The advantages of automated invoice processing in your accounts payable department
When it comes to the question of which business area would tolerate an upgrade, accounts payable departments in particular should be examined more closely. After all, there is often plenty of scope there to generate disproportionate impact with only marginal improvements. For example, increases in efficiency and productivity can be achieved, which in turn can lead to relatively lower costs and result in more value creation for customers due to resource reallocations.
In accounts payable units, a large amount of data from numerous documents is continuously being processed. In the case of invoices, for example, the supplier and the amounts of the line items as well as the final amount are entered in a document management system (DMS) and then linked in the ERP system to the respective posting records in order to gradually increase the amount of dark postings. However, for the majority of companies, this data is still entered manually. So employees manually enter the relevant data from the respective documents into a system. This is not only tedious, but also extremely time-consuming and error-prone. And it is not a fulfilling task, neither for the employees nor for the customers. Firstly, because it is a robotic work process and, secondly, because it means significantly higher costs for the customer.
Template-based OCR can already drastically reduce manual work and error-proneness. The disadvantage of this solution, however, is that the creation and administration of templates takes a lot of time. With a small number of different suppliers, this is still halfway reasonable. But if we consider that even the smallest companies often have dozens of stakeholders already, this can quickly lead to a major administrative challenge that can be very costly. That is why you should definitely rely on a future-oriented OCR software provider who can enable you to extract data without templates and at much cheaper conditions.
In the following, I will explain to you the disadvantages behind inefficient accounts payable accounting and the advantages that automation of invoice processing can bring.
Possible problems with inefficient accounts payable
Starting with the status quo, it is possible to analyze what may result from non-automated invoice processing and thus inefficient accounts payable. Since, as already mentioned, manual work is slow and error-prone, the following problems can occur:
- Late payment or lost invoices
- Incorrectly entered data
- Difficulties in retrieving invoice data
- Susceptibility to fraud
- Increasing cost pressure
If invoices are paid too late or are lost, early payment deductibles and discounts are not granted. Failure to pay at all may result in additional administrative fees or even penalties. In addition, this can also bring business relationships into disrepute.
If data is entered incorrectly, this can have negative effects on accounting. For example, if a zero is forgotten and only 1,000 is transferred instead of 10,000, this can lead to discrepancies that prevent your employees from carrying out their day-to-day business due to extraordinary clarification work. Sometimes the clearing up takes several days and one or more employees, which can be very costly. Furthermore, employees from other departments or other stakeholders can be hindered in their daily business. Not just the ones in accounts payable.
Poor creditor accounting can also be attractive to fraudsters. Cause it happens that organized criminal organizations send fake invoices to companies in the hope that the companies will pay them. According to the FBI, the number of fraudsters worldwide taking advantage of these vulnerabilities is increasing. Google and Facebook were stolen in this way some time ago over $100 million, for example. Pretty crazy, huh?!
So, the problems mentioned above that might arise illustrate the importance of efficient accounts payable processes.
Advantages of efficient accounts payable accounting
Thanks to modern technologies, precisely these problems can be greatly minimized or even prevented and accounts payable units can be made more efficient.
To do this, it is first necessary to identify the inefficiencies you have in order to get a clear picture of the possibilities for improvement. Almost without exception, however, one of these improvement possibilities will be found in data extraction. With Parashift’s versatile document extraction platform, you can take significant steps forward to regain significant capacity from your valuable accountants and reduce costs, while laying the foundation for building more comprehensive process automations.
A small digression: During the Corona crisis, the number of companies switching from manual to automated processes has increased dramatically. According to automation researcher Mark Muro, the scientific literature also shows that such investments are made especially in times of crisis. At Parashift, we felt the effect of this crisis even more as we also relieve customers of the obstacles to high investment through our transaction-based billing model.
Cost and time savings
So, a key benefit of our machine learning-based data extraction solution is the significant cost savings. Just like the inefficiencies mentioned above, which can drive up the cost of accounts payable, increased efficiency can reduce costs. Parashift can therefore save accountants several weeks of man-hours that they may have previously spent on tasks such as invoice template creation, data entry and order or invoice reconciliation. The time saved can be invested in more meaningful, truly value-adding work, and employee satisfaction tends to increase quite significantly.
The Parashift Platform therefore automatically provides you with the data of the line items of an invoice, allowing you to automatically reconcile them with the line items of the corresponding purchase order and detect potential differences. This is particularly valuable for complex ordering processes with time-consuming reconciliations. We have found that such a solution can save a great deal of time, especially in industry, and can also ensure that downstream processes run smoothly and cost-effectively.
Automated invoice processing also leads to the realization of the cost-saving potential provided by suppliers who offer early payment deductibles and discounts, due to early payment. But the cost savings should not stop there. According to a study by McKinsey, the costs of automation (oh, what a surprise!) continue to fall increasingly, which should lead to further cost savings in the future.
Simplified exchange of information
A centralized, cloud-based invoice processing solution can also improve information exchange. The tedious process of searching for documents is eliminated. When late or missed claims need to be verified or refunds granted, there is no need to search through a tangled web of documents. And other systems, in which processes building on these document data are configured, can be easily integrated via an interface.
In summary, implementing an automated invoice processing solution can lead to the following advantages:
- Time and cost savings
- Fast return on investment (ROI)
- Resource conservation/expansion in value creation
- Process optimization
Ultimately, cloud-based OCR software helps you better orchestrate and leverage your organization’s resources to achieve your strategic goals and gain valuable competitive advantage.
It’s best to see for yourself how Parashift can help you optimize the processes of your accounts payable department. Simply click on the banner below, register for a 14-day test account and upload a dozen representative documents. PS. The post-processing of the results takes place on working days between 08:00 and 17:00 CET within 3 hours. Have fun!