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Accounting & Finance

What is Invoice Automation and How Does it Benefit Your Accounts Payable Team?

Jun 17, 2021

Invoice automation makes your workflow smoother, your accounts payable team more agile, and fosters better relationships with business partners.

Ashish UpadhyayContent Writer
What is Invoice Automation and How Does it Benefit Your Accounts Payable Team?

Still processing invoices manually? The accounts payable (AP) department is overrun with hundreds of invoices every month? From paper invoices and PDFs to emails and fax, invoices come in every shape and size but a sluggish process causes delays, causing late payment fines. For finance managers and accounting heads, these struggles are all too familiar.

One research indicates that accounts payable practitioners end up wasting up to 84% of their time on manual activities related to transaction processing. Such inefficiencies increase during peak business season when there is a larger influx of invoices from suppliers, vendors, and business partners.

In such scenarios, automation can speed up certain processes and make workflows more efficient for AP teams. With hundreds of invoices pouring in every month, invoice automation (a part of accounts payable automation) is able to capture, store, and validate data accurately without any manual intervention and accelerate your payable processes and reduce late payment penalties.

What is invoice automation?

Invoice automation is the process of enabling a software tool to read and analyze incoming invoices, store the analyzed data in an accounts payable system, match it with purchase orders and receipts generated against the invoice, and finally process the invoice and release payments to the concerned party.

Compared to manual processing, automated invoice processing creates faster workflows as it takes care of all routine accounting tasks. These include matching prices, purchase orders, and entering data into an ERP system to finalize payments. Research indicates that automation can improve efficiency by 73%.

How does invoice automation work?

Unlike traditional invoice management that includes multiple layers of matching, processing, and approving bills, invoice automation directly extracts data from incoming invoices, validates it as per established business rules, and pushes the details into the system for final payment. Let’s look at this process:

1. Extracting data with AI-enabled optical character recognition (OCR)

Invoices, as you know, come in all shapes and sizes. With the help of AI-enabled OCR technology, you can convert all invoices into a paperless format and process them digitally.

AI-led OCR automatically selects all relevant information, such as client name, address, and purchase history, from digital invoices. It then identifies which piece of text corresponds to which information field and eliminates the need to manually enter data.

This process significantly decreases invoice processing time and delays caused by end-of-month invoice bottlenecks.

2. Analyzing collected data with AI

Once invoices are scanned and the relevant data is fed into the system, data validation is required. In advanced invoice automation solutions, AI extensively goes through the invoice data to check for errors and discrepancies without human intervention.

Not every vendor will submit an ideal invoice with all the necessary information. In such situations, AI can easily detect and fill in missing information wherever possible or trigger an alert to the AP team in case contacting the vendor is necessary. This is possible because AI analyzes similar data from past invoices to build an invoice pattern and type for the businesses you work with.

Additionally, AI also helps in intelligently cross-checking and matching invoice information with purchase orders for two-way validation. As your business grows and you interact with more parties, the invoice automation system analyzes larger amounts of invoice data, making these processes more accurate over time.

 3. Identifying and prioritizing complex and high-effort invoices 

AI-led AP automation can isolate high-effort invoices that take a lot of time to process. These could be invoices with missing information, mismatching purchase orders, or large enough to require further approvals before payment.

Sorting such invoices manually wastes time but with AI, your AP team can easily track these high-effort invoices and prioritize those to create a better workflow.

This process also helps identify vendors and suppliers who send the most high-effort invoices that take a lot of time to process. With these insights, your AP team can build a roadmap to address these challenges and make AP processing more efficient.


Benefits of invoice automation

Invoice management in 2021 shouldn’t look like it’s from 2001. With 71% of AP departments automating in 2020, these numbers are likely to increase in the coming years and reasonably so for there are a lot of benefits of investing in an AP automation solution. Companies reluctant to act may fall behind.

1. Efficient and accurate invoice processing: Processing an invoice manually, especially if it’s a large one, can take as long as 25 days. With automated invoicing, the process of extracting data, entering it into a system, validating and matching it with purchase orders, and approving final payment becomes more efficient and the processing time is greatly reduced.

Additionally, with an AI-led automated solution, there are fewer mismatches and inaccuracies as processing errors are reduced. This happens mainly in two ways:

a) Invoice data is captured and fed into the system without human intervention.

b) Invoices are validated against purchase orders early on so any discrepancies are immediately flagged.


Creating an invoice in Zoho Books (Source)

2. Cost and labor savings: Manual tasks are one of the biggest reasons for high accounts payable costs. Not only do AP teams end up wasting time clarifying payment terms when invoices are complex, the costs of printing and faxing invoices, and sending payment checks add on to the expenses.

Research suggests that digital AP platforms can reduce processing costs by 81%. An automated system eliminates a large part of human involvement per invoice. This significantly reduces the time your AP team has to spend on processing invoices.

Additionally, a lot of businesses offer early payment discounts and with faster invoice processing, you can avail these discounts and lower costs for your company. Finally, going paperless also lets you enjoy the benefit of storing data digitally.

3. Increased compliance and fraud prevention: Automation-enabled invoice processing also increases regulatory compliance as it keeps every part of the process in check. An AI-enabled system improves the quality of invoice validation.

Since all the files are digitally stored, your AP team and clients have access to all the files, you will get notified immediately if any issues or discrepancies arise. Additionally, with digitization, your AP team and clients have greater transparency with invoices.

Lastly, AI-enabled invoice analysis and process control reduce fraudulent invoices from slipping through. Since information is available digitally, it becomes easier for an automated system to scan through the data and check for misinformation. Your AP team can verify the details with a client if the automation system catches any discrepancies.

Toward a more agile AP team

Manual invoice management ends up creating operational bottlenecks and slows down your business. With an advanced AP automation system in place, your AP team can process invoices at a much faster rate, create a better workflow, and not waste time on routine tasks. With increased productivity, comes a better and empowered workforce.

  • OCR technology accelerates the process of capturing invoice data and feeding it into an ERP system with greater accuracy and no human intervention.

  • AI-enabled invoice automation analyzes data and detects discrepancies early on to minimize mismatches and incorrect invoice processing. This helps AP teams focus more on improving financial control policies and budgetary forecasts.

  • Lastly, with fewer tactical tasks to worry about, AP teams can take initiatives to improve internal as well as external stakeholder satisfaction.

If you’re considering looking at invoice automation software online, visit our category page to find out more.


The applications selected in this article are examples to show a feature in context and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.

About the author

Ashish Upadhyay

Content Writer
Ashish Upadhyay is a content writer at GetApp, helping small businesses identify the right software for their business needs by analyzing user reviews data for the highest rated products in relevant software categories.

Prior to joining Gartner, he worked in insurtech, fintech, and real estate. Specializing in marketing, project, and IT management, Ashish’s works have been featured in MAST magazine and Medium. In his free time, he enjoys working out and playing video games.
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