Process incoming invoices

Incoming invoices are invoices from a vendor or supplier that need to be verified, approved, assigned the GL account coding and prepared for payment processing. Handling incoming invoices can be a simple or complex process, depending on the rules of your company, and must follow compliance standards.

The most important factor is that incoming invoices are processed quickly, accurately and digitally — and that the right people are in the approval workflow. This yields immediate benefits:

• Eliminate paper and manual data entry
• Automate workflow processes and exception handling
• Reclaim early payment discounts
• Dramatically cut audit prep time

This article describes the core process of digitizing incoming invoices, and how document management and workflow software can enhance, automate and streamline the entire process.

When your company receives an invoice, its content and amounts must be checked that data is accurate and contains zero errors and that the invoice itself is valid.

This verification ensures the invoice is booked in a timely manner and approved by an authorized employee or multiple employees in different departments. Formal invoice verification involves the review of necessary and mandatory invoice data by the accounts payable department.

Taxes, fees and totals

Verification also ensures the invoice amounts are correctly stated and calculated, including the correct tax rates, tax amounts and any other fees listed. The total amount and all other calculations are checked here as well, including entering the general ledger coding and the appropriate accounting period. In most cases, accounts payable also handles these tasks.

Order verification

Content verification is tasked with determining whether the product being billed was the one actually ordered and received. The number of items, quality and the agreed price are also checked at this point. These tasks are usually handled by clerks in the accounts payable department, receiving department, or in purchasing.

Fraud detection

Finally, every invoice undergoes fraud examination. Validating if the vendor is known and approved, ensuring invoices have not been sent more than once, and ensuring individual line items do not appear on more than one invoice are part of the verification process. Fraud is a damaging threat and every company is a potential victim.

Invoices are therefore subject to a factual, technical and formal review before they are approved, posted and then paid.

If done manually, this is expensive and time-consuming. To realize leaps forward in efficiency, companies should optimize invoice verification as part of their accounting activity whenever possible.

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The verification of content, dollar accuracy and invoice formalities involves complex processes that must be performed correctly as well as quickly.

Early payment discounts and rebates can be lost if verification takes an excessive length of time. Delaying invoice payments too long can even result in late payment fees or credit issues with the vendor.

Booking invoices is prone to error since typing in billing information may lead to typing errors or incorrect information. In addition, paper invoices must be archived. Copies are also often required for individual clerks and supervisors. 

Digitizing invoices allow accounting teams to take advantage of a machine learning system to check invoices and use automated workflows to approve invoices. This speeds up the process considerably. As a result, invoices are paid faster, and early payment discounts or other rebates can be gained. Late fees can also be avoided when invoice verification takes place in digital fashion. With digitization, documents are processed faster and with far less cost.

In addition, there are numerous other benefits of digitizing invoices:

1. Rapid and automated invoice processing increases trust with suppliers. This automatically improves your reputation with suppliers since invoices are paid faster and more reliably.
2. All process steps are tracked and transparent to supervisors and authorized employees. Automated processes can compensate for employees who are absent due to illness or vacation.
3. Doing away with paper copies and paper printouts provides massive cost savings, as well as practical benefits such as reclaiming office space from filing cabinets and unnecessary printers.
4. Filing is easier since no paper folders are necessary. Office material is saved, and archiving is easier since it is completely digital. With automation, digital organization happens automatically – you set the rules, and then invoices and other documents are instantly stored in the correct manner.

Note:

In general, the problem with paper invoices is that they can be lost or lie on desks for extended periods of time, for example when an employee is out of the office . This does not happen with digital invoice processing since documents are immediately available electronically in the document management system (DMS) and can be used by all authorized employees. This eliminates the effort involved in recovering documents that can no longer be found.

Digital invoice verification increases approval reliability

Invoices are sometimes quickly “waved through” — especially during hectic times when employees are dealing with heavy workloads — due to a lack of time or information that would permit more thorough verification.

In addition, when due dates pass, overworked employees can also potentially approve invoices that should not be authorized for payment.

With digital invoice processing, employees have access to all information as quickly as possible and authorize payments with speed, ease and accuracy. Digital invoice verification improves the reliability of payment approvals since validation is improved. Added to this is the transparency that allows the approver to view a process at any time without first having to request a copy. This drastically reduces the risk of invoices being approved without verification.

Automated digital invoice verification greatly simplifies approvals down to a few mouse clicks. At the same time, the employee's workload is minimized and his or her satisfaction is increased since they can use the right tools to perform their tasks both faster and more effectively.

Information is available at all times

If an accountant, management or staff member has questions about an invoice, the necessary data and information can be retrieved and displayed at any time and, ideally, in any location. This significantly increases the flow of information. The employees responsible can also retrieve information or approve invoices using their smartphone or tablet.

The advantage: you dispense with tiresome searches for information which may not even be available. On the contrary, information is immediately available via the document management system.

Unnecessary costs and risk is removed

A study by International Data Corporation (IDC) describes how employees spend vast amounts of time processing, storing, archiving and searching for paper documents. IDC estimates that a company with 1,000 employees has nearly 213 individuals whose time is spent managing too many paper documents.

The risks and downsides of paper documents are well known and documented. Eliminating paper yields clear benefits:

Cleaner office

Imagine no more filing cabinets, fewer printing devices, and shelves of storage reclaimed from paper and toner supplies. Less shipping, less photocopying, less filing and searching. The first advantage is a cleaner, brighter, more spacious office.

Streamlined workflows

Automated workflow makes the right content accessible at the touch of a button whenever and wherever you need it. It takes only seconds to route and share documents across multiple departments and systems.

Reduced business risk

Custom access controls and digital data security make it easier and less expensive to maintain compliance and reduces the likelihood that missing documents will result in fines or lost revenue.

Better customer relationships

Information is only seconds away with a quick search — no more putting people on hold to dig through folders. Deliver the speed and quality of support your customers and vendors deserve.

Increased visibility

Using digital workflows instead of paper results in greater transparency, allowing management to monitor business processes in real time for smarter decision making.

Positive environmental impact

If you have a “green” initiative in place, one of the easiest ways to reduce your carbon footprint is to print, ship and store less paper.

Introducing digitization to any part of your business can reduce reliance on tedious, manual tasks and help your organization go paperless.

Audit prep and response is simplified

Audits are much easier with digital invoice processing. Documents in the document management system are available at all times, are archived in a legally secure manner, and can be retrieved at any time in a highly organized manner to support even the deepest audits. This can help avoid fines for missing documents.

See how DocuWare's solution for invoice processing takes care of your invoice processing automation securely and easily:

Invoices can come from anywhere: emailed PDFs, XML-only transmissions, faxed documents, even mailed paper. No matter what the source or format, the document management system intakes the invoices and starts the process of “reading” them.

Low-quality systems will simply capture an image of the document, and force users to input key data like totals, vendor, tax information, due date, and more. Some systems perform OCR to read the text to at least make it searchable but there is zero contextual business information.

The best document management systems use modern capture technologies to intelligently read the document, understand its content, and then push that data into key index fields.

This fully eliminates the need for manual data entry. The best systems use machine learning to learn the patterns and templates of invoices to get smarter over time and reduce the friction of incoming invoices even further.

Once the document management system intelligently indexes the incoming invoice and understands its content and purpose, it can use key index data like vendor, purchase order, address fields, totals and more to automatically decide how invoices should be processed.

For example, invoices from an approved vendor under a certain dollar amount can be automatically approved — with no human touch.

Invoices from an unknown vendor can start a new vendor workflow before any approvals happen protecting you from fraudulent vendors.

Invoices with large dollar amounts that require multiple levels of approval based on dollar thresholds or multiple cost center approvals can be sent through a digital approval workflow based on your business rules. The workflow ensures the correct individual approves based on the set criteria in the system.

Once the key index data of an invoice is understood, digital workflow enables fully customizable automation to closely follow business rules.

The combination of intelligent indexing and workflow automation yields impressive time and cost savings at every point of the invoice process.

With digital workflow automation in place to ensure invoices go to the right people as efficiently as possible, the next step is invoice approval, including escalation.

Feature-complete document management systems will use workflow logic to expedite the fastest possible approvals with minimal exceptions.

Once invoices are approved and the process is completed, that data -can be synchronized with financial applications like Quickbooks, Sage and other accounting systems. While native integrations are possible through APIs and prebuilt connectors, the universal method to export and import transaction data is through CSV files which sophisticated document management systems will produce.

The final step is securely archiving invoices in a legally compliant manner.

The invoice is archived in the document management software with retention policies applied. These retention policies are extensions of workflow and dictate when documents can be safely destroyed.

In addition, the safe archive of invoices — or any documents — will have robust access rights and data encryption to prevent tampering, loss and unwanted access. Security is one of the most important aspects of document management system and is crucial to ensuring peace-of-mind at the end of a document’s lifecycle.

Note:

In most cases, it is not necessary to keep documents longer than required by law. Manually deleting documents and destroying paper invoices is very time-consuming since the expiration of the retention period must be carefully checked. This is very easy to implement with a document management system since a document’s storage period is recorded digitally. This allows documents to be deleted quickly and easily in an automated manner.

Companies should not be forced to acquire hardware and software when purchasing software. For many smaller businesses, or for those updating their IT ecosystems, managing internal data centers is simply not an option.

With a Software-as-a-Service (SaaS) cloud solution, you need not worry about setting up and managing servers and software. These tasks are performed by the service provider of the document management and invoice processing system. This is a huge benefit to accounting organizations.

The digitization of accounting drastically increases total team efficiency since numerous processes can run in a parallel, automated manner and with much less human intervention. Electronic invoice processing benefits hugely from this.

DocuWare digitizes and automates every step of the incoming invoice process.

Intelligent indexing captures incoming documents and automatically applies critical index data. Workflows then route invoices through an automatic approval queue, or to the right people for approvals. Invoices are then securely archived and prepared for future audits. Finally, transaction information in the form of a CSV file can be uploaded into ERP and other finance applications to ensure all information is synchronized.

DocuWare customers experience the following benefits:

Faster payments

The workflows for electronic invoice processing also transmit all important information for further processing directly to an accounting program to ensure speedy payment without delays. Discount deadlines can be easily met, and repetitive reminders become a problem of the past.

More productive staff

And because of this automation, accounting staff can reach decisions significantly faster to open more time for strategic tasks such as liquidity planning or controlling. Daily responsibilities transition from manual tasks and data entry to monitoring automated processes, handling exceptions, and focusing on strategic planning.

Security and data integrity

Since sensitive documents arrive in accounting day in and day out, the security, reliability and integrity of digital systems are very important. Rights management, virus scanners, audit trails, data encryption and information accuracy are foundational to digital processes.

Auditing prep and delivery

Thanks to intelligent archiving, all required data – or just the data you need – can be transmitted to auditors quickly and completely electronically in real time. In the event of questions about an invoice process, a quick look at the digital archive provides complete transparency of the workflow data. Even short audit deadlines are no problem.  And if you have integrated with your financial application, invoices can be accessed directly from there as well.

Legal compliance

In addition, DocuWare archives documents in a legal, compliant manner to comply with Federal and State laws and regulations regarding invoice archiving. Digital processes can be easily adapted to audit and accounting standards. Digitized accounting practices does not only save time and money, but also increase process quality and data security.