Incoming invoice processing

digitize and automate

Incoming invoice processing causes enormous costs in companies of all industries and sizes. Despite modern technological capabilities, most organizations are still far from a high-level digital purchase-to-pay process. This not only leads to a high administrative effort but also to cash discount losses and dunning fees. In addition, it is not ensured that audit and legal requirements are consistently adhered to.

All these challenges can be met with the digitization and automation of the invoice workflow. On this page, we will explain what measures are needed to achieve this goal. Furthermore, we show you how you can evaluate the benefits of electronic processing of incoming invoices for your company using concrete figures.

Purchase-to-Pay – from procurement to payment

The term purchase-to-pay, often also procurement-to-pay or in short: P2P, refers to a process that begins with procurement, includes receipt of invoices and auditing, and finally ends when the incoming invoice is paid. Essentially, the procedure is as follows:

1. Demand notification or requisition
2. Audit and approval of the request
3. Supplier selection and launching of the purchase order
4. Receive order confirmation from the supplier
5. Receive goods and post goods receipt based on the delivery note

6. Invoice receipt (usually paper, e-mail or data format)
7. Invoice check, assignment of the invoice to purchase order
8. Approval of the invoice
9. Booking and payment of the invoice
10. Archiving of the invoice in accordance with legal requirements

For steps 1-5, most companies use the standard functions of materials management of ERP systems such as SAP. The main challenges arise only with steps 6-10, the incoming invoice processing. At this point, the accounting department receives invoices in a variety of formats. This includes paper invoices as well as PDF invoices by e-mail and various data formats (EDI, Xrechnung, ebInterface, ZUGFeRD, etc.). In most cases, no software solution brings all these formats to a unified, structured data layer. The subsequent audit workflow and release are also characterized by numerous manual interventions, although many operations could be automated by assigning invoices to purchase orders. In many companies, great potential is still being given away.

Challenges in the incoming invoice process

Incoming invoice processing is a process that has always caused a great deal of effort in companies. In the past, invoices were received exclusively in paper form. Today, accounting is confronted with a mix of paper invoices, e-mails and electronic invoices of different formats. However, the conditions are still the same:

Full transparency on all available incoming invoices
Check-up of incoming invoices for correctness
Approval of payment by eligible employees
Ensuring the discount deduction, avoidance of dunning fees
Compliance with audit specifications and legal regulations
Realisation of the leanest and fast process with a high degree of automation

To achieve all these goals while minimizing the cost of manual work and gaining process reliability, you need a solution that allows you to process all invoices based on the workflow.

Savings potential through electronic invoice processing

In the past, several studies have already looked at the costs of the incoming invoice process. For a paper invoice that is processed manually, the values range from 13 to about 18 euros per operation.

A medium-sized company with 500 to 1,000 employees receives around 25,000 incoming invoices per year. A fully manual invoice workflow therefore costs between 325,000 and 450,000 euros per year. For the sake of simplicity, let us assume an average value of EUR 380,000.

Digitization and automation of incoming invoice processing can reduce these expenses by at least 50 percent. Some studies even assume an 80 percent cost reduction. If we stick to our example, savings of between EUR 190,000 and EUR 304,000 can be achieved.

This value relates purely to the expense and process costs. Other aspects such as cash discount losses and dunning fees are not yet considered. However, the significant shortening of the lead time can also generate significant financial benefits with these levers, which must be included in the accounts.

Tip: Determine the savings for your business based on individual values. Then compare it with the cost of a software solution for digital invoice processing. In this way, you can determine the amount of document revenue from which system support is economical.

Non-monetary benefits

An electronic invoice workflow as part of an end-to-end purchase-to-pay process not only offers financial benefits. It relieves employees of the monotonous and time-consuming entry of invoice data into the ERP system. This creates scope for more value-adding activities and increases motivation. In addition, digital processes ensure a higher degree of transparency. It is always clear to what extent incoming invoices are received and the status of individual transactions is transparent and traceable. Optimization potentials within the business processes can also be better identified.

In 4 steps to the digital incoming invoice process

To process invoices automatically and thus make purchase-to-pay consistent, four main steps are required:

Incoming invoices (scan/mail/interface)
Scanning incoming invoices is already a widely used standard. The process step can be carried out either in-house or by external service providers.
More and more invoices are now received electronically, by mail as PDF or via a standardized data format. These input channels can be fully automated and no longer require manual work.
Character recognition (OCR)
The automation of the processes only begins with character recognition. This is done using OCR (Optical Character Recognition). How good the recognition rate of invoice data is, depends decisively on the software used as well as the master data quality of your ERP system.
Electronic workflow for auditing and sharing
It is important that after character recognition, a direct comparison with the master and movement data from the ERP takes place in order to check the plausibility. In the sense of Purchase-to-Pay, the automatic assignment to orders is also important at this point. Only in the event of discrepancies between the invoice and purchase order is a manual invoice check required. All other operations can be booked by the system on its own. If necessary, especially for invoices without order reference, a release mechanism can be finally installed. This mechanism can be linked to value limits and responsibilities or release policies so that, for example, only higher-value invoices require a manual release.
Audit-proof archiving
In addition to the aforementioned requirements, ERP invoicing processing software should also enable audit-proof archiving of invoice images and associated documents, so that no manual interventions are made in this process step and your documents are kept securely.

Our solutions for your purchase-to-pay process

Digitised and automated incoming invoice processing in conjunction with ERP systems (e.g. SAP) offers you considerable optimization potential. It relieves your employees of monotonous tasks, saves costs, speeds up processes and at the same time ensures transparency.

With our solutions you achieve all these goals. The xSuite covers all parts of the procurement-to-pay process. From procurement to the handling of order confirmations to the processing and payment of incoming invoices.

Arrange a consultation now!

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Incoming invoice processing

Purchase-to-Pay – from procurement to payment

1. Demand notification or requisition

2. Audit and approval of the request

3. Supplier selection and launching of the purchase order

4. Receive order confirmation from the supplier

5. Receive goods and post goods receipt based on the delivery note

6. Invoice receipt (usually paper, e-mail or data format)

7. Invoice check, assignment of the invoice to purchase order

8. Approval of the invoice

9. Booking and payment of the invoice

10. Archiving of the invoice in accordance with legal requirements

Challenges in the incoming invoice process

Full transparency on all available incoming invoices

Check-up of incoming invoices for correctness

Approval of payment by eligible employees

Ensuring the discount deduction, avoidance of dunning fees

Compliance with audit specifications and legal regulations

Realisation of the leanest and fast process with a high degree of automation

Savings potential through electronic invoice processing

Non-monetary benefits

In 4 steps to the digital incoming invoice process

Incoming invoices (scan/mail/interface)

Character recognition (OCR)

Audit-proof archiving

Our solutions for your purchase-to-pay process

Procurement

Order confirmations

Incoming invoices

Learn more about …

ZELMION GmbH

Incoming invoice processing

Purchase-to-Pay – from procurement to payment

Challenges in the incoming invoice process

Savings potential through electronic invoice processing

Non-monetary benefits

In 4 steps to the digital incoming invoice process

Incoming invoices (scan/mail/interface)

Character recognition (OCR)

Electronic workflow for auditing and sharing

Audit-proof archiving

Our solutions for your purchase-to-pay process

Learn more about …

ZELMION GmbH