per EY's 2018 worldwide electronic invoicing survey report, it costs 7 euros for the shipment of an issued paper invoice on average and 15 euros for a received paper invoice. This cost alone is enough to signify how expensive manual invoice processing can be.

In this article, we discuss manual and automated ways of processing invoices, and what goes into both the methods.

Difference between manual and automated invoice processing:-

Let's have a look at steps involved in each invoice processing method to clearly explain the difference:-

Manual Invoice Processing Steps

Starting from receiving an invoice to the payment clearance, when each step of the process is performed manually, is called manual invoice processing. 

Step 1 : Receiving invoice from vendor - An invoice is sent before or after the delivery of products/services based on the agreement between two parties. After that, the accounting team manually enters data into the accounting system. 

Step 2 : Process the invoice against tolerances - This step is specific to PO invoices. The received invoice is processed by 2-way, 3-way, or 4-way match processing methods against the purchase order(PO) for pre-defined tolerances.

Step 3 : Keep the copy of the invoice safe in the filing system - After entering data into the accounting system and processing against tolerances, the invoice is scanned and kept safe in the filing system. Often physical copies of invoices are kept safe as well. 

Step 4 : Invoice is sent for approval - Based on the size and structure of a company, invoice is sent for approval for the payment. In small businesses, there may be 1 or 2 people with the authority and responsibility to approve invoices for the payment whereas in large businesses and enterprises, a whole team is responsible for invoice approvals. 

Step 5 : Make the payment - Once the invoice is approved, the payment is made.

Despite being time-consuming and needing a lot of manual effort, this process is not free of errors. Automated invoice processing makes it easier to extract information from an invoice, validate it, and keep it safe in the accounting system. Not only does it reduce manual efforts thus reducing the cost, but it is more efficient and accurate as compared to manual invoice processing. 

‍Automated Invoice Processing Steps

Step 1 : Data extraction from invoices - Invoices vary in terms of layout, structure, and fields but with the help of Intelligent OCR and machine learning technology, an automated invoice capture tool seamlessly adds invoice data whether it be from paper invoices or electronic invoices sent through Electronic Data Interchange. 

Step 2 : Data entry and invoice coding - Data entry and coding is achieved through Intelligent Data Capture mechanisms that identify and extract data for processing into your invoice management system, which depending on your software’s capability, will only need your AP professional’s minimum supervision or none at all.

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Step 3 : Validate the extracted information - After data extraction and invoice coding, the invoice processing software validates the captured data for pre-defined validation rules. If it doesn’t meet the set standard and any anomaly is found, it is routed for manual verification.

Step 4 : Invoice is sent for approval - This phase is also a tedious step as it needs complex logical solutions and constant follow up. Usually the Enterprise Resource Planning and the Enterprise Content Management systems are used in this phase to manage notifications, follow ups, and to assign approval tasks. 

Step 5 : Make the payment - Finally, the payment is made after the approval.

More and more businesses are moving towards automation in their day to day operations. Invoice processing, being one of the most crucial aspects of the business process, is something will surely be automated by businesses to gain the benefits of low-cost efficiency. With the help of intelligent OCR and machine learning, Docsumo helps automate your invoice processing shortening your turn-around time. Get a free demo today and let’s find out how we can help you process invoices 10 times faster with 50% less cost.