Why Automate Your Invoice-to-Pay Process?

Ira Brooker   January 05th, 2023

invoice to pay processes

Managing invoices is a crucial part of keeping your bills paid, your supply chain flowing, and your business running smoothly. That makes it all the more important to have a reliable and easy-to-navigate process in place for guiding invoices through your workflow, from the moment they’re received until the final payment is made. Let’s take a look at some of the specifics of the invoice-to-pay process, including the benefits of moving from a manual process to an automated invoice processing solution.

What is Invoice-to-Pay?

The term “invoice-to-pay” refers to the process by which a supplier requests payment for goods or services. In most cases, this involves a supplier creating a detailed invoice that includes a list of the goods or services provided and a statement of how much money is owed for the purchase. The invoice is then sent to a buyer, who confirms the accuracy of all of the included data, obtains approvals from the appropriate departments and individuals, and finally issues a payment to the supplier.

Until recently, most businesses handled this invoicing process manually. That was often a difficult and tedious process for an accounts payable (AP) team that left plenty of room for errors, fraud, and late payments. Automated invoice processing software has changed the game, streamlining the invoice-to-pay process and allowing businesses to receive, approve, and pay invoices more efficiently, accurately, and quickly than ever before.

What is the Invoice-to-Pay Process?
Manual vs Automated

The invoice-to-pay process will vary across businesses, but the basic structure will be similar no matter your organization or industry. (Note that the invoice-to-pay process should not be confused with procure-to-pay or purchase-to-pay, which are similar processes but involve a different set of steps. To learn more, have a look at our procure-to-pay guide.) We’ll go more in-depth in a moment, but the main steps of the invoice-to-pay process include:

  1. Receipt of the invoice
  2. Data entry into your ERP system
  3. Matching of invoice data with purchase orders and receipts
  4. Routing of the invoice for approval
  5. Issuing final payment

Those functions can be performed either manually or using an invoice automation system. Let’s look more closely at the differences between those approaches.

What Does a Manual Invoice to Pay Process Look Like?

For organizations that have not made the move to an automated invoice processing solution, many key tasks end up on the plates of your accounts payable employees. That can lead to a number of challenges, including delays, potential fraud, and human errors. Routing an invoice using a manual process usually looks something like this:

  1. An invoice is generated by your supplier
  2. Your AP department receives the invoice via email, physical mail, or fax
  3. Your AP team manually enters data from the invoice into your accounting system
  4. Your AP team manually confirms that all invoice data matches with the purchase order and receipt of good or services
  5. If any discrepancies or exceptions are found in the matching process, your AP team contacts the supplier to make corrections
  6. The invoice is routed for approval by your AP team
  7. The payment is authorized by the relevant departments or individuals
  8. Your AP team prints a physical check on paper
  9. Your AP team sends the check to the supplier, usually via mail or courier
  10. Once your AP team receives confirmation that payment has been received, they manually update your ERP to log payment

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What Does an Automated Invoice-to-Pay Process Look Like?

Automation not only speeds up invoice processing significantly, it also builds quality control and fraud prevention right into the process. Automating your invoice-to-pay process greatly reduces the risk of errors and fraud while making your invoice payments faster, more accurate, and less labor-intensive for your AP team. Routing an invoice using an automated process usually looks something like this:

  1. An invoice is generated by your supplier
  2. Your AP department receives the invoice via email, physical mail, fax, or an online portal
  3. Your AP team scans the invoice into your digital accounting system
  4. All invoice data is captured automatically, using optical character recognition (OCR) to pull data from physical documents
  5. Captured data is automatically mapped and entered into your ERP system
  6. Your system automatically compares the invoice against the purchase order and receipt of goods or services using 3-way matching
  7. If any discrepancies or exceptions are found in the matching process, your system flags them automatically and re-routes the invoice
  8. Once the invoice clears the matching process, it is automatically routed for approval
  9. The payment is authorized by the relevant departments or individuals, with automatic reminders being sent out to any late or outstanding approvals
  10. Once payment is authorized, it is issued to your suppliers via electronic or physical means
  11. Once your AP team receives confirmation that payment has been received, your ERP is automatically updated to log payment

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The Main Features of Automated Invoice-to-Pay Platforms

What makes an automated invoice-to-pay solution more effective than a manual process? A combination of automated functions working together to create a smooth, efficient workflow that keeps invoices moving through your system swiftly and accurately. Some key features of an automated platform include:

OCR Technology for Invoice Intake

Optical character recognition (OCR) allows your system to capture data from any source material, including PDFs, Microsoft Word documents, and even scans of paper invoices.

Automated Invoice Approval

An automated solution offering three-way matching can instantly compare captured data from an invoice against corresponding data from purchase orders and receipts of goods or services, then route verified invoices to the appropriate parties for signatures of approval.

Automated Supplier Payment

After payment has been approved, an automated solution can then send a digital payment to your supplier, completing the transaction with a minimum of human touch points.

Automated Payment Approval

Once the routing process is complete, invoice-to-pay software can confirm that all necessary signatures and approvals are in place and mark the invoice approved for payment.

What are the Benefits of an Automated Invoice-to-Pay Process?

The list of benefits that come with upgrading to an automated invoice-to-pay process could go on and on. From greater speed and accuracy to deeper insights into invaluable data, automation is simply the most sensible option for any business that processes a high volume of invoices. Here are seven of the most noteworthy benefits of automation.

   Increase Data Security and Eliminate Fraud Risk

Invoice fraud and data leaks are major concerns for every AP department, and a manual system greatly increases the risk for both. An automated solution drastically reduces human touch points and limits access to sensitive data for a far more secure workflow.

   Avoid Duplicate Payments

A manual invoicing process makes it much easier for an organization to issue duplicate payments for the same purchase, whether by mistake or due to fraud. An automated system makes it far more difficult for a second payment for the same invoice to make its way through your system.

   Eliminate Human Error

A repetitive and detailed process like matching a high volume of invoices against POs and receipts comes with an elevated risk of costly human errors, especially in an organization dealing with high volumes of invoices. Automation eliminates those errors by cutting out risky human touch points, often moving an invoice through an entire workflow without the need for human intervention.

   Increase Efficiency
Studies have shown that it takes roughly 25 days for a mid-sized business to complete payment on a manually processed invoice. Automation eliminates the most time-consuming elements of that process, cutting payment times down to 3 or 4 days. That boost in efficiency reduces stress on your AP team and bolsters relationships with your vendors.

   Reduce Processing Costs

Time is money, and the time spent working an invoice through a manual processing system costs a lot of it. Relying on manual data entry, routing invoices by hand, and physically matching data and correcting exceptions adds up to a lot of employee hours. Automation cuts those costs significantly by not only removing human touch points, but also reducing expenses for paper, printers, and other tools used in manual processing.

   Increase Visibility

Being able to follow an invoice through every step of your processing workflow offers a tremendous advantage for being able to correct errors and answer questions quickly and accurately. A manual system makes it far more difficult to track where a specific invoice is at a given time, while an automated solution allows at-a-glance visibility into each invoice’s progression through your workflow. That also provides an easy-to-find trail for internal or external data audits.

   Leverage Invoice System Analytics

Your invoicing process generates a lot of valuable data, but a manual process makes it difficult or impossible to access that information in a usable form. An automated system generates real-time data analytics that provide valuable insights into opportunities for cutting costs, setting key performance indicators (KPI), and managing spend.

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Find out how to simplify the processing of invoices and payments while reducing costs, errors, and time-consuming tasks with MHC NorthStar! Explore the features and book a free demo today!

Automate Your Invoice-to-Pay Process with MHC

Getting a strong handle on your invoice-to-pay process is one of the most important tasks entrusted to your accounts payable department. Making sure that invoices move smoothly from the supplier to your AP team and on to approval and payment is essential to maintaining strong working relationships and avoiding costly errors and fraud.

For any business dealing with a significant volume of invoices, attempting to process invoices manually is an invitation to missed payments, duplicate payments, fees for late payment, and even compliance violations. Upgrading to an automated invoice-to-pay solution removes much of that risk while also greatly increasing your processing speed, reducing your spend, and ensuring accuracy.

MHC NorthStar offers industry-leading AP automation software that streamlines your invoice-to-pay process, allowing your AP team to reduce human touch points and spend far less time managing exceptions. Ready to learn more about the ways MHC NorthStar can help ensure your invoices are paid accurately and on time? Contact us today to schedule a free demonstration of our automated software solutions!

Ira Brooker

Ira Brooker is a freelance writer and editor based in Saint Paul, Minnesota. He has been writing blogs and copy about software-as-a-service solutions for most of the past decade. Before exploring accounts payable and workflow solutions with MHC, he wrote about fields including cybersecurity, workforce management, online accessibility, audiology, retail sales, and much more. When he’s not doing business writing, he also indulges in writing fiction, journalism, arts criticism, and bar trivia.


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