Managing invoices manually is often a slow, repetitive, and error-prone task that can drain your finance team’s time and resources. From data entry mistakes to approval delays, these inefficiencies can lead to bottlenecks, late payments, and even compliance risks. Fortunately, there’s a better way.
By automating your invoice processing, you can eliminate these frustrations, save valuable time, and improve accuracy across the board. In this blog, we’ll explore the step-by-step process of automating your invoice processing, highlight the benefits, and introduce the tools and technologies that can transform your workflow, from simple data extraction to full-scale financial management.
What is Automated Invoice Processing?
Automated invoice processing involves using software to manage the entire invoice-handling workflow. This method eliminates manual tasks such as entering data, verifying details and approving invoices. With automation, businesses can automatically pull and check invoice data, speeding up the process and improving compliance.
With automation, each step—from capturing data to storing records—is handled digitally, making financial operations faster and more accurate. These systems can also connect with your ERP platform, updating records in real-time for better oversight of accounts payable.
As one of the best practices in AP, switching from manual to automated invoice processing not only saves time but also improves cash flow management, providing more control over financial processes. Next, let’s look at the steps in automating your invoice processing.
How Does Automation of Invoice Processing Work?
Automating invoice processing replaces the manual, time-consuming steps with technology that handles everything from invoice receipt to payment, with minimal human involvement. Here’s how it works, step by step:
1. Invoice Receipt and Data Capture
The process begins when an invoice is received, either via email, as a scanned document, or even uploaded directly by the vendor. Automated invoice processing software immediately captures the data from the invoice using technologies like Optical Character Recognition (OCR).
This eliminates the need for manual data entry, which is often error-prone and time-consuming. The system identifies key details such as the invoice number, date, supplier information, line items, and total amounts.
Take a look at how Klippa DocHorizon automates invoice processing
2. Data Validation and Matching
Once the data is captured, the system runs validation checks to ensure the accuracy of the information. For example, it verifies that the supplier’s name matches the details in your company’s database, and cross-references the invoice with purchase orders or delivery receipts to confirm that the goods or services have been received as described.
If the software detects any discrepancies, such as mismatched amounts or missing data, it flags the invoice for human review.
3. Approval Workflow
After the data is validated, the invoice is routed through an approval workflow. Automated systems allow you to set up customizable workflows based on your organization’s structure and approval thresholds. For instance, smaller payments might require only one level of approval, while larger amounts may need sign-offs from multiple departments. This ensures that invoices are reviewed by the right people without unnecessary delays.
4. Payment Processing
Once approved, the invoice is sent for payment. Automated systems integrate with your accounting or ERP software to ensure that payments are processed on time. You can set rules for early payment discounts or reminders for due dates, helping avoid late payment penalties. Payments can be scheduled automatically, or approval can trigger the final payment release based on your preferences.
5. Record Keeping and Auditing
After payment is made, the invoice and its corresponding records are automatically stored in a centralized, searchable database. This makes future retrieval for audits or inquiries simple and quick. Invoices are indexed based on relevant fields, such as supplier name, payment date, or invoice amount, ensuring that all information is easily accessible for tracking and reporting purposes.
6. Continuous Learning and Improvement
One of the most powerful aspects of automated invoice processing is its ability to learn over time. The system can be trained to recognize specific formats, suppliers, and even common errors. Over time, it becomes more accurate and efficient at capturing and processing invoices. Machine learning algorithms can also analyze trends and patterns in your invoice data, helping to identify potential fraud or areas for cost-saving improvements.
This workflow offers a seamless approach to handling invoices, saving time, reducing errors, and increasing transparency across financial processes. Automated systems also scale with your business, ensuring that as your volume of invoices grows, your processing efficiency remains consistent.
Next, let’s explore the benefits of automating your invoice processing and why this transformation is key to optimizing your accounts payable process.
Benefits of Invoice Processing Automation
Still debating whether to automate your invoice processing? Let’s dive into the specific advantages invoice workflow automation can bring to your day-to-day operations.
Manual invoice processing can be a slow, tedious task that eats up valuable time and introduces unnecessary challenges for your business. By switching to automation, your organization can enjoy a range of benefits, including:
Increased Efficiency
56% of finance teams spend up to 10 times more hours on invoice processing compared to those using automated systems. Automating invoice processing allows you to handle large volumes of invoices quickly and accurately. By cutting down on manual work, you reduce labor costs and streamline your workflow, freeing up your team to focus on higher-value tasks.
Reduced Errors
Human error in data entry can lead to costly mistakes. By using technologies like OCR to extract invoice data automatically, the risk of errors is minimized. This ensures accuracy from the moment the invoice enters your system.
Real-Time Visibility
Automation gives you a clear, real-time view of your entire invoice process. With every invoice status available at a glance, you can easily track where each invoice is in the approval chain and who’s responsible for the next steps, preventing bottlenecks.
Improved Compliance
With automated systems, all invoices and supporting documents are securely stored and organized in digital formats. This makes it easier to retrieve records for audits or reporting, ensuring your company stays compliant with financial regulations and reporting requirements.
Faster Approvals and Payments
Automation accelerates the approval process by routing invoices directly to the right people for review. This speeds up payment cycles, reducing delays and helping to maintain strong relationships with your vendors by ensuring payments are on time.
Fraud Detection and Prevention
Klippa’s 2024 report uncovered that 46.7% of financials encounter up to 10 fraudulent invoices per month! Automated invoice systems can cross-check invoice data with other internal systems and external data sources. By employing machine learning algorithms, these systems can flag suspicious patterns or discrepancies, helping to detect and prevent fraud before it becomes an issue.
Cost Savings
Although automation requires an initial investment, the long-term savings can be substantial. Reduced labor costs, fewer errors, faster processing times, and improved cash flow all contribute to a significant return on investment (ROI) and up to 42% of reduced processing costs.
Curious about how to get started with invoice workflow automation? In the next section, we’ll explore different methods for automating your invoice processing and introduce you to an all-in-one solution to get up and running quickly.
Tools to Automate Your Invoice Processing
There are multiple ways to automate your invoice processing, each offering unique capabilities. These technologies can be combined to maximize the speed, accuracy, and efficiency of your invoice workflows. Let’s take a closer look at the most effective tools that can help transform your process:
1. Intelligent Document Processing (IDP)
Intelligent Document Processing (IDP) is the next step beyond traditional OCR. It not only extracts data from invoices but also classifies, organizes, and validates the content automatically. IDP systems leverage AI and machine learning to process unstructured data, handling even complex invoices with varying formats. This makes it especially useful for businesses dealing with a wide range of invoice templates.
2. Electronic Invoice Presentment and Payment (EIPP)
EIPP is an automated system that allows vendors to submit invoices electronically, reducing paperwork and manual handling. Invoices are uploaded directly through a web portal or via email, and the system automatically captures, validates, and routes them for approval. EIPP simplifies the entire invoice lifecycle—from receipt to payment—and offers real-time visibility into the status of each invoice, improving transparency and reducing processing delays.
3. Robotic Process Automation (RPA)
RPA uses bots to automate repetitive and rule-based tasks that don’t require complex decision-making. This includes tasks like data entry, logging into various systems, copying data between applications, and even triggering approval processes. RPA is particularly effective when integrated with other systems like IDP or EIPP, as it can manage routine tasks while more sophisticated technologies handle data extraction and analysis.
4. AI and Machine Learning
AI and machine learning (ML) enhance invoice processing by continuously learning from the data it processes. Over time, these systems improve their accuracy in data extraction, validation, and fraud detection. AI can also predict patterns, such as detecting duplicate or fraudulent invoices, by comparing them to historical data. Machine learning algorithms help fine-tune automation, making it more adaptable to your specific business processes and requirements.
5. Integration with Financial and ERP Systems
One of the most powerful ways to automate invoice processing is by integrating your automation tools directly with your accounting or ERP systems. These integrations ensure that invoices, once processed, are automatically recorded in your financial systems, updating ledgers, tracking budgets, and managing cash flow without manual input.
Many of these technologies work best when combined and can be tailored to the specific needs of your business. For example, if your primary need is a straightforward data extraction and validation, an IDP platform like Klippa DocHorizon can be the best choice. Software like that utilizes OCR, AI, and machine learning to extract and process data from any type of invoice, seamlessly forwarding it to your preferred system.
On the other hand, if you require a more accounting-focused solution for managing invoices and expenses, a software like Klippa SpendControl would suit you better. A software like that not only scans invoices using OCR but also triggers custom workflows—such as approvals—based on the invoice amount, vendor name, or any other criteria.
Next, using plug & play integrations with accounting and ERP systems, it transfers the data, reducing significant manual input within your finance team. This automation can drastically improve efficiency and minimize errors, allowing your team to focus on more strategic tasks.
Automate Your Invoice Processing with Klippa
Stop wasting valuable time on manual invoice processing. Whether it’s simple data extraction or complex financial management, Klippa has a solution for you.
DocHorizon – For Workflow Automation
Klippa DocHorizon is an IDP platform that uses AI-powered OCR software for smart and accurate document scanning, classification, anonymization, data extraction, and verification.
Simply upload your documents through email, web, or mobile applications, and let the DocHorizon platform automate your whole document workflow with just a few simple steps. Make use of our out-of-the-box models or build your own OCR model to provide support for any document type you need.
Furthermore, integrate our solution into your existing mobile applications and tools through the low-code platform or via SDKs and APIs.
With DocHorizon you can:
- Employ a low-code IDP platform with an easy-to-use drag-and-drop interface
- Achieve data extraction accuracy of up to 95% and seamless file conversion
- Utilize human-in-the-loop automation for the highest level of accuracy
- Build custom extraction models for any document type
- Process documents in more than 150+ languages in various formats
- Sort and classify documents to organize databases or archives
- Automatically detect fraudulent documents
- Utilize key-value pair extraction and line item extraction
- Mask and anonymize data
- Export data in multiple output formats including JSON, PDF/A, CSV, XML, XLSX, UBL
- Sync with any system using our API and SDK integrations
SpendControl – For Financial Management
Klippa SpendControl is a pre-accounting solution that combines invoice processing, expense management, and business credit card management, all in one platform. It allows you to easily capture, process, and approve invoices, reducing any manual input. Once data is validated and approved, SpendControl automatically syncs it with your ERP or bookkeeping system, simplifying tasks that once took hours into just a few clicks
Our solution simplifies the invoice approval process by automatically routing data to authorized employees based on custom business rules. With real-time updates and insights, SpendControl keeps all your financial data up to date, ensuring a smooth and efficient month-end and year-end close.
With SpendControl you can:
- Manage your vendor invoices, employee expenses, and business credit cards in one platform
- Scan, submit, process, and approve invoices via web or mobile app
- Achieve 99% invoice data extraction accuracy with Klippa’s OCR
- Regain control over your accounts payable with intuitive dashboards
- Customize your approval management with multi-level authorization flows
- Never fail to comply with tax and data privacy regulations with our ISO27001-certified and GDPR-compliant solution
- Rely on automatic multi-currency support for international payments
- Prevent invoice fraud with built-in duplicate and fraud detection
- Integrate SpendControl with your accounting and ERP software, like Quickbooks, NetSuite, or SAP
FAQ
To automate invoice processing, you need to use specialized software that digitizes the entire process. Start by choosing a platform that uses OCR to capture and extract data from invoices. The software will validate the data, route it for approvals, and automatically sync it with your ERP or accounting system.
AI is used in invoice processing to enhance data extraction, validation, and fraud detection. By learning from past data, AI algorithms can improve the accuracy of invoice data capture, identify discrepancies, and flag potential issues for review. AI also helps predict patterns, such as duplicate invoices or fraud, making your accounts payable process more efficient and secure over time.
Automated invoice processing boosts efficiency, with finance teams saving up to 10 times more hours compared to manual methods. It reduces errors through OCR technology, provides real-time invoice tracking, and ensures compliance with secure storage for audits. Automation speeds up approvals, helps detect fraud (with up to 46.7% of financial teams facing fraudulent invoices monthly), and can lead to cost savings of up to 42%.