What is invoice management?

Before we go any further, let’s do a quick summary of what invoice management actually is and entails to ensure we’re on the same page.

Invoice management refers to the process of receiving, processing, and tracking invoices from vendors or suppliers to ensure timely payment and accurate financial record-keeping. This process encompasses every step involved in handling an invoice, from its initial receipt to its final approval and payment. It includes data entry, approval workflows, PO matching, and exception handling, as well as archiving for future audits and compliance purposes.

A well-organized invoice management process ensures that businesses can manage their accounts payable efficiently, minimize manual errors, and maintain full visibility and control over their financial operations.

Top invoice management challenges and how automation solves them

There are quite a few common invoice management challenges to consider, some more severe than others. However, all of them, if not properly managed, will sooner or later become a thorn in your side, resulting in an invoice management process riddled with issues and inefficiencies.

Manual data entry errors

Challenge: One of the fastest ways to accelerate invoice processing is to solve the “capture” problem. Many organizations are still manually entering vendor invoice data, either from paper and/or emailed invoices coming from suppliers. This creates bottlenecks as well as manual errors and missed invoices.

Solution: A good invoice management automation system incorporates invoice capture technology that collects all the essential data on vendor invoices received and stores the information in a database. Superior invoice scanning capture solutions can intuitively recognize invoice layouts and perform all the necessary mapping of digital data. Modern invoice OCR technology can do this with a 95% accuracy rate.

Slow approval processes

Challenge: Traditional approval workflows often rely on paper-based or email systems, causing bottlenecks and slowing down the payment process. Delayed approvals can negatively impact cash flow and strain vendor relationships.

Solution: Automated workflows route invoices to the correct approvers instantly. Notifications, mobile access, and one-click approvals enable faster decision-making, significantly reducing approval times.

Difficulty handling high invoice volumes

Challenge: As businesses scale, managing large volumes of invoices manually becomes time-consuming and difficult, leading to disorganization and missed payments.

Solution: Automation allows businesses to process hundreds or even thousands of invoices simultaneously, using a centralized system that efficiently tracks and handles all invoices, no matter the volume.

Lack of visibility into invoice status

Challenge: Without a centralized system, tracking the status of an invoice—from submission to approval and payment—can be difficult. This can lead to duplicate payments, missed deadlines, and disputes with vendors.

Solution: Invoice management automation provides real-time visibility through centralized dashboards, where finance teams can monitor the entire process and track every invoice, eliminating blind spots and delays.

Compliance and audit challenges

Challenge: Managing paper and manual records makes it difficult to maintain a clear audit trail. Gathering necessary documentation during internal or external audits is time-consuming and risky.

Solution: Automated systems generate time-stamped digital audit trails for every invoice, documenting each action taken. This simplifies compliance and auditing processes, providing easy access to all necessary records.

Purchase order (PO) matching issues

Challenge: Manually matching invoices to POs can be a complex, error-prone process, especially when there are discrepancies in quantities or pricing, leading to delayed payments and reconciliation issues.

Solution: Automated PO matching tools handle this task by automatically matching invoices to purchase orders and goods receipts, even for multi-line invoices. Discrepancies are flagged and resolved efficiently, speeding up the entire process.

What is invoice management software?

Organizations are looking to optimize their finance administration and Accounts Payable is one area that is looking to be disrupted. That’s because many companies in North America are still using paper processes, email, spreadsheets, phone calls and other manual methods to manage invoices and get approvals.

Times have changed, and invoice management software (or accounts payable automation software) is giving finance professionals a better way to work – providing all of the above mentioned benefits. Vendor invoice management becomes much easier when the accounts payable process is digitized and automated.

How the invoice management process looks using automation software?

1. Digitization of invoice data: Once invoice data has been digitized, the invoice will appear in the central dashboard of the invoice management software. This is where the invoice management process begins, and digitization eliminates manual handling, allowing the system to take over.
2. Approval workflow setup: The finance administrator can now set up approval workflows for project managers and supervisors. Once the approval workflow is configured, invoices will automatically flow to the designated approver as soon as they enter the system. Ad hoc routing within the invoice management software is also available, and thanks to the drag-and-drop interface, no developer is needed for adjustments.
3. Easy approvals via email or device: Approvers can view invoices currently in the invoice management process on their devices and approve them with a single click directly from their email. This streamlined process eliminates the need for team members to log into the system, saving time and making the approval process much more efficient.
4. Handling PO invoice exceptions: For PO invoices that do not match, the invoice management software flags them in the administrator’s dashboard. The exception is sent to the approver with all necessary documents for reconciliation. Small variances in quantities or dollar amounts are handled within the administrator’s system settings to ensure smooth processing.
5. ERP integration and payment recording: Once approved, the invoice is automatically sent to the ERP system for recording and payment. After payment is completed, the invoice management software retrieves the invoice and stores it securely in the cloud.
6. Audit trail and invoice archive: A complete invoice management system offers a searchable invoice archive, allowing administrators to access past invoices with ease. The system also includes a time-stamped invoice log that shows messages, documents, and all activities related to the invoice approval process. This feature is invaluable during audits, saving finance teams time during tax season or internal investigations.