Technology is changing every aspect of our lives. From communication, education, and entertainment to finance, banking, and not least how we do business.
In order to survive, grow, and be profitable in this constantly evolving world, businesses should start focusing on strategies that increase efficiency, reduce cost & time, and streamline processes.
Automation is a straightforward, effective way to get started on that path. From administration to accounting, businesses can automate in many areas of day-to-day operations. In this article, we’ll focus on one of the most crucial processes: invoicing.
Though the invoicing process may appear to be a simple procedure on the surface, as the number of vendors and transactions grows, its complexity also increases. Businesses process billions of invoices every year, and research predicts that the number of invoices sent and received will triple by 2035, highlighting why invoice automation is no longer a choice but a necessity.
What is invoice automation?
Simply put, invoice automation is the process of using technology to run the invoicing procedure automatically. It can be used for any stage of a standard process like issuing an invoice, sending out payment reminders to clients, or reconciling payments. Invoice automation is basically the next level of the manual process.
Traditionally, it can take 20-25 days to complete an invoicing cycle. Sometimes, it can be even longer, depending on the nature of your business. This is a significant amount of time, especially when dealing with hundreds of invoices per day. More importantly, any delays or errors during the process have the potential to cause serious damage to the business’s cash flow. There are numerous ways invoice automation can address these issues.
Why automate the invoicing process?
There are enormous advantages to using automated invoice processing. Invoice automation shortens the manual workflow, improves accuracy, and increases the chance of receiving payments on time.
We’re going to explain in detail the five reasons why invoice automation would be beneficial to your company.
Save you & your business time
As the saying goes, time is money. Time saved means extra income to your company. Manual invoice processing is often lengthy and cumbersome. Automation ensures that invoices are processed at a much faster rate, without the need for human intervention. You may shorten a traditional invoicing cycle from over 20 days a cycle down to less than a week, resulting in faster processing cycle times and timely payment.
With the accounting staff free from being hampered by hours of tedious chores, they may now offer more value to the company, for example, by devoting more effort to creating better and more insightful financial reports.
By switching to invoice automation, you may save money on labor, printing costs, mailing expenses, interest, and late penalties.
According to a study, manually processed invoices cost $30 per invoice on average, while it costs only $3.50 for each invoice in a fully automated system. That means businesses can save up to 90% of the cost of spending on the accounts payable side.
Another key benefit of automated invoice processing is that it helps you diminish back-office expenditures by reducing manual work. For example, your accounting department will not have to go over every invoice manually. Instead, they only need to interfere when your automated invoice processing program is unsure about the data it has extracted. Less labor working hours means you pay fewer wages.
Limit human errors
Human errors are inevitable. They are a constant threat in manual invoicing procedures. Mistakes in data entry could lead to late or missed payments and incorrect amounts, severely impacting the cash flow. In the United States, according to Billentis, incorrect invoices account for up to 16% of late payments, whereas in Western Europe, they account for 15%. By using automated invoice processing, you can enhance the accuracy of every invoice, as well as the consistency across your process.
Frankly, no automation can eliminate human errors completely. But it’s the simplest and most effective way to ensure more accuracy and efficiency on a large scale.
Improve visuality and control
With invoice automation, you can monitor all elements of the invoicing workflow on a single dashboard. You can improve your visuality and control by looking into task reviews, extracted data, access, and so on. Based on the extracted information, you would know which clients always pay on time or who are always paying late. This enables you to make decisions about payment reminder notices or follow-ups in your system. Moreover, you can quickly check your invoices for discrepancies or incorrect entries and take immediate measures required for correct invoicing.
Also, invoice automation makes your cash flow more transparent as you can ensure your numbers are accurate and updated in real-time. It can provide crucial data for your business performance analytics, allowing you to forecast future events and understand who is doing what, when, and how. Being aware of this is key to your business success.
Increase customer satisfaction
Outstanding customer experience is crucial for the continued growth of any business. Investing in processes and operational excellence helps you exceed customer expectations with ease. Invoice automation helps you do just that. A seamless and simple invoice payment process provides a positive customer engagement with each transaction. Additionally, with invoice automation, errors and mistakes are reduced comparatively, helping to minimize any unfortunate disputes with clients. When you consistently meet high standards, clients are more likely to develop a preference for your business. Gradually, they will become your regular customers.
Generally, invoice automation is an excellent tool for businesses of all kinds. With automated invoicing, a company can accelerate the billing system by eliminating all the time-consuming aspects. It saves you and your business time & money, boosts productivity, and consequently creates more profits.
How does invoice automation work?
In this section, we will look into two different stages of an invoicing process to demonstrate just how automation works:
In many business sectors, sending invoices before receiving payment is typical, as invoices serve as payment requests outlining the items or services given. Businesses can start automating many manual tasks in both accounts receivable (AR) and account payables (AP) processes.
With AR procedure, automation opportunities are:
- Digitally invoicing clients to speed up the payment process
- Automatic payments for subscription services or recurring invoices
- Set automated reminders to send to clients before the invoice due date, when the due date occurs, and/or when it’s overdue
With AP procedure, invoice automation can include:
- Convert vendor invoices in any form like paper, PDF, e-invoice, XML, etc. into a single standard digital format
- Automatically flag emails, including invoices
- Extract important details from an invoice with Optical Character Recognition (OCR) technology
- Cross-check against purchase orders
- Match invoices with their corresponding accounts in the general ledger
When customers finish their payments, you can automate the following tasks to streamline the invoicing process:
- Automatically send a copy of the invoice as a receipt to customers
- Transfer data to accounting books
- Create a billing history for customers
Four easy steps to automate your invoice processing
So, how do you switch from the outdated, traditional method to an efficient invoice automation process? We’ve listed 4 easy steps for you to get started on this necessary transformation:
1. Understand your current invoicing workflow
The initial step does not need to be the installation of a new automatic system right away. Technology enters the picture only when a solid foundation of rules and processes has been built. That’s why we suggest before everything else; you should look into your current invoicing process deeply. Learn about how your company is dealing with invoices. Make a list of questions to fully understand your current system, such as:
- How are invoices numbered?
- How long does it typically take to process an invoice?
- What is the average cost per transaction?
- What step usually causes mistakes?
- Which part of the procedure takes up the most time?
You can create your own question list relevant to your business type. Make sure to examine both AP & AR areas. Aim to determine how you are handling bills, where bottlenecks and delays lie, and how much it costs. Only then will you find the opportunity to improve your invoicing operations.
2. Standardize policies and procedures
Create and document standard regulations and workflow for processing invoices, such as when and how to check for duplicates and mathematical integrity, discrepancy resolution procedure, criteria for approval, and so on. The primary objective is to make it clear how your company should process invoices. The clearer your procedures are, the easier it is to automate.
3. Research carefully for suitable invoice automation software
There is a lot of invoice automation software out there on the market, and you would be wondering which one is the best for your business. Each software has different unique features that can either be helpful or redundant to your business. That’s when your understanding of the company’s current process (step 1) comes in handy. If there are special considerations that you need to consider in the invoicing process — such as insurance payments — make sure you’re choosing an automated solution that can provide that function.
4. Integrate with your accounting system
If invoice automation features aren’t already built-in, make sure it integrates with your accounting software.
Assuming your company uses the accrual accounting approach when an invoice is made, the billing system should immediately record journal entries that recognize revenue and accounts receivable and update your books when clients pay. Meanwhile, businesses that operate on a cash basis will only record revenue when customers make payments.
Implementing an invoicing system that does not connect with your accounting software is nothing more than shifting your present billing burden to bookkeeping.
Invoice automation tip for freelancers
When it comes to invoices, freelancers are often up to their necks in preparing them manually. Depending on their field and industry, many freelance workers charge hourly rates for their services. They would need to calculate the total hours worked, multiply it by the hourly rate, and then create and send an invoice to their clients. It may sound straightforward, but these tasks become a headache as soon as clients and projects start piling up.
With errors and delays posing a risk to their bottom line, freelancers should also automate invoice production and ensure it is completed on time and correctly. Many apps offer time monitoring features to track their working hours down to the minute and generate invoices appropriately.
If you want to use your own invoicing software, many apps these days enable you to integrate your time-tracker with your invoicing software, resulting in automatic and correct bills to send to clients.
How can AccountDock help?
After your business receives payments, it might be the end of a transaction. However, it shouldn’t be the end of your customer’s experience.
AccountDock is an online software application that allows Stripe-powered businesses to provide billing history for their customers. There are countless times when customers want to review and check if their invoices have been charged successfully and correctly, or if a payment fails to proceed, what causes it? Just connect your Stripe account, drop in a few lines of code, and AccountDock will automatically take care of the rest.
Creating an online billing history for your customers lets them instantly manage their invoices, generate PDFs from their receipts, or send an email directly from the web.
It shows that you genuinely care about their happiness and satisfaction, even after they have bought your products or used your services.
Go paperless with invoice automation!
Automation is the leading innovation in every aspect of business, and your company must adapt to the changing times. Switch to automated invoice processing to save money & cost, increase profitability, and help your company stay on top of the game for years to come.
Sign up AccountDock to start your free 14-day trial now!