What is invoice processing & how to automate it?

What is invoice processing & how to automate it?

Invoice processing data

Invoice processing is one of the key financial elements of any company. Research conducted by Levvel even stated that invoice processing tops all the other tasks that accounts payable employees are responsible for by a stunning 77%. With so many people involved, having a solid invoice processing routine is essential. 

At the same time, traditional methods are not seen as the holy grail of invoice processing anymore. Levvel, for example, concluded that manual data entry and inefficient processes are considered to be the biggest challenge that AP employees are facing during their work. Mostly as a result of traditional invoice processing. 

To give you a deeper understanding of invoice processing, we will unfold everything you need to know about this subject. We will also discuss the other difficulties that come along with traditional invoice processing.

At the end of this blog, we disclose a method that can make this process much easier with the help of the right tools. Do you want to know how? Then stick with us.

What is invoice processing?

Invoice processing is the administrative task of receiving, reviewing, verifying, and approving invoices for payment. It ensures vendors or suppliers are paid promptly and accurately while maintaining accurate financial records.

The process typically includes verifying that goods or services have been received, checking for any discrepancies or errors, and ensuring that the invoice has been approved for payment by the appropriate parties. This allows companies to keep track of their expenses and make sure that they are not paying for services or products they did not receive. 

Invoice processing methods can be used to process various types of invoices, including purchase invoices, sales invoices, expense invoices, and many more. Maintaining accurate financial records for a company also helps to improve vendor relationships, avoid late payment fees and comply with financial regulations. To do so, companies should have an invoice processing procedure in place. 

Invoice processing steps

A traditional invoice processing procedure typically includes five steps:

  1. Receiving the invoice: Invoices are sent by the supplier to the merchant and can be received on paper, via mail, or e-mail. 
  2. Verifying the invoice: The invoice is reviewed for accuracy, including checking that the correct goods or services have been received and that the correct prices have been charged. Any discrepancies or errors are identified and brought to the attention of the vendor for correction.
  3. Approval: Once the invoice has been verified, it is approved for payment by the appropriate parties within the organization. These can include a supervisor, manager, or other designated approver.
  4. Payment: After approval, the invoice is paid by the preferred method of the organization. This can be either by issuing a check or making an electronic payment.
  5. Record keeping: Finally, the invoice, along with any supporting documentation, is filed and stored for future reference and compliance with financial reporting requirements. Adhering to the compliance requirement is especially important for potential audits that can be conducted.

These five steps can help you to adhere to an adequate invoice processing procedure that can help your company to stay organized and compliant. By keeping track of invoices, your company can keep track of its spending and make sure that it is not exceeding the budget.

Signing an invoice

For tax purposes, processing invoices correctly is also essential. Your company can make sure that it is reporting all of its income and expenses correctly which prevents you from possible penalties from local tax authorities. All in all, it is a critical process and should be given the attention it deserves. 

However, conventional methods of processing invoices come along with challenges that companies have to face. In the next section, we will highlight the most crucial difficulties. But don’t worry, for every challenge there is a solution.

Difficulties of traditional invoice processing

Traditional invoice processing can be a time-consuming and error-prone task, as it often involves manual data entry and document handling. Some difficulties of traditional invoice processing include:

  1. Data entry errors: Manually entering invoice data into accounting software leads to errors, such as typos or transposed numbers, which can result in incorrect payments or disputes with vendors.
  2. Delays in approval and payment: Conventional invoice processing takes longer than necessary to approve and pay invoices, leading to delays in vendor payments and potentially damaging relationships. The average cycle time for processing a single invoice manually is on average 25 days. 
  3. Lack of insight: With manual invoice processing, it is difficult to track the status of invoices and to know who is responsible for approving them, especially when dealing with large invoice quantities. 
  4. Difficulty in maintaining compliance: Traditional invoice processing makes it difficult to comply with financial reporting requirements, as invoices and supporting documentation may be lost or misfiled.
  5. Inefficiency: Processing invoices by hand is a very labor-intensive task. Moreover, it can be difficult to process a large volume of invoices in a timely manner.
  6. Limited scalability: When a company scales up and the number of invoices increases, it is difficult to scale up traditional invoice processing methods to handle the increased volume. You would have to hire and train a lot of new employees.
  7. Difficulty in detecting fraud: Traditional invoice processing methods rely on manual review and approval, which makes it more difficult to detect fraudulent invoices. Fraudulent invoices can be difficult to spot, as they may be disguised as legitimate invoices and may be mixed in with large volumes of legitimate invoices.

The difficulties that companies deal with in regard to traditional invoice processing can vary from minor effects to seriously impacting a company. The compounding effect of a mixture of these challenges can result in a catastrophe for the company and even its stakeholders. 

But, as we mentioned before, there is a solution. Many companies still process their invoices the conventional way. If you want to stand out from the crowd and improve your invoice processing; the answer is automation. 

In the next section, we will tell you more about invoice processing automation, discuss different reasons to do so, and highlight methods so that you can capitalize on this opportunity as well.

Automated invoice processing

Invoice automation is the use of technology to streamline and automate tasks involved in processing invoices, such as data capture, validation, approval, payment, and record keeping.


Invoice automation can make sure that all the difficulties of traditional invoice processing become history. This brings us to the next section where we highlight the various reasons why you should automate your invoice processing.

Why you should automate your invoice processing

Manual invoice processing can be a tedious and time-consuming task that can lead to numerous difficulties for your organization, as we discussed before. Therefore, automating your invoice processing methods can bring many benefits to your organization, including: 

  1. Increased efficiency: Invoice automation allows you to process a large volume of invoices quickly and accurately, reducing labor costs and improving overall efficiency.
  2. Reduced errors: The risk of errors caused by manual data entry can be reduced significantly via data extraction technology, such as Optical Character Recognition (OCR) technology, to automatically extract data from invoices. More about this technology is provided in the next section. 
  3. Improved overview: Invoice automation can provide real-time visibility and improve the overview of the invoice statuses, making it easy to track who is responsible for approving them.
  4. Improved compliance: Automation ensures that invoices and supporting documentation are properly filed and stored digitally, making it easier to retrieve invoices if needed and comply with financial reporting requirements.
  5. Faster approval and payment: Invoice automation can route invoices for approval and payment more efficiently, reducing delays and improving vendor relationships.
  6. Detection and prevention of fraud: Invoice automation systems can also cross-reference invoice data with other systems and data sources, and use machine learning algorithms to detect patterns and deviations to catch document fraud.
  7. Cost-effective: Automation can be cost-effective in the long run, as it can save on labor costs and improve overall efficiency. If you want to know what automation can do for you in terms of cost-effectiveness, try to calculate the ROI of automation based on time and costs.

Are you interested in invoice automation, and do you want to know the different methods to do so? We got you covered. In the next section, we discuss different methods of invoice processing and also give you an option for an all-in-one solution to get started as soon as possible. 

Five ways to automate your invoice processing

There are several ways of automating your invoice processing. Each way has its own characteristics and can be combined with other methods to maximize the performance of your company’s invoice processing. The most important methods of automating invoice processing are:

  • Optical character recognition (OCR): OCR technology is used to automatically scan and extract data from invoices, eliminating the need for manual data entry. OCR software can recognize and interpret characters and images, and convert them into machine-readable data such as JSON.
  • Electronic Invoice Presentment and Payment (EIPP): EIPP systems allow vendors to submit invoices electronically, either through email or through a web portal. The system can automatically capture and extract data from the invoice, validate the data and route the invoice for approval.
  • Robotic Process Automation (RPA): RPA is a technology that allows organizations to automate repetitive, manual tasks such as data entry and invoice processing. RPA software can mimic human actions, such as logging into a system, navigating through different screens, and entering data.
  • Machine Learning: Machine learning algorithms can be used to process invoices and extract information from them. This allows for more accurate and efficient data extraction, and can also help in detecting fraudulent invoices.
  • Integration with financial systems: Automated invoice processing systems can integrate with an organization’s financial systems, such as enterprise resource planning (ERP) or accounting software, to automatically process payments and update financial records.

Some financial management solutions combine the force of multiple of these methods to maximize its capabilities, such as Klippa SpendControl. Klippa SpendControl is an all-in-one financial management solution that is ideal to kickstart your automation journey for a seamless invoice processing experience. In the next section, we tell you more about how Klippa can improve your invoice processing.

How Klippa can improve your invoice processing

With Klippa SpendControl, invoice processing will be a breeze. The solution allows you to minimize manual effort and integrate with your ERP or accounting system in place. Your financial department will feel blessed when you make it possible for them to:

  • Submit invoices easily via email, mobile application, or web environment. You can even send multiple invoices in bulk to minimize effort. 
  • Extract data by utilizing AI-driven data extraction technology that recognizes all required invoice data, such as invoice number, total sum, and even multiple different currencies. 
  • Automate approval processes with smart business rules and create fixed or variable approval processes for a sophisticated workflow. 
  • Prevent fraud with a built-in analysis to detect fraudulent and duplicate invoices. 
  • Integrate the solution with a wide variety of ERP and accounting software, such as NetSuite, SAP, Xero, and many other integrations
  • Retrieve documents via a dedicated cloud environment. All your invoice files will be stored for 10 years which makes it easy to access your files for possible audits to stay compliant.

Do you want to improve your organization’s invoice processing right now? Feel free to contact us directly or book an online demo of our product via the form below.

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