One of the more exciting trends impacting accounting and finance departments over the past few years has been digital transformation. As businesses grow, their financing needs become bigger and more complex.
Digital transformation in accounting means implementing innovations such as artificial intelligence (AI) and machine learning (ML) to streamline processes primarily through automation.
Invoice automation is one of the most important elements of accounting digital transformation. For businesses looking to keep up—or get ahead—taking advantage of invoicing automation is essential.
In this guide, we’ll explain what invoice automation is, how it differs from manual invoicing, and the main invoice automation benefits.
What is invoice automation?
Invoice automation is an approach to invoice intake, processing, and management. Notably, it leverages technology to cover tasks a human would otherwise do. Depending on the deployment, a wider or more narrow set of activities can be automated—but the overall idea is to remove manual data entry where possible.
Automation starts with intake, as invoice documents are emailed, faxed, uploaded, or otherwise put in contact with the platform. From there, machines trained on invoice data can recognize, identify, sort, and mobilize based on information like the sender, recipient, dollar amounts, and terms of a deal. They can also be validated by cross-referencing with purchase orders (POs) and other data in linked systems.
From these early stages, invoice automation systems can then directly generate approvals, send payments, and/or notify stakeholders about the next actions that need to be taken. They also collect data and create reports to optimize visibility and projections, with targeted insights pushed out to users on personalized dashboards.
Manual vs automated invoicing
Manual accounting systems, or processes that rely heavily on human inputs, are subject to several concerns that are simply not present in automated systems.
In fact, manual accounting is unsustainable because of high costs, time consumption, risks of inaccuracy and fraud, and other secondary factors like staff burnout. Controllers Council has aggregated data suggesting manual accounting can cost 40% more than automated accounting at scale, corresponding to 30-40% more time spent. In addition, about 41% of leaders have blamed manual input for inaccurate financial data.
In contrast, automated invoice automation software eliminates these concerns.
Automated invoicing minimizes or eliminates initial manual inputs, removing most points at which human error becomes possible. This means costly mistakes are less likely to happen.
As a knock-on effect, their infrequency makes mistakes easier to spot earlier if any occur. That, paired with the reduced time to input and process invoices, makes for a much more efficient and accurate system.
Invoice automation benefits
Beyond mitigating the inefficiencies and risks associated with manual accounting, automation adds features that make it more than just an addition by subtraction.
The biggest benefits of automated invoicing are:
- Saving time and money by minimizing human inputs
- Making fewer errors and inaccuracies across invoices
- Accelerating cash flow both daily and long-term
- Generating better reports more quickly and easily
- Improving relationships with clients and prospects
- Boosting data security and streamlining compliance
- Creating more opportunities for scaling and growth
- Integrating smoothly with all connected systems
Let’s take a closer look at each of these.
1. Optimized time and cost savings
Automating invoicing processes saves time and money. It significantly reduces the time team members spend on manual data entry for the initial intake and validation, approval, and any follow-up adjustments that need to be made.
This leads to cost savings in the form of fewer hours needed from internal staff or outsourced (i.e., fractional) accounting personnel. It also allows these individuals to focus on more impactful operations or revenue-generating activities, so even if there aren’t direct cuts to labor expenditures, there is greater overall efficiency. Every dollar spent goes further when fewer hours are spent on repetitive tasks.e
2. Reduced errors and improved accuracy
Beyond efficiency, automation is also a boon to performance. By limiting human inputs, automation reduces the number of errors made.
Variables that humans could easily make a mistake with—especially when stretched thin—are no longer subject to human-only oversight. With automation, you can expect fewer (if any) mistakes in amounts to be paid, recipient names or addresses, duplicate payments, or terms.
And, if mistakes are made elsewhere in the process where humans still feed information into the system, automated invoice tools are excellent at finding them. Notifications get sent out immediately to resolve errors swiftly and seamlessly.
3. Accelerated cash flow
Automated invoicing leads to greater stability and potential for growth in cash flow. A faster and more efficient invoice approval process leads to quicker, easier payments with fewer hiccups. People getting paid faster is a win-win for all parties involved, making clients or customers more likely to spend more money more often.
Automated systems can also send reminders to stakeholders who need them, shortening the receivables cycle. In addition to removing human inputs in the form of approvals or transfers, automation can facilitate other parts of the invoicing process that require a human to either enact or oversee with targeted notifications.
4. Enhanced financial visibility and reporting
Automated invoicing systems generate insights into outstanding invoices in real-time. Stakeholders can receive step-by-step notifications as invoices are validated, approved, or paid or as adjustments or issues arise. This provides visibility into a company's day-to-day finances and allows for assessments of financial health along with accurate projections of its financial future.
These insights can be scaled up or down and customized to a given user’s needs. Leaders shift between high-level overviews of the company’s invoices or focus on a particular segment’s billing. Staff can be provided as much information as they need to perform their roles effectively—and/or as little as necessary to retain focus.
5. Better customer relationships
Faster, more accurate invoicing leads to a better payment experience for clients, customers, and strategic partners. In turn, this all leads to better relationships as there are fewer points of logistical conflict. Customer support and success teams can work their magic without worrying about underlying billing or payment issues.
With fewer disputes and delays, accounting and operations teams also have a more accurate picture of monthly expenses. This can be a source of confidence and conviction in negotiations with new and existing clientele. Knowing what overall spending looks like helps sales and other client-facing teams present a unified message, minimizing the likelihood of miscommunication.
6. Boosted compliance and security
Automated invoicing ensures adherence to tax laws and regulatory requirements, with automatic updates to maintain compliance. This includes both governmental mandates (e.g., the Sarbanes-Oxley Act) and industry-wide best practices (e.g., SOC audits).
Automated systems can be configured to minimize exposure to sensitive financial data through access controls. They can also ensure that the data stays secure even if breached by applying strong cryptographic controls, limiting harm in a worst-case scenario.
Relatedly, invoice automation is a first line of defense against fraud. On the scale of international governance, the European Union (EU) is moving toward “e-invoicing” and other digital methods to combat value-added tax (VAT) fraud. Automating these processes is the next logical step to ensuring secure, compliant payments every time.
7. Greater scalability for growing businesses
Growing as a business means processing a greater volume of invoices. With that volume, there are also often increases in the diversity and complexity of invoices and related tasks, like greater demands for accountability or regulatory creep as you work within or across different industries. These dynamics have a multiplicative or exponential effect on invoice processing rather than just an additive one.
Likewise, automation’s impact becomes greater the more invoices you need to process and the more complicated the processes surrounding invoices become.
Automating invoices future-proofs your business to survive and thrive at scale.
8. Seamless integration with existing systems
Lastly, an effective invoicing automation tool integrates with your existing systems seamlessly.
This means:
- Receiving data from and pushing reports out to any other software it needs to
- Communicating with financial and recordkeeping systems as easily as it does with human resources (HR), enterprise risk management (ERM), and other suites
As a bonus, it should facilitate efficiency in and across these other systems, empowering comprehensive professional service automation (PSA).
The best invoicing automation solutions—like WisePay—integrate with all of your current tools and any you plan to use in the future.
Ready to implement invoice automation?
The features above are all key reasons forward-thinking businesses are automating their invoicing functions. Reducing the manual work and human intervention needed, especially with WisePay, can improve quality without increasing costs.
WisePay is the best invoice automation software solution available today, not least because it delivers all of the features above and more. It is a comprehensive, customizable solution that makes invoices quicker and easier to process with greater accuracy across the board while minimizing costs.
Learn more about automated invoicing with WisePay.
