For any business, invoice processing is probably one of the least enjoyable tasks required in the ordinary course of its operations. Aside from the obvious fact that invoice processing typically involves negative cashflows – paying money to whoever issued the invoice – invoice processing also involves many tedious but necessary steps for verifying the invoice, scheduling and tracking payment, and documenting the payment for tax, audit, and regulatory purposes.
As with any tedious and repetitive task, the risk of human error is ever-present. Of course, when dealing with financial transactions and the downstream record-keeping requirements, those errors can be extremely costly. The sheer volume of invoices companies process only compounds the risk of costly human error.
If you’ve been reading our other posts on robotic process automation, or “RPA,” then you have probably already guessed that the nature of invoice processing – a critical but tedious, repetitive, and error-prone manual task – is a perfect candidate for RPA.
Typical Invoice Processing Steps
Unsurprisingly, businesses generally don’t blindly cut a check the second they receive an invoice; they tend to be a bit more careful with their money than that. There are several steps most businesses go through after receiving an invoice:
Receive and categorize the invoice. This step involves translating an invoice from any number of external entities into something that can be processed internally. For example, a human might read over an invoice from a vendor of computer equipment to decide if a vendor asking for payment and to identify the correct internal department the invoice should be approved by.
Verify and approve the invoice. Just because someone says they’re owed money doesn’t necessarily mean they are owed that money, that amount of money or that it’s owed in the timeframe stated on the invoice. Invoices need to be verified for accuracy and approved by the proper internal stakeholder before being paid.
Authorize payment. Once the right department verifies and approves the invoice, it is typically necessary for the accounts payable team to officially authorize the payment.
Entry into the payment system. Most accounts payable teams have an invoice payment system that manages the actual transfer of funds associated with an invoice.
Back-end record keeping. Auditors, regulators, and tax authorities all want businesses to keep complete and accurate records of their outbound cashflows and the transactions associated with those cashflows. After invoices are paid, businesses document those payments in some sort of back-end accounting system.
Each of these steps has traditionally involved people. The more people involved the more costs go up and the more potential there is for error.
Automation can help.
Ample Opportunity for Automation
Several of the steps described above are ripe for automation. While it may be necessary for a human decision-maker to authorize payments, it shouldn’t be necessary to have human involvement in the receipt and categorization of invoices, the entry of approved invoices into payment systems, or the transfer of those records to a back-end record-keeping system. In fact, humans can do more harm than good during these processes if they incorrectly enter data or send it to the wrong location.
Of course, in the initial setup of the RPA invoice processing system, human input is needed to design and program the process flow. In other words, humans are needed to teach virtual machines how to do their jobs and must provide inputs down the road as processes are improved or changed. The key is that RPA can easily and reliably manage the day-to-day process.
Unlike human workers, RPA can work round the clock to process invoices, including nights, weekends, and holidays. This helps avoid unnecessary delays in getting money out to vendors and incurring potential late payment penalties, interest, or other consequences.
Free Staff from the Weeds
In tedious processes like invoice management, it’s incredibly easy for multiple staff with valuable experience and knowledge to get bogged down in the minutia of day-to-day troubleshooting and paper pushing. To the extent RPA can take over these low-level but tedious tasks, human staff can be freed up to consider more strategic challenges such as modifying invoice processing and payment strategies and policies.
Relatedly, RPA can provide a wealth of actionable data about how money is flowing out of an organization and to where. Instead of being focused on making sure invoices are accurate and going to the right departments, accounts payable staff can spend more time analyzing the newfound data to glean insights into potential opportunities to save time and money.
Invoice processing can be a painful activity for any organization, and not just because it involves handing out valuable money. Invoice processing, like many applications for which RPA is an ideal solution, involves a lot of tedious, routine, and repetitive steps which are prone to human error, particularly over the course of many, many transactions. RPA not only helps avoid these potentially costly human errors but also frees up human staff for more important high-level analysis and action.
Ready to learn more. Get in touch with us to learn more about NITCO’s RPA solutions.