Invoice Automation in Logistics — Cost Optimizing Solution for Invoice Processing

What is Invoice Automation?

Invoice automation is defined as streamlining invoice related processes within an accounts payable department . It also includes paying the suppliers without human intervention in some cases.

Steps Involved in Invoice Processing

To understand the problem, it is important to understand how an invoice is processed in an organization in its most traditional sense.

  • Creation of the invoice.
  • Printing, posting, or emailing the invoice.
  • Sending the invoice to the accounts team for further processing.
  • Review of the invoice for final authorization of the payment.
  • Paying the overdue invoice to the supplier, vendor, or any associated party.
  • Archival of the invoice to the ledger for accounting purposes.

Limitations of Manual Processing

Including the cost of processing an invoice, there are multiple other variables that limit manual processing. Manual processing requires a lot of re-handling and re-entry of the same data. This leads to human induced errors, slow processing, loss of data, duplicate payments, overpayment, loss of early payment discounts, etc.

Challenges Leading to Delayed Payments during Invoice Processing

Invoice processing in the logistics industry is a series of tasks done in progression to fulfill payments and record data for general ledger. With prominent challenges associated with the process and simultaneous other processes, employees have to constantly manage their responsibilities, thereby, leading to delays.

Huge Volumes of Invoices

In a report by Billentis, an estimate of 550 billion invoices were produced in the year 2019. In addition to that, the volume of invoice-like documents and messages in the same year was likely to be 5 to 15 times of the actual invoices depending on the geography. This data is also relevant to business transactions, therefore, needs to be processed or recorded in one way or the other.

Multiple Invoices with Multiple Formats

There are multiple types of invoices that serve different purposes for Accounts Payable. For example standard invoice, pro forma invoice, credit invoice, commercial invoice, recurring invoice, etc. Additionally, there are also multiple formats accounts payable has to deal with. For instance, a standard invoice can be of varied formats depending upon its source (i.e. different companies) and geolocation. This acute problem leads to challenges such as sorting of documents and processing large volumes of unstructured data that validates payment approvals.

Supplier Management

Suppliers onboard provide early payment discounts for the shipment when the payment is released by the accounts payable under a definite timeline. If this condition isn’t met, the company has to pay the usual price. Also further extension can lead to penalties, poor relationships, or both.

Strategic Tasks

AP departments spend a huge share of time working with repetitive invoice processes such as data entry, data extraction, data validation etc. Additionally, they are also required to perform strategic tasks such as data analysis, forecasting, vendor master data cleanup, etc that are often left behind because of invoice processing.

Multiple Standalone Systems

From creating a purchase request to its final payment, there is a complex network of processes that work in unison. This accounts for multiple standalone systems that often falter because of their codependency. For instance, creating a purchase request then confirming the request externally (by inventory management) to its final approval from the authority, there are multiple standalone systems at work. This points towards an invoice automation solution that can collaborate these standalone entities and turn it into a system of cumulative progress without breaking the flow.

Poor Visibility

Accounts Payable clerks spend half of their time searching for a required document. This time can be excruciatingly high with file cabinets and dockers working against urgencies.

No Scalability

In a survey report by Aberdeen Group, 33% of the participants agreed to have faced challenges while processing huge volumes of data with the existing staffing level. Manual processing isn’t scalable. With an increase in the number of invoices to process, the organizations are also required to upscale their workforce to finish off the work in time.

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