Automated invoice processing: An introduction

Automated invoice processing handles your accounts payable using automation software. It automates the entire process right from capturing the invoice, understanding the context, sorting out the expense report, to disbursing payments to the respective vendors.

A recent survey by IFOL shows that top founder priorities for AP departments include increasing efficiency, improving reporting and analytics, and automating processes completely. The reason for this is the rapid increase in the invoice volumes. This means any inefficiency today compounds as you grow. In numbers, automated invoice processing is ~80% faster, swifter, and brings higher accuracy to accounts payable invoice processing.

​Automated invoice processing uses AI-powered software with Optical Character Recognition (OCR) to capture, validate, route, approve, and pay invoices with minimal human intervention. Over the last decade, the market has evolved from basic OCR add-ons inside ERP systems to cloud-native, AI-first platforms with over 98% accuracy that handle multi-entity, multi-currency operations end-to-end.

​How automated invoice processing works

Normally, when the accounts department receives an invoice, the AP manually types the details into the ERP software. They spend 10-15 minutes on average to mark one invoice. After that, it goes through a chain of approvals before being cleared for payment. The entire process takes up to days to clear an invoice, sometimes longer. Automated invoice processing does the same process in less than half the time.

An automated invoice processing system is generally a part of a bigger expense management software. It captures data and processes it automatically, and processes payments after corroborating the data.

Invoice capture

Whenever a team member or a vendor submits an invoice, the modern automated invoice processing software captures it. It reads and auto-fills all the key fields, as these platforms are capable of capturing the input in different formats, whether a PDF, an image, or handwritten notes.

Data extraction and validation

For paper or image-based invoices, Optical Character Recognition (OCR) and computer vision detect characters and layout. For e‑invoices, in the form of Extensible Markup Language (XML), JavaScript Object Notation (JSON), or Electronic Data Interchange (EDI), the system ingests structured data directly, improving accuracy.

Matching and verification

The platform matches invoices against your POs, contracts, and goods receipt notes.

• Two-way matching compares the invoice against the purchase order — ensuring quantities, prices, and terms align.
  
• Three-way matching adds the goods receipt or service confirmation into the equation — verifying that the goods or services ordered, received, and billed for match.
  

Customize how the system views differences in invoices, so the system auto-approves small discrepancies of a few dollars and only flags outliers. For bigger payment differences, you can set up an exception workflow. This is where you tell the system to flag cases so a human can intervene to handle them.

Approval routing

Once validated and matched, invoices are routed for approval based on rules you define. It can follow fixed paths (for example, manager then finance). More dynamic setups are based on budget ownership or historical behavior. If the PO was pre-approved, the system will automatically process the payment.

Payment processing

Once approved, the system schedules payment according to your terms and preferences. It can handle multiple payment methods and supports international payments with proper currency conversion and compliance documentation. The system also identifies opportunities to capture early payment discounts. It automatically schedules payments to take advantage of discounts to significantly impact your bottom line.

Integration and reconciliation

Finally, the platform syncs invoice, vendor, and payment data back to your ERP or accounting system. Near real-time general ledger posting keeps your books current, with coding rules that map vendors and line items to the right accounts and cost centers automatically. Automated bank reconciliation matches outgoing payments against invoices and bank statements, reducing manual checks to tighten your month-end close.

Manual vs automated: where the difference shows

Like any other automated task, founders can expect an increase in the number of invoices handled in the pro-rata time with the AP automation vs manual AP processing.

[Table:1]

Compared to manual invoice processing, automatic invoice processing:

• Cuts processing time per invoice from around 15 minutes to a few minutes or less.
  
• Ensures higher check accuracy every time.
  
• Speeds up the approval cycles to only 2 days or less.
  
• Is ready to handle a growing number of invoices to process without any additional cost.
  

These benefits improve further when you integrate AP automation with expense management software.

​Benefits of automated invoice processing

Implementing invoice processing and receivables automation is a significant change for your team. However, this kind of change pays off across operations, finance, and strategy. Automating invoice processing offers many upsides, including:

• Faster invoice processing: Operationally, automation cuts processing time by 60–80%, taking your cycle times from weeks to days, and drastically reduces manual data entry.
  
• Enhanced cost per invoice: Invoice processing and receivables automation reduce the cost per invoice from around USD $12–$30 manually to USD $1–$5 through automation, saving thousands of dollars annually, depending on your volume.
  
• Highly detailed insights: An automated AP function shifts focus from pushing paperwork to providing real-time spend insights by vendor, category, and entity.
  
• ESG goals contribution: Complete digital audit trails help simplify audits and contribute to your startup’s ESG goals by reducing reliance on paper, printing, and physical storage.
  
• Regulation compliant: Invoice automation platforms incorporate fraud detection and support regulations like SOX and GDPR by enforcing segregation of duties and data protection controls, along with manual access control.
  

Implementation roadmap: How to automate invoice processing

Creating a plan on how you’re going to implement the automated invoice processing can simplify the shift from traditional invoice processing and increase team acceptance.

Your first 6-12 months of implementing the invoice payment automation system will look something like this:

Immediate Steps (Today):

• Assess current invoice volume and costs. Make a note of how many invoices you processed last month. How many hours did your AP team spend on invoice processing? What's your current cost per invoice, including labor costs?
  
• Document existing workflow. Map out exactly how an invoice flows through your organization. Include every step, handoff, and approval.
  
• Identify 2-3 major pain points. Find what creates a higher negative impact. Is it approval delays, data entry errors, lost invoices, or a lack of visibility? Identify your top pain points to guide your automation priorities and help you build your business case.
  

Short-Term (Next 30 Days):

• Gather stakeholder input. Talk to your AP team, approvers, procurement, and finance leadership. Understand what their frustrations are with the current process? What would they want in an automated system? Getting buy-in early makes implementation smoother.
  
• Research solution providers. Read reviews on G2, Capterra, and TrustRadius to create a shortlist of 5-7 vendors that look appropriate for your size and industry.
  
• Calculate potential ROI. Use your current metrics to project savings. If you're processing 2,000 invoices at $12 each, that's $24,000 monthly. Automation might cut that to $5 per invoice ($10,000 monthly), saving $14,000 monthly or $168,000 annually. Factor in discount capture, error reduction, and productivity improvements. Most organizations find 200-300% ROI over three years.
  
• Request demos from 3-5 vendors. Narrow your shortlist and schedule demos. Prepare specific scenarios from your environment to test during demos. Ask about implementation timelines, support, and total cost of ownership.
  

Here are some top features you should look for in your demos:

[Table:2]

Medium-Term (60-90 Days)

• Select vendor. Based on your demos, reference checks, and evaluation criteria, choose your vendor.
  
• Create an implementation plan. Work with your selected vendor to develop a detailed implementation plan with timelines, resource requirements, and milestones. Include pilot phase, training, and rollout strategy.
  
• Assemble project team. Identify your executive sponsor, project manager, AP team representatives, IT resources, and key stakeholders. Get time commitments from everyone and ensure they understand their roles.
  

Long-Term (6-12 Months)

• Complete implementation. Execute your plan through pilot, refinement, and full deployment phases. Stay engaged with your vendor's implementation team and address issues quickly as they emerge.
  
• Achieve operational proficiency. Give your team time to become proficient with the new system. Expect a learning curve, as full proficiency typically takes 3-6 months after deployment.
  
• Measure results against goals. Track your KPIs religiously and compare them to the baseline. Are you achieving the cycle time reduction you expected? Cost savings? Accuracy improvements?
  
• Document these results. Schedule regular reviews, identify optimization opportunities, and evolve your workflows as your business changes.
  

Common challenges to automate invoice processing

Shifting from a manual accounts processing system to a newer invoice automation can be tedious, especially when your team is used to a set workflow. However, you can mitigate some of the most common challenges with strategic solutions.

Data quality issues

From different invoice formats to handwritten notes, extreme variations and poor scans can impact the OCR accuracy, resulting in reading errors.

Solution:

Train your system based on past data for a variety of formats, especially the major ones, to increase accuracy levels. Negotiate comprehensible invoice formats with your vendors to increase OCR readability.

Integration complexities

If you are using multiple systems to do different tasks or your ERP is old, the supported APIs might be outdated. In that case, integrating an automated voice processing system may not work.

Solution:

The easiest way is to invest in a middleware platform, a tool that bridges the gap between your old ERP and the modern AP automation system. However, if you are a new startup and have multiple different tools that work synchronously, then adding a one-stop expense management system like Aspire’s will bring all your tools to one single platform.

Change resistance

Some of your team members are wary of the new technology and are unwilling to change their old ways. This demotivates other team members and brings an invisible barrier to change.

Solution:

Roll out the automation in phases rather than in one go. Communicate with your team to demonstrate the benefits of implementing automated invoice processing. Provide extensive training and support, and reward those who take the initiative and excel.

Process inconsistencies

If you are operating in more than one location, having process inconsistencies can be one of the challenges that slows down change. Where one process is followed in location A, location B follows a very different process.

Solution:

Conduct workshops with team members from both locations to communicate and bring uniformity to your processes in all the locations. Make your team aware of how automating accounts payable invoice processing can benefit them in the long run.

Final Thoughts

Many founders around the US and the world are switching towards invoice processing automation, with the scope of AI in invoice processing growing exponentially in the global market. This is the best time to migrate towards automated invoice processing. It will help your AP team close their books on time and with higher accuracy, so that they can put their efforts into creating better company policies and strategies.

Disclosure: AFT US LLC, d/b/a Aspire, is a financial technology company, not a bank. The Deposit Account and banking services are provided by Column N.A., Member FDIC. FDIC deposit insurance covers the failure of an insured depository institution. Deposits in the Deposit Account are FDIC-insured through Column N.A., Member FDIC and Column's Sweep Program Network Banks. Certain conditions must be satisfied for pass-through FDIC insurance to apply

FAQs

How can AI automate invoice processing?

AI capabilities like NLP and Machine Learning boost invoice processing automation by adding AI understanding and context to the scanned invoices, so that each invoice is processed with higher accuracy and speed.

How does AP automation handle different invoice formats?

Automated invoice processing using technologies like OCR, NLP, and cognitive machine learning, to read and understand invoices and send the data to your ERP. You can train the system on different invoice formats to further improve its accuracy.

What is the 3-way invoice process?

A 3-way invoice process automation matches the raised invoices with the purchase orders and the goods received to ensure the data on the purchase order and the goods match the invoice. The system flags any discrepancies so that it can be addressed in real-time.

Does invoice processing automation handle global suppliers?

Yes, most modern invoice processing automation systems are made to handle global suppliers along with the compliance structure necessary to manage them. Most advanced invoice automation platforms support multi-currency operations while complying with international standards.

How secure is automated invoice processing?

Automated invoice processing systems offer multiple layers of security, knowing that the invoice data is confidential for many startups. These systems are created to comply with international data protection regulations like GDPR and offer role-based access control, so only people with authority can view or modify sensitive information.