Streamline Your Invoice Processing: 7 Ways to Reduce Errors and Save Time

Overcoming Challenges with Digital Invoice Processing

In today's dynamic business environment, finance and accounting departments face numerous challenges, such as improving cash flow, keeping up with tax and regulatory changes, and managing remote teams. However, the good news is that adopting digital invoice processing through a document management system (DMS) can help your team navigate these obstacles effectively and position them for future success.

What is Invoice Processing?

Invoice processing involves receiving, reviewing, approving, paying, registering, and storing invoices. The process begins when an invoice from a supplier is received. It must be examined for accuracy and completeness, and, if necessary, matched with purchase and delivery orders. Once verified, it needs to be authorised for payment. This authorisation can involve signing the invoice or approving an electronic payment. After approval, the invoice is processed through the accounting system, and the supplier receives the payment electronically. The process concludes with recording the transaction in the general ledger and storing the invoice for future audits. Automating this process can significantly enhance efficiency and accuracy.

 Four major steps of Automated Invoice Processing:

Common Challenges Solved by Digital Invoice Processing with a DMS

Lost Productivity

Many finance departments still rely on paper-based processes for handling invoices. This means employees spend a large portion of their time manually entering data from paper invoices into their accounting systems. This method is time-consuming and prone to errors, which can lead to issues such as incorrect payments and delays in processing.

Even if your team uses digital tools like Google Drive or SharePoint to store invoices, or if you have modules within your ERP or accounting system, you might not be fully utilising the benefits of digitalisation. These systems may not have capabilities like automated data capture, centralised document storage, and enhanced search functions, which are crucial for improving productivity.

By integrating your accounting software or ERP with a document management system (DMS), you can automate data entry. When an invoice arrives, the DMS can automatically extract relevant information, such as invoice number, date, amount, and vendor details, and input it directly into your accounting system. This reduces the need for manual data entry and minimises the risk of errors.

Additionally, a DMS creates a centralised repository for all your documents. This means that invoices, purchase orders, and other related documents are stored in one place, making it easy for employees to find and access them. Enhanced searchability means you can quickly locate any document using keywords or filters, improving efficiency and reducing the time spent searching for information.

Furthermore, a DMS can scale with your business. As your company grows and the volume of invoices increases, the system can handle more data without compromising performance. This scalability ensures that your invoice processing remains efficient and error-free, even as your business expands.

For example, if purchase order data is already entered in your accounting software, the DMS can automatically share this information with other business software. This eliminates the need to re-enter data manually, saving time and ensuring accuracy. As a result, your team can work faster and more efficiently, with more accurate information at their fingertips.

Undocumented Business Processes

In many organisations, some processes are only known to certain employees. These processes are not documented and rely heavily on the institutional knowledge of specific individuals. This creates a risk because if any of these key employees leave the company, they take their expertise with them. As a result, it becomes challenging to ensure that the correct procedures are always followed.

By setting up digital invoice processes and workflows in a document management system (DMS), you can formalise and automate these procedures. The DMS allows you to define process steps according to your business rules and integrate them into automated workflows. This ensures that the official process is consistently followed, reducing reliance on individual employees' knowledge.

Moreover, a DMS provides audit trails that track activities such as approvals and changes. These audit trails document every step of the process, ensuring transparency and accountability. This way, you can be confident that invoices and other documents go through the established best practices set by management.

Automation also increases productivity by eliminating guesswork and reducing the likelihood of human error. When processes are clearly defined and automated, employees spend less time figuring out what to do next and more time on value-added activities. This not only enhances efficiency but also ensures that all invoices are processed accurately and in compliance with your company’s standards.

Failure to Make On-Time Payments

Slow invoice processing can lead to several negative consequences for your business. When payments are delayed, you may incur extra fees, face credit holds, or even experience a suspension of deliveries from suppliers. On the other hand, failing to take advantage of early payment discounts means missing out on potential savings. Manual invoice processing often makes it difficult to keep track of payment deadlines and identify bottlenecks that cause delays.

A document management solution (DMS) can significantly reduce the time it takes to process invoices from receipt to approval and payment. The system automatically tracks payment due dates and sends reminders to ensure timely payments. It can also route invoices to the designated approver or a backup person if the primary approver is unavailable.

By automating these tasks, a DMS helps you avoid late payment penalties and maintain good relationships with your suppliers. It also enables you to take advantage of early payment discounts, improving your company's cash flow. The system’s ability to identify and address bottlenecks ensures a smoother and more efficient invoice processing workflow, reducing the risk of delays and errors.

For instance, when an invoice is received, the DMS can quickly route it through the necessary approval steps based on predefined business rules. If an approver is out of the office, the system can automatically forward the invoice to an alternate approver, ensuring that the process continues without interruption. This automation ensures that all invoices are processed promptly, helping you stay on top of your payment obligations and avoid unnecessary costs.

Lack of Insight into Cash Flow

If you don’t know when invoices are due, it’s challenging to predict and manage cash flow effectively. Without a clear understanding of your payables and spending, financial planning becomes difficult. This can lead to unexpected shortfalls and missed opportunities to optimise your finances.

Implementing a document management system (DMS) provides a central repository to store all documents, including customer and vendor communications. This centralised storage gives you an accurate, real-time overview of your monthly spending and outstanding payables. You can easily track how much is spent with each vendor and monitor payment schedules.

With a DMS, you can control supplier costs more effectively by negotiating better rates based on your detailed spending data. The system also ensures you never miss a payment again by keeping track of all payment due dates and sending reminders. This helps you avoid late fees and maintain good relationships with your vendors.

Improving the efficiency of accounts payable processes is essential for maintaining a steady cash flow. Digital invoice processing allows you to keep track of crucial metrics such as expenses, past-due invoices, and operating cash flow. This real-time knowledge enables better financial planning and decision-making. By seeing patterns and fluctuations in your cash flow, you can make informed decisions to optimise your financial strategies and prepare for future growth.

Supporting Staff During Audits

Preparing for an audit can be a stressful and time-consuming task for your finance team. In a paper-based system, employees must pull individual files and documents from filing cabinets and make photocopies to compile the necessary information. This manual process not only puts stress on staff but also takes them away from their daily responsibilities, leading to decreased productivity.

An electronic document management system (DMS) can significantly ease the burden of audit preparation. By storing all documents in a secure, organised digital repository, a DMS allows your team to quickly and easily access the required files. This reduces the time and effort needed to compile and organise documents for the auditor.

With a DMS, you never have to worry about losing or misfiling important invoices or supporting documents. The system ensures that all documents are stored in a logical and searchable manner, making it easy to locate and retrieve any file within seconds. This instant access to documents enables your team to respond promptly to any questions auditors may have, ensuring a smooth and efficient audit process.

Additionally, a DMS can provide secure, online access to auditors, allowing them to review documents remotely. This not only saves time but also frees your staff from the need to make physical copies or be present for document reviews. By minimising disruptions to your team’s workflow, a DMS helps maintain productivity and allows your staff to focus on their regular duties.

Compliance

In today's regulatory environment, businesses must be prepared for increased monitoring and analysis by financial regulators. Failing to establish internal controls and accountability can result in significant risks, including fines, penalties, and lawsuits. To mitigate these risks, it is essential to ensure data integrity and meet regulatory requirements.

A document management system (DMS) plays a crucial role in helping businesses maintain compliance. One of the key features of a DMS is version control. This ensures that you always have access to the most recent version of any document, reducing the risk of errors and discrepancies. Version control also helps maintain an audit trail of all changes made to documents, making it easier to track revisions and identify the source of any issues.

In addition to version control, a robust DMS includes comprehensive audit trails that enable you to detect and prevent fraud. Each time a document is accessed, modified, or deleted, the system records the activity, along with the user who performed it. This detailed log of actions provides transparency and accountability, ensuring that any unauthorised or suspicious activities can be quickly identified and addressed.

To further protect sensitive information, a DMS allows you to control access to documents through authentication mechanisms such as unique usernames and passwords. By restricting access to authorised personnel only, you can prevent unauthorised activity and safeguard confidential data. The authentication process creates a record of who accessed a document, when they accessed it, and what action they took, providing a clear chain of custody.

Moreover, the DMS can include redaction capabilities to further protect confidential information. Redaction allows you to hide sensitive data within documents, ensuring that only authorised users can view the full content. This is particularly important for protecting personally identifiable information (PII) and other confidential details that must be safeguarded to comply with privacy regulations.

Activity reports generated by the DMS provide an additional layer of security. These reports can notify you of any violations of security protocols, such as unauthorised access attempts or unusual patterns of activity. By receiving timely alerts, you can take immediate action to address potential security breaches and maintain compliance with regulatory requirements.

In summary, a document management system helps businesses avoid compliance woes by ensuring data integrity, establishing internal controls, and providing robust audit trails. By automating retention schedules and enforcing security protocols, a DMS helps you meet regulatory requirements and protect your business from the risks of fines, penalties, and legal actions.

Not Starting Your Digital Transformation Now

Delaying your digital transformation in invoice processing can have significant financial implications for your business. Research from Gartner reveals that the average cost of processing an invoice in the UK ranges from £4 to £25. Complex or error-prone processes can escalate this cost to as much as £50 per invoice. If you're hesitant about investing in a document management and automated workflow solution due to perceived budget constraints, consider the potential savings and efficiencies it can bring.

Implementing a robust document management solution isn't just about reducing costs; it's about enhancing your department's efficiency and productivity. By automating manual processes and streamlining workflows, you can significantly reduce the time and resources spent on invoice processing. This translates into faster turnaround times, fewer errors, and improved cash flow management.

Modern invoice processing solutions offer your team several advantages:

1. Cost Savings: Automating invoice processing reduces the labour costs associated with manual data entry and processing errors. It also minimises the risk of late payments and associated penalties.
2. Improved Accuracy: Automated workflows ensure consistent adherence to business rules and eliminate human errors that can occur with manual processing.
3. Enhanced Visibility: A centralised document repository provides real-time access to invoice status, approvals, and payment schedules. This transparency enables better decision-making and financial planning.
4. Compliance and Security: Document management systems offer robust security features such as access controls, audit trails, and encryption to protect sensitive financial information and ensure regulatory compliance.
5. Scalability: As your business grows, a scalable document management solution can easily accommodate increased invoice volumes and evolving business needs without compromising performance.

By investing in a document management and automated workflow solution now, you position your business for long-term success and competitiveness. The initial investment yields a substantial return on investment through increased efficiency, reduced operational costs, and improved overall financial management.

Don't wait to start your digital transformation journey. Embrace modern invoice processing solutions today to streamline operations, mitigate risks, and unlock new opportunities for growth. Partner with Workflo Solutions to implement cutting-edge document management systems and automated workflows tailored to your business needs. Our expertise in digital transformation will help you enhance efficiency, reduce costs, and achieve your financial goals. Contact us today to get started!