Invoice processing is an integral part of the myriad of source-to-pay processes performed by organizations, and the automation of invoice processing is crucial to achieving the efficiencies and cost-savings that are critical to maintaining or improving competitiveness.
An effective invoice automation platform should result in close to 100% self-provisioning of invoices, automatically processed through to the ERP system and approved to pay, with zero errors. It should be an integrated component of an end-to-end solution that includes third party logistics, purchase orders (PO), goods receipts (GR), quality modules, engineering Q&A, and more.
As with the deployment of any new system, the goal should always be to minimize business disruption and the required allocation of time, people, and money. The same is true when discussing invoice automation solutions, and the best way to achieve rapid and cost-effective deployment is by using standard process templates and minimizing customization.
At the same time, however, the solution should be designed to accommodate the unique business processes of the buying organization, and the validation tests that wish to put in place.
There should not be a conflict between the two, allowing the configuration layer to either rely on existing templates or to create completely new paths, to remove certain functions and add others, to define unique parameters like tolerance or time constraints, and so on.
An effective invoice automation solution should perform the following types of validations:
- Mandatory data, including that which is dependent on the type of invoice or order
- Formats of quantity fields, prices and dates
- Comparison of sum of rows to total invoice amount
- Invoice date accuracy
- Existence of previous documents such as PO, GR, or drafts
- Value Added Tax, coins, and units of measure
- Quantity in invoice versus quantity in previous documents such as PO, GR, draft account, etc.
- Unit prices
- Line amounts in the invoice versus Line amounts in previous documents such as PO, GR, draft account, etc.
- Linkage to foreign currencies and other indices
- Ensurance that invoice VAT percentage is in line with VAT in force in relevant country during relevant time period
- Tax validations
- Adjustment between credit invoices and tax invoices
Naturally, the widespread adoption of invoice automation by suppliers is also a critical element and should be to the tune of 90% or more. One way to achieve such a high adoption rate is by causing minimal business disruption and enabling suppliers to submit invoices in a multitude of methods – email, web portal, mobile app and/or B2B integration (further elaborated on below).
Minimal Business Disruption
The true benefits of invoice automation cannot be achieved if the investment required to get there is exorbitant. Ideally, the effort to automate invoice processing would not impact the ERP system or any other procurement applications that might already be in place, but rather seamlessly integrate with them and complement their functionality.
This should be true on the supplier side as well. In fact, most smaller suppliers, which often generate the greatest amount of complexity around invoice processing, would not play along with new systems if it required them to read through thick guides, to invest heavily in new systems or to modify existing technology infrastructures.
An effective invoice automation solution should drive correct data to the ERP system. One way to ensure data accuracy is to control the process of data submission and require suppliers to correct errors, discrepancies, or misalignment with buyer policies in real time. Because this places greater responsibility on the supplier, it should also provide a guidance mechanism that simplifies the process and reduces frustration. It should also display invoice status throughout the lifecycle, through payment, including historical data.
In addition, the ability to automatically create a draft invoice for suppliers to approve, which is based on the GR, payment calculation, or approved customer bill, significantly reduces manual effort, and shortens processing time.
Suppliers should gain real value from the process in the form of having real-time visibility into payment status and a direct link to the relevant invoices, and an ability to export the data into third party systems.
Ideally, implementing a direct B2B connection should not be cumbersome of expensive, and it should provide suppliers with additional business opportunities beyond the one-to-one connection between a supplier and their customer. For example, if a supplier invests in building a B2B connection, they would welcome the opportunity to utilize it to interact with other current or prospective trading partners. Furthermore, the solution should support the conversion of any format to any structure, format, or transport type, including standard protocols, such as XML, CXML, RosettaNet, EDI (EDIFACT and X12) and any subsets of them:
CSV, Flat Files, IDOCS, Jason and the like.
To simplify implementation, there would ideally be adaptors to the leading ERP systems, like SAP/R3, Oracle, Dynamics, SAP B1, QuickBooks, DayWork and to many others. Furthermore, the solution should support all standard communication methods: VAN, Web Service, SFTP, AS2, HTTP/s, GXS Trading Grid (WS), CyberArk, API, RESTful, and others.
A portal should enable trading partners to track and monitor transaction flow and possess business rules validations capabilities, providing real time identification and alerts around requirements and correction of errors. It should also support PO or non-PO invoice transmission, managing all requirements as a unified business process.
Suppliers might prefer to submit PDF invoices as attachments, straight from their ERP/Accounting systems. The invoice automation solution should be able to parse the data from the PDF with 100% accuracy, using intelligent OCR (further discussed below), as well as extract data provided in the email subject, using RPA capabilities, which could be used to complete required invoice data.
Suppliers that wish to do so, should be able to use an app on their smartphone to send einvoices to their customers. This could be done by photographing the paper invoice, adding key data, and sending the image through the app.
The Human Element
Humans bring great value to invoice processing because they have the capacity to investigate complex situations and the capacity to think creatively. An intelligent automation solution should go beyond simple automation of repetitive tasks and venture into the realm of human attributes by addressing such complex issues as cross-border tax regulations in line with invoice type, local e-invoicing and invoice archiving regulations, cross-documentation data validation when data is labelled differently, automated data error correction, invoice reconciliation against GRs and/or orders, and the like, and should do so for goods, services and mixed order invoices, as well as for proforma, credit, non-PO, and financial invoices,
across all types of spend.
In some countries, buyers are allowed to issue invoices on behalf of their suppliers by flipping GRs or shipping notifications and POs into invoices – a time and error-saving process called Self Billing or ERS (Evaluated Receipt Settlement).
Normally, human involvement would also be required when invoices are transmitted with incomplete information. An effective automation solution should have the ability to autonomously draw missing information from the relevant master data, such as supplier or customer details, or financial data, which would support an effective validation process.
Invoices are a tool by which payment is sought and should be updated once payment is made. An effective invoice automation platform should be capable of updating invoice status to “invoice paid”, thereby allowing for the closing of the accounting process, and should consolidate all relevant information regarding payment – list of invoices paid, amounts paid, amounts not yet paid, deductions, bank details, and withholding tax.
OCR is an important element in automatic invoice processing, given that many suppliers submit PDF invoices that then need to be investigated for accuracy and processed. The challenge is that most OCR solutions are inaccurate. For invoice automation to be effective, the OCR capabilities need to have a very high rate of accuracy, which would likely entail the combined use of Artificial Intelligence (AI) and Robotic Process Automation (RPA). Ideally, OCR capabilities should require no data configuration, work on both searchable and scanned documents and use AI to gradually improve as more and more data becomes available.
Securing organizational Buy-In
There is no doubt that automating invoice processing could bring great value to an organization, but as with any new implementation of technology, there is always a concern around the required financial investment and effort, the ability to adapt to the new system and ultimately the ROI that it provides, which consists of the following elements:
- Rapid implementation
- Reasonable cost of implementation
- Minimal business disruption
- High rates of full participation by suppliers
- As close to 100% as possible of invoices processed self-provisionally
- As close to 100% as possible of invoices processed touch-free and error-free all the way to the ERP system, and approved to pay
- A reduction of more than 50% in procurement and accounts payable costs resulting from the automation of invoice and order fulfillment processing, validation and reconciliation