Finance professionals nearly always struggle with manual accounts payable paper processes and sometimes question precisely what to do about it. If you want to avoid tedious tasks such as chasing down execs for invoice approval, inefficient data entry, or scrambling to find missing paperwork, investing in solid AP automation software that makes invoice processing a breeze should suffice.
However, different terminologies may confuse finance administrators when exploring invoice processing solutions. For instance, it is easy to think that electronic invoice processing is the same as AP processing software, which is not quite true.
Therefore, this article focuses on the significant differences between electronic invoice processing solutions and AP automation software to clear this confusion. Before doing so, the following questions need to be answered: What is electronic invoice processing? What is AP automation software?
What is electronic invoice processing?
Electronic invoice processing involves digitizing the information on an invoice obtained originally in email, paper, or formats like XML, PDF, and EDI. This data is made available and accessible in the electronic invoice processing software.
‘AP automation’ or ‘Accounts payable automation’ describe electronic invoice processing software. Both cases involve the use of technology that automates every process in accounts payable.
Electronic invoicing eliminates error-prone, time-consuming, and costly manual invoicing processes. In a traditional sense, employees usually create invoices manually or by hand, stuff them into envelopes, and mail them to customers. In a few cases, the invoice is emailed to customers when available in PDF. Unfortunately, this is a labor-intensive procedure that is always prone to considerable data-entry errors.
Customers will, in turn, perform almost similar labor-intensive tasks of checking the invoices manually against their personal purchasing records as well as shipments they received before paying them by check, in most cases.
This is where the electronic invoice processing system saves the day. It enables organizations to automate all accounts payable processes. At the same time, it allows customers to automate accounts receivable processes, which is usually possible when electronic invoicing functions have already been integrated into their business applications.
The adoption of electronic invoicing has grown rapidly over the last few years; its roots can easily be traced back to the 1960s. This was when organizations started using pre-internet EDI (electronic data interchange) networks and data formats to exchange business information, including invoices.
Although some industries still use this archaic technology, many electronic invoice process systems now use XML formats and modern, cloud-based platforms for exchanging invoices.
What is referred to as electronic invoice processing solutions?
Electronic invoice processing solutions provide a unique way of capturing invoice data. This depends significantly on the initial or original format, as well as populating a central dashboard with invoice status.
In most cases, there is an approval workflow for automating the task of sending vendor invoices for approval to the individual primarily responsible for purchases.
Examples of electronic invoicing solutions, arranged in no particular order, include:
- Invoice processing;
- Invoice data capture;
- Archive and audit;
- PO matching;
- Approval workflow.
What are the benefits of electronic invoice processes?
Electronic or automated invoice processing offers various benefits to organizations that utilize it. From fewer errors to improved cash flow and lower costs, businesses gain a lot when they use a dedicated invoice processing system.
Electronic invoicing facilitates more all-embracing automation of accounting and payment processes for suppliers and customers. The following are such benefits:
- Increased productivity;
- Reduced costs;
- Fewer errors;
- Zero frustrating and time-consuming payment disputes;
- Automated matching and validation;
- Less environmental impact;
- Improved cash flow;
- Supplier discounts.
What is AP (accounts payable) automation software?
AP automation software, or accounts payable invoice processing software, is the tool used to process all accounts payable procedures digitally using technology instead of manually. As a result, technology has efficiently revolutionized how organizations process and pay their invoices.
The AP automation software is a set of unique instructions customized for automated and efficient start-to-finish business payment processes. This software categorizes, matches, and even verifies data and moves them to an accounting system to be posted.
Making use of AP automation helps accomplish the following:
- Enable highly secure end-to-end payments;
- Minimize errors such as duplicate payments, double receipts, etc.;
- Eliminates data entry;
- Match invoices to payments and POs;
- Generate digital audit trails;
- Enable online approvals, etc.
By replacing paper with electronic invoices and payment methods, organizations have realized the significance of this cost-saving tactic. This is why they are milking AP automation for all its worth, and the benefits are profound.
What are the benefits of AP automation software?
Using AP automation software also comes with lots of benefits, some of which include the following:
- Better collaborations;
- Time savings;
- Reduced accounting risk;
- Personalized process;
- Electronic audit trails, etc.
Automated invoice processing offers businesses a sense of control that paper-based invoices can never achieve, no matter how seemingly efficient they are. The invoice processing system instantly informs you where each invoice is, how productive the individuals managing them are, and practically everything you need to know about payables.