ERP Invoice Processing
What is ERP Invoice Processing?
ERP invoice processing is the process by which supplier or vendor invoices move through an organization’s enterprise resource planning (ERP) system from its initial receipt to the final payment and recording in a general ledger. Invoice processing is a function of the accounts payable department and can be performed either manually or with the assistance of automation software.
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What are the risks of manual invoice processing?
Even in an era of rapidly increasing automation, a surprising number of businesses and organizations continue to rely on outdated, manually oriented systems for processing invoices. Attempting to handle high volumes of invoices without the efficiency and accuracy provided by an automated system is a recipe for avoidable errors and delays. The risk is elevated further for businesses using a source-to-pay or procure-to-pay approach, both of which begin the invoicing process before a vendor has been selected. Let’s take a look at a few of the biggest potential pain points for businesses processing invoices manually.
More human errors
Manual ERP invoice processing means more human touch points, which greatly elevates the risk of human error. That risk gets even higher when an accounting system deals with high volumes of invoices every day, all of which need to be matched against purchase orders (PO) and receipts of goods or services. Attempting to consistently apply three-way matching using manual processes virtually guarantees that some costly mistakes will slip through the cracks and require even more time and effort to correct. When you automate invoice processing, that matching is performed instantly and without human touch points.
Greater risk of fraud
Invoice fraud is a major concern for AP departments. That might involve incorrect information being included in an invoice, multiple invoices being submitted for the same purchase, or even falsified invoices being submitted for purchases that never happened. The unifying factor is that all of those forms of fraud are much easier to pull off when you process invoices manually. An automated system can flag the discrepancies that allow fraud to pass through your system unnoticed, helping to protect your bottom line and your reputation.
Slower processing times
Verifying all of the information included in a standard invoice takes some time. When your accounts payable team handles dozens or hundreds of those invoices every day, that time adds up quickly. Studies show that it takes around 25 days for a midsize business to manually process a single invoice from receipt to payment, while an automated invoice processing workflow can complete the same task in three or four days. That is a big improvement in turnaround time and a major cost-saving strategy for high-volume organizations.
As noted, processing invoices manually takes a great deal of time even when the information included in them is flawless. When there are errors or exceptions — both of which are much more common with manual processing — the turnaround time becomes even longer. Those factors significantly raise the risk of invoices being paid later than expected, which can lead to penalties for late payments and reputational damage that can make suppliers and vendors hesitant to do future business with an organization. An automated invoice processing solution ensures that payments are issued within a specific time frame, with reminders and notifications sent to approvers who may be slow on the turnaround.
As with almost any financial activity, compliance with governmental regulations, industry standards, and organizational rules is a major concern when it comes to invoice processing. All of the above-mentioned factors — the risk of human error, invoice fraud, late payments — can contribute to compliance violations that can lead to fines, sanctions, and serious reputational damage for non-compliant businesses and organizations. Automating your accounts payable system makes it simple to require that your invoice processing is compliant with all applicable business rules, local and federal laws, and any other compliance considerations.
What are the benefits of automated invoice processing?
With all of those risks to consider, it simply makes sense for most organizations to invest in an automated invoice processing solution. Especially for businesses that consistently process high volumes of invoices from multiple suppliers and vendors, the efficiency, accuracy, and speed of automated software is a genuine game-changer that helps to get invoices paid on time, correctly, and in full compliance with applicable regulations. Let’s run through a few of the ways automating your accounts payable system can benefit your invoice processing.
Easier data capture
Invoices are likely to arrive in your system in a number of formats, including email attachments, Microsoft Word documents, PDFs, faxes, and scans of paper documents. An automated invoice processing solution with optical character recognition (OCR) capability can scan and capture relevant data from a wide range of invoice formats and make sure it is entered into the system correctly, eliminating the need for time-consuming and error-prone manual data entry while also boosting the overall accuracy of your invoice data.
Faster invoice approval
Rather than spending time manually routing each invoice to the departments and employees who need to sign off on it, an AP automation solution can ensure that all required approvers are looped into the routing process and receive documents in the correct time frame and order of approval. Automatic notifications and reminders help to eliminate the problem of invoices being forgotten or ignored. If a required approver is out of the office or otherwise unavailable, invoices can be instantly re-routed to the next person in the chain.
Less time spent on training
Handling invoices manually often requires a complicated series of processes and tasks that need to be carried out in a precise order and within a specific time frame. Training AP employees in all of the necessary functions takes time. When one of those employees is out of the office or leaves their role, the entire invoice processing system can quickly be thrown out of order, leading to costly delays and miscommunications with suppliers. An accounts payable automation solution with an easy-to-use dashboard makes it simple for any member of an AP team to track the progress of an invoice within your ERP and make adjustments and corrections as needed, with only minimal training required.
Increased employee engagement
To put it bluntly, processing invoices is nobody’s favorite job. Manual invoice processing is a repetitive and often tedious task that comes with some serious consequences in the likely event of human error. In an era of employment when many businesses are struggling to retain a fully staffed workforce, automation can eliminate many of those repetitive tasks and free up AP employees to focus on more productive and fulfilling work. That provides a much-needed boost to morale and engagement while cutting down on burnout and employee turnover.
Why automate ERP invoice processing with MHC software solutions?
The fact is that the old ways are no longer sufficient for keeping up with the demands of high-volume ERP invoice processing. Efficient invoice processing in the modern era requires an automated solution capable of moving a large volume of invoices through your system at a speedy pace, capturing data accurately, and obtaining approvals from the necessary parties. Contact MHC today to arrange a demonstration of the many ways our automated software solutions can change the way your AP team processes invoices.
Want to learn more about Accounts Payable? Here are some related terms that you might be interested in. Explore our AP glossary further!
Step into the exciting world of accounts payable with MHC! Explore our in-depth glossary of some key terms related to AP processes, roles, tools, and services.
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