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The Manual AP Process and Invoice Automation

Manual AP Process

In organizations where accounts payable invoices are handled manually, the process would typically be as follows:

– Open the mail, sort the vendor invoices based on company requirements, and distribute.
– Attempt to process the invoice in the company’s business system.
– If material has been received, the company can continue the process, checking the quantities, costs, freight, tax, and any other charges the vendor may have included.
– If material has not been received, the payables employee places the invoice on the bottom of their stack and repeats the process until the material comes in.
– If the correct materials are received, the company processes the payable in their business system.
– If the materials received do not match the original order, the payables employee will have to clear the record from the business system, document the issue, and contact the buyer or salesperson for resolution. In this case, the invoice may be reviewed multiple times before the resolution is obtained.
– Once the invoice is processed, the paper document is filed on-site for some period of time (hopefully in the right place so it can be retrieved later if needed) and eventually archived to off-site storage.

Towards Invoice Automation

Companies looking to streamline their accounts payable process are rapidly adopting automated invoice processing solutions that leverage OCR (optical character recognition). To determine whether these technologies would provide the desired automation, it is important to consider several relevant factors including:

– How long does it take the company to open and distribute mail?
– Is it a common practice to circulate multiple hard copies of the same invoice amongst various departments?
– What are the costs associated with retrieving invoices to address potential disputes, audits, etc.?
– Are employees struggling to keep pace with increasing volumes?
– Does your company consistently maximize early payment discounts?
– What percentage of the company’s invoices are currently processed through electronic data interchange (EDI)? Do they import efficiently? Companies will find that while their vendors may send invoices via EDI, their accounts payable department has to consistently review and process invoices manually.
– What percentage of invoices typically have issues requiring further review? Do particular problems reoccur frequently? Companies need to remember that invoice processes are created internally. Therefore, if a company is unwilling to make changes or evolve, automation may not accomplish the desired goals. For example, if a company calls in purchase orders to a supplier but takes their time in processing the purchase orders within their business system, no amount of automation will help prevent their accounts payable employees from encountering the invoice multiple times.

Examining The Internal AP Process

The management team needs to partner with the employees who truly understand the payables process and requirements from both a business and technical perspective. It’s common for companies to have structured work instructions that no one actually follows. Engage the staff (including subject matter experts from Accounts Payable, IT, Project Management, etc.) in conversations to let them know why the company is evaluating the process, what the end goals are, and the part each individual will play in ensuring the project’s success.

End-users can easily view the information identified by OCR together with an electronic copy of the actual invoice and edit any invoice that does not meet the company’s defined business rules.

Evaluating & Automating the Internal Accounts Payable Process

Once a company evaluates their current process, they should explore invoice automation solutions to assist with tightening up efficiency gaps. SoftWorks AI offers a robust payables automation system that leverages advanced OCR to read invoices, apply business rules of their choice to identify invoices requiring end-user review, and create the import files required for the company’s business system. Once files are imported into a company’s business system, any business rules that were established for updating of accounts payable is in place. End-users can easily view the information identified by OCR together with an electronic copy of the actual invoice and edit any invoice that does not meet the company’s defined business rules. For example, if the company is tax exempt, a business rule can be established to identify any invoice with sales tax. The payables employees can choose to edit the invoice total, exclude the sales tax, and approve the change. Corrected invoices can subsequently be imported to the company’s financial system.

Once a company elects to pursue an automated solution, they must allocate the appropriate funds and resources (including representatives from AP, IT, etc.) to ensure a successful deployment. Organizations also need to consider related factors including the quality of their scanner(s) and where the converted text searchable and compressed PDF files will reside. Organizations should also be prepared to scan a month’s worth of invoices and engage SoftWorks AI to assist with the initial OCR recognition and system training process. SoftWorks AI can leverage these samples to identify vendor invoices that might present recognition challenges and proactively resolve any issues as part of the implementation process. This dramatically increases system accuracy and ensures the highest level of automation.

Case Study: Success in Automated Invoice Processing

The Automation Process

Companies that have introduced SoftWorks AI Trapeze for Invoice Processing benefit from a much simplified process that’s often similar to the following:

– Scan incoming hardcopy invoices and route electronic invoices for processing.
– Process invoices with Soft Works AI Trapeze to OCR, apply pre-established business rules, machine learning, and predictive analytics.
– Generate text searchable and compressed PDF files together with the associated data extraction output.
– Review, edit, and validate any invoices identified with potential business rule conflicts or errors.
– Import extracted data into relevant business systems.
– Companies may have additional reports configured within their business systems for further reviewing invoices that do not meet certain business rules. Invoices that satisfy all business rules will be automatically processed without requiring any human intervention.

Automated Invoice Processing Success

SoftWorks AI’s Trapeze for Invoice Processing drastically reduces data entry costs by automatically extracting invoice field information. One company’s success story features the implementation of SoftWorks AI’s Trapeze for Invoice Processing and a resulting 99 percent accuracy rate for invoices that were scanned, read, and automatically validated. Following the scanning process, these invoices are imported into the company’s business system without anyone touching the paper. Invoices received via email are also no longer printed. They’re simply routed to the appropriate network folder for processing via SoftWorks AI Trapeze for Invoice Processing.

The company originally processed around 7,000 invoices a month with over 2,000 active vendors which required three full-time accounts payable employees. The company wanted to promote one of their accounts payables employees to a position within their purchasing department without having to hire a new employee to replace the worker they planned to promote. Within two months of implementing SoftWorks AI’s Trapeze for Invoice Processing solution, the company had achieved all business objectives. Of the two remaining payables personnel, the individual responsible for the SoftWorks AI solution found they now had time to refocus a portion of their efforts on gaining early payment discounts and performing additional value added tasks.

Initially, approximately 15 percent of the company’s invoices were being captured for review before the extracted data could be imported. Many of these invoices either contained conflicts with the company’s accounts payable rules or did not meet the system’s defined confidence level for accurately extracting required text. As invoices were validated, any corrections made were learned by the SoftWorks AI Trapeze for Invoice Processing solution so similar future invoices would process correctly. SoftWorks AI Trapeze leverages this advanced machine learning process to continuously improve recognition rates, extraction accuracy and automation.

“The company originally processed around 7,000 invoices a month with over 2,000 active vendors which required three full-time accounts payable employees. Within two months of implementingSoftWorks AI’s Trapeze for Invoice Processing solution, the company had achieved all business objectives.”

Objective Benefits Achieved
Repurpose key personnel Accounts Payables personnel were able to meet career goals and assume new roles
Save time and significantly decrease processing costs Invoice processing time was reduced by over 50 percent
Reduce misplaced invoices, the generation of multiple “convenience copies” and off-site storage fees Text searchable and compressed PDF copies of vendor invoices eliminate the need for storing paper invoices.
Improve compliance with internal policies Annotations could be added to the PDF files for recording any conflicts and/or resolutions for future reference
Increase internal coordination The company developed an efficient follow-up process for problem invoices using the electronic PDFs, which eliminated maintaining multiple hard copies and duplication of effort
Accelerate invoice processing Organization was able to speed up invoice processing and leverage early payment discounts

 

Conclusion: Implementing Automation in Existing Workflows

People are often resistant to change, especially when their company is altering a process which the employees are comfortable with. Many people fear the unknown and employees often associate “automation” with a reduction in the workforce. Employers owe it to the employees to provide honest reassurance, proper training, the opportunity to expand their roles, and the willingness to listen to feedback once new processes have been implemented. They must remember that their employees perform the tasks and thus, their employees know what really works.

Embracing Automated Invoice Processing

Companies that embrace automated invoice processing and create a working partnership with a solution provider like SoftWorks AI Technologies will ultimately increase their bottom line and empower their employees by providing them with the opportunity to bring greater value and efficiency to the workplace.

“Employers owe it to the employees to provide honest reassurance, proper training, the opportunity to expand their roles, and the willingness to listen to feedback once new processes have been implemented.”

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