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Automated Invoicing Guide: What It Is, Why It’s Important

May 3, 2021
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As a finance professional looking towards the future, you may be interested in ways to improve the productivity of your business. You’ll take a big step in achieving that by using automated invoicing processes.

We’re going to help you learn how and why. We’ll explain what automated invoicing is, the different types, and cost- and time-saving benefits it offers.

Let’s get right to it.

What is automated invoicing?

Automated invoicing uses software technology to process an invoice and schedule it for payment on a specific date and time — with minimal use of paper or people.

The process starts when an invoice arrives at a business, continues through verification and approvals steps and ends when the invoice is paid. Four specific steps take place:

  • invoices are received via email attachment (JPEG, PDF, EDI, etc.)
  • intelligent data capture technology extracts invoice data electronically, converts it to a digital file and inserts the data into the corporate online system
  • dynamic workflows route invoices for approval
  • invoice and payment data is integrated into the company’s Enterprise Resource and Planning (ERP) system

A crucial part of this process happens at the start. That’s when the invoice automation software converts data to an online corporate document populated with text that can be searched and found quickly. This step is key because a person no longer has to spend time typing in the invoice data.

Why is automated invoicing important?

Automating invoicing is important because it helps boost productivity, speed up payments, cut processing time and reduce costs such as labor, paper, stamps, envelopes and postage.

The technology also helps decrease manual errors. These mishaps slow the process, increase the chances of late payments and associated fees and strain vendor and supplier relationships.

Another benefit – and one of the most valuable — is automatically scheduling invoice payments in advance. Payments can be timed so you don’t have to worry about who gets paid when every month.

Despite these benefits, invoice automation can be undervalued, according to an article in IPS.

“Since the whole invoice management process is already digital, we have seen companies deprioritize invoice processing automation,” the article says. “This would be a mistake because even though the whole process is almost completely digital even without automation, it relies on a lot of manual labor.”

What are the types of automated invoicing?

You’ll want to focus on two main types of automated invoicing: optical character recognition (OCR) and invoice capture.

OCR extracts text from a scanned document and converts it to an online digital format. A person then doesn’t have to type in the data and can focus on other value-added work.

Invoice capture goes one step further. It captures key value pairs and tables that help streamline automated invoice processing. A value pair would look something like this:

  • a key equals the word “name” on the left and directly to the right the name of the person “John Smith”
  • key equals the word “address” on left and to the right the person’s address “101 Main Street
  • key equals text “ID” on left and to the right the company name “Company XYZ”

Together, the pairing looks like a table with headings and text. During the digital format conversion, an invoice keeps the tabular structure of extracted data so the text stays grouped within each table cell.

Invoice capture also automatically recognizes products or services listed on invoices, lifts the data and processes it into online tables. Here’s an example of tabular data that can be converted accurately and easily:


Both OCR and invoice capture take the typing of data out of the process, which lessens mistakes and frees up people to more strategic work.

What are the costs of automated invoicing?

The costs to your business of automated invoicing are attractive compared with manual, paper-based invoicing.

It costs businesses approximately $22 to manage the process manually starting with the receipt of the invoice until the payment gets made, notes Aberdeen Research. Using an AP automation process, that cost drops to approximately $10.

What are the time savings of automated invoicing?

The time savings of automated invoicing are significant compared with manual invoicing. Studies have shown best-in-class companies can process invoices four times faster.

Why? One reason is because invoice information is easier to find so companies get fewer questions about the status of invoices.

Just how much faster do top-performing companies get paid using invoice automation?

Up to 15 days faster, according to Billergenie.

“The manual invoicing process is cumbersome and lengthy when compared to automated invoice processing software.”

What are some key technologies used in automated invoicing?

Automated invoices use technologies starting with the software code that provides the instructions and rules to make the entire automated system run smoothly.

Machine learning is used to detect patterns in data to speed up the process while staying reliable. A type of artificial intelligence, machine learning can identify specific approvers for specific invoices.

For faster and more accurate processing, machine learning also scans invoice keywords and new invoice numbers and recognizes company names and amounts owed to specific vendors.

Final thoughts

As you think about whether it’s time to automate your company’s invoicing, it’s important to remember why automated invoicing is worth considering in the first place. Manual processes are largely to blame for inefficient finance departments.

“Processing payments for finance departments is a chaotic process with invoices coming in every format possible: paper invoices, PDFs, scanned PDFS and emails,” according to Nanonets. “The volumes also fluctuate with seasons where peaks become extremely hectic for finance personnel. Invoice capture using manual data entry into systems during these times leads to common issues like lost documents and tally mismatches.”

There you have it. Manually processing invoices isn’t a fast path to making your business more productive. It’s prone to errors and often a scattered exercise.

But automating invoicing certainly isn’t that. It’ll propel you well on your way to faster growth, and a more thriving workplace, in this new economic era.

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