How to reduce manual invoice processing with AP automation

Manual invoice processing is an all too familiar headache for many AP departments.

Put nicely, it’s a slow, error-prone process that ties up resources. Put not-so-nicely, it’s a nightmare: AP teams, probably understaffed, constantly entering and coding invoices, shuffling mountains of paper, chasing down approvers, and putting out fires. Mistakes get made, payments are missed, and let’s be honest, you probably don’t have as great a handle on your cash flow as you’d like.

What if there was a better way?

Taking a holistic, data-driven approach to invoice management can significantly reduce processing times and improve efficiency. This guide offers practical suggestions based on real-world scenarios faced by AP departments. Backed by data and customer success stories, it will help you evaluate your current invoice processing system and implement specific strategies to streamline invoice processing, making it faster, accurate, and cost-effective.

Key takeaways

• How to evaluate invoice processing performance and identify bottlenecks.
• Five real-world invoice processing challenges and how to solve them.
• Use case: How Wolf Construction unburied itself from paper invoices.

After reading this guide, you’ll have the tools and strategies to free your AP department from time-consuming and error-prone tasks and empower it to focus on more strategic initiatives.

Let’s dive in.

How to evaluate invoice processing workflows

To improve invoice processing efficiency, start by evaluating your current performance. Compare your AP team’s key performance indicators (KPIs) with industry benchmarks. This will help identify potential bottlenecks and inefficiencies in your invoice processing workflow.

Here are four metrics you can measure to evaluate your team’s performance:

1. Invoice processing cycle time

Invoice processing cycle time measures the time from when an invoice is received to when it’s paid. Compare this metric to industry benchmarks to measure your overall invoice processing efficiency.

Use this benchmark: In a 2023 survey, Stampli and Probolsky Research asked AP departments about their processing times. The majority of respondents (68%) said their invoice processing cycle time was under one week, 17% said one to two weeks, and the remaining 15% said it was two weeks or longer.

2. Invoice receipt to approval time

Invoice receipt to approval time measures the time from when an invoice is received to when it’s approved for payment. Compare this metric to industry standards to evaluate how efficiently your organization captures, codes, matches, and approves invoices.

Use this benchmark: According to the American Productivity & Quality Center (APQC), the median invoice receipt to approval time is four days. For organizations using manual invoice processing workflows, the median time is seven days.

3. Invoice approval to payment time

Invoice approval to payment time is the time from when an invoice is approved and enters the payment queue to when it’s paid. You can use this metric to assess the efficiency of your payment processes.

Use this benchmark: Invoice approval to payment time can vary depending on your payment policies. For example, if a vendor is offering net 30 payment terms, you may want to delay payment until the due date to hold more cash in your business.

4. Number of invoices processed per full-time equivalent (FTE)

The number of invoices processed per FTE measures the average number of invoices processed by your AP employees over a period of time. Use this metric to evaluate current employee productivity and to forecast future labor requirements.

Benchmark: According to the APQC, the average number of invoices processed per FTE per year for organizations that process invoices manually is 6,488. The median number is 11,111 invoices per year per FTE, and the average for firms that have fully automated their AP processes is 20,934.

5. Average cost to process an invoice

To calculate the average cost to process an invoice for a period, divide the total direct and indirect costs (labor, storage, IT costs, etc,) by the number of invoices processed during the period. Compare this cost to the industry benchmark for organizations that have automated their invoice processing. This comparison will give you an estimate of the potential savings your organization could achieve by automating invoice processing.

Benchmark: Stampli’s analysis of accounts payable (AP) automation costs indicates that the approximate labor cost of manual invoice processing is $7.75 per invoice. By automating invoice processing, businesses can significantly reduce labor costs, with an approximate per-invoice cost of only $2.02.

Calculating the benefits of moving from manual to automated invoice processing

Benchmarking your organization’s invoice processing performance reveals bottlenecks and provides insight into opportunities to streamline workflows. For example, we can estimate the annual cost of processing invoices manually by multiplying the number of invoices processed by the average cost to process an invoice. So for a company manually processing 12,000 invoices per year, the estimated annual cost of processing invoices would be $93,000:

Annual labor cost of processing invoices manually = 12,000 invoices X $7.75 = $93,000

If that same company automates their invoice processing, their estimated annual cost of processing invoices drops to $24,240, a savings of $68,760 per year.

Annual labor cost of processing invoices with automation = 12,000 X $2.02 = $24,240

Although this is a simple estimate, it shows the significant cost savings to be gained by having more efficient invoice processing. However, there are several common challenges that organizations can face when they’re trying to streamline their invoice processes. Let’s walk through the top six challenges and explore strategies to overcome them.

5 manual invoice processing scenarios and strategies to solve them

In their 2023 survey, Stampli and Probolsky Research asked AP teams about their challenges processing invoices manually and how they felt streamlining and automating those processes could help them. The top five challenges will be familiar to AP teams:

1. Reducing mistakes and missed payments and avoiding sending duplicate payments.
2. Approving and paying invoices faster.
3. Getting better insight into invoice status.
4. Improving financial reporting and cash flow management.
5. Reducing labor requirements for accounts payable processes.

Let’s unpack these challenges and explore strategies you can use to overcome them and maximize invoice processing efficiency.

Scenario 1: Errors and missed or duplicate payments

Challenge

Repetitive manual tasks like data entry and GL coding can be repetitive and tedious. This can lead to fatigue and burnout among AP employees, increasing the likelihood they make mistakes and resulting in missed, duplicate, or late payments.

As invoice volume and complexity increase, AP teams can get trapped in a vicious cycle. The greater workload puts more pressure on team members, increasing their stress levels. When they’re stressed, they’re more likely to make mistakes. Then, they have to spend even more time fixing those mistakes, which makes them fall even further behind and leaves the company chronically late paying vendors.

Strategy: Automate invoice capture and coding to improve accuracy

Automating manual invoice processing tasks like invoice capture and GL coding reduces the likelihood of errors and missed or duplicate invoices. Automation solutions with optical character recognition (OCR) and machine learning (ML) capabilities can automatically interpret different invoice styles and formats and accurately extract data from invoices.

“With Stampli, gone are the days of lost invoices”

A compliance manager says using Stampli has transformed their invoice processing, making it faster and eliminating errors:

“In an era where time is of the essence, and efficiency is paramount, Stampli stands out as a beacon of simplicity and effectiveness.

“One of the standout features of Stampli is its seamless integration with existing accounting systems. Regardless of whether your organization utilizes QuickBooks, NetSuite, or another platform, Stampli seamlessly integrates, eliminating the need for tedious manual data entry and ensuring data accuracy.

“Navigating through invoices and approvals is a breeze with Stampli. The platform’s intelligent automation capabilities streamline the entire invoice approval process, allowing for swift and efficient processing. With Stampli, gone are the days of lost invoices and delayed approvals – everything is centralized and easily accessible, enhancing transparency and accountability within the organization. Stampli redefines invoice management, making tedious tasks a thing of the past.”

Scenario 2: Slow invoice approval process

Challenge

Factors like slow manual document management, inefficient invoice matching, complex approval processes, and lack of transparency conspire to slow approval and payment workflows to a crawl. For example, in a typical manual approval workflow, AP staff need to determine the correct approver, forward the invoice for approval, and follow up to obtain sign-off. Processing can grind to a halt if the invoice goes to the wrong approver, or the approver is unavailable or forgets about the invoice.

Strategies to speed up approval and payment workflows

There are a number of ways you can speed up approval and payment processing.

• Use document management software: Automating the process of scanning, entering, searching, and storing documents such as POs, invoices, and receipts expedites invoice matching and gets invoices to the approval stage faster.
• Automate approval workflows: Many ERPs, accounting platforms, and financial automation solutions provide automated, rules-based approval routing. This feature eliminates the need for manual intervention and saves time by automatically routing invoices to the correct approver.
• Enable mobile approvals: Some ERPs or AP automation platforms enable approvers to review and approve invoices from their mobile devices, reducing delays when they are out of the office.

“Stampli makes it incredibly easy to reconcile and closely monitor all invoices…”

With Stampli, making an invoice decision has never been easier. Features such as a simplified approver view with all relevant details and documents available, automated three-way matching, and built-in communications enable approvers to get the information they need from teammates and vendors and approve invoices with confidence.

“Stampli makes it incredibly easy to reconcile and closely monitor all invoices in real-time while also ensuring timely approvals, says one Stampli customer. “The approval process is not only efficient but also highly accurate, with the added benefit of a feedback section that enhances accountability.

“With Stampli, it’s possible to extract invoice data and match it with relevant purchase orders and receipts seamlessly. Thanks to the complete digitization of invoices and the elimination of paper copies, we’ve been able to eradicate manual data entry altogether. The central dashboard is yet another powerful feature that enables us to manage and track invoices with ease, providing instant visibility into the status of account.”

Scenario 3: Lack of visibility into invoice status

Challenge

It’s difficult to track invoice status and calculate invoice processing metrics manually. As a result, AP teams and approvers can be left in the dark about where invoices are within the processing workflow. This makes it difficult for AP employees to provide up-to-date information on invoice status for approvers and vendors and slows down invoice processing.

Strategies to get better visibility into invoice status

Most AP automation software solutions provide invoice tracking and reporting features that prioritize solutions that provide these capabilities:

• Real-time reports and dashboards: Using live reports and visual dashboards, you can quickly check invoice status and aging and identify potential bottlenecks.
• Vendor portals: Self-serve vendor portals allow suppliers to check invoice and payment status without tying up AP employees’ time.
• Centralized invoice storage: Digitize and store invoices in a searchable central location for easier access and tracking.

“Stampli has transformed business as we know it in the finance division”

Many financial automation platforms provide reports and dashboards, but only Stampli is designed for the way AP teams work. By centralizing all communications and documents on the invoice itself, Stampli makes checking invoice status a breeze. With Stampli’s advanced search feature, users can easily locate any invoice and check its status at a glance.

“Stampli has transformed business as we know it in the finance division,” says one Stampli customer, who goes on to describe how Stampli has made their invoice processes more transparent: “It is a tool that has moved our company forward in both technology and increased productivity…We process thousands of invoices monthly without hiccups, and it has cut down on employees having to request information from the finance dept. as they are able to pull up any invoices that have been placed in their queue to see the status or get a copy if needed.

“There are multiple reports that can be run through Stampli, from spend per vendor to productivity of accounts payable administrators. You can break down the time it is taking employees to approve their invoice and find any bottlenecks in the process. Stampli is a wonderful tool and we are very happy that we chose to implement it in our department!”

Scenario 4: Limited reporting and cash flow management capabilities

Challenge

Finance teams that use manual AP processes can have limited insight into spending patterns because they rely on paper invoices and spreadsheets. This lack of visibility can make it challenging to predict cash flow needs and manage working capital effectively. For example, if the finance team is unaware of the timing of upcoming large expenses, they may not have sufficient cash on hand to cover them, leading to missed payments and strained vendor relationships.

Strategy: Invest in invoice automation to improve data gathering and analytics

The most effective way to improve AP reporting and cash flow management is to invest in an AP automation solution. Here are the ways AP automation gives better insight into spending and helps you make informed cash management decisions:

• Real-time data analytics: Access timely, actionable data and insights into spending trends and savings opportunities.
• Cash flow forecasting: Leverage AI-powered analytics and forecasting tools to analyze historical data and payment terms to predict future cash outflows and plan accordingly.
• Custom reports: Create reports tailored to stakeholders’ needs that provide insights into key financial metrics and KPIs.

“Slick software that greatly improves my visibility”

Stampli empowers finance leaders with the real-time visibility and internal controls they need to make more informed business decisions. It provides detailed audit logs, management dashboards, and live reports to give you complete visibility and control over invoice and payment processing. Stampi helps you optimize cash management by supporting you pre- and post-implementation and providing insights into how your organization can maximize the benefits of AP automation.

Stampli is “slick software that greatly improves my visibility,” according to one CFO. “As CFO I now feel like I have significantly greater visibility over the state of payables and can much better monitor the work of my AP team. I can plan cashflow better with the payment functionality by scheduling payments in the future.”

Scenario 5: Overworked accounts payable teams

Challenge

AP teams are being asked to do more with less. As a business grows, so does the volume and complexity of the invoices it must process. At the same time, finance leaders are under increasing pressure to reduce costs, improve efficiency, and support business strategy. Manual processes aren’t easily scalable, so adding more headcount isn’t the solution.

Strategy: Improve AP employee productivity with AP automation

Despite investing in ERPs, accounting software, and other business systems, many accounts payable departments still process invoices manually. However, as we’ve seen, AP automation significantly increases the number of invoices processed per FTE. By eliminating tedious manual processes, automation frees AP employees to focus on more valuable (and less stressful) strategic tasks.

Here are some strategies you can follow to automate invoice processing tasks and reduce your AP team workload:

• Identify tasks to be automated: Evaluate the time your AP team spends on common manual tasks like invoice capture, coding, matching, and payment processing.
• Integration with business systems: Look for AP automation solutions that integrate with your existing ERP to ensure data consistency and integrity across your organization.
• Choose the right partner: Look for an automation provider with a proven track record of excellent customer service and helping customers achieve real results. 

“Stampli isn’t just an AP invoice solution; it’s a game-changer”

Stampli is the only financial automation platform built for accounts payable. It liberates AP teams from tedium by boosting productivity and providing complete visibility and control over invoice processing.

“What I love about Stampli is its transformative efficiency in invoice processing,” says one business owner. “Since integrating, our workflow has soared with faster processing, reduced errors, and enhanced transparency for approvers. Our Customer Success Manager and the entire Stampli support team have been outstanding—prompt, collaborative, and attentive, even across time zones. The AI integration aka “Billy the Bot”, adds an innovative edge. Stampli isn’t just an AP invoice solution; it’s a game-changer with stellar support….

“Stampli has revolutionised our AP team by addressing multiple challenges head-on. Its streamlined invoice processing has notably reduced our processing times, while ‘Billy the Bot’ optimises tasks and boosts accuracy of data entered. The user-friendly platform enhances transparency and efficiency for approvers, simplifying the approval process which is a critical part of our invoice processing.”

Case study: How Wolf Construction unburied itself from paper invoices

West Des Moines, Iowa, based Wolf Construction is a fast-growing contractor that was struggling with manual, paper-based invoice processing workflows. Wolf had effectively implemented a digital documentation solution in its construction operations, but its AP staffers were drowning in paper.

The company usually manages 25-45 projects at a time. Before automating invoice processing, it manually processed invoices from hundreds of subcontractors and suppliers. The volume was overwhelming and, according to president Jon VanDis, putting Wolf at risk of missing vendor payments: “You didn’t know if you’re missing invoices. Something could have fallen out of a folder. It could be sitting on someone’s desk for days.”

Wolf wanted to eliminate manual invoice processing and make it efficient across multiple locations. They also wanted greater visibility into invoice status and better cash flow management. They decided to use Stampli to help them automate their AP processes and go paperless.

Wolf said goodbye to manual invoice processing when they partnered with Stampli. They eliminated manual scanning, data entry, coding, and verification, saving them time and eliminating errors. They also optimized their approval workflows and added remote access so approvers at all Wolf’s locations can review, comment on, and approve invoices.

After implementing Stampli, Wolf can easily check the status of any invoice. According to Jon, the increased transparency makes it much easier to manage cash flow: “We can see exactly who we’re waiting for, or where any invoice stands. Our controls are stronger today because it’s easier to find information.”

Stampli: The financial automation platform that transforms AP

Stampli is the leading AI-powered AP automation solution. Created by AP professionals for AP professionals, it features an easy-to-use interface, seamless integration with ERPs, and Billy the Bot, the AI copilot that makes AP tasks simple.

Stampli’s unique “invoice as a communications hub” design centralizes invoice processing communications, documentation, and tasks on the invoice so AP teams can access the information they need right when they need it.

What makes Stampli different?

AI working for humans

Stampli’s AI copilot, Billy the Bot, is revolutionizing how organizations handle accounts payable. Billy uses machine learning to read and understand invoices, match them to purchase orders and route them to the right approver. Billy learns as it works, adapting to your workflows and cost accounting rules.

Since Stampli’s founding in 2015, Billy has helped 1600+ customers process $85+ billion in invoices every year, saving millions of hours in labor. With Billy as your AI copilot, your AP team can do what they do best: analyze, strategize, and build supplier relationships.

Start in days without changing your existing AP processes

Stampli’s pre-built integrations support the native functionality for over 70 ERPs. You can implement Stampli in days, not weeks, without changing your processes or reworking your ERP.

Customer support by accounts payable professionals

Stampli is the recognized customer service leader for AP automation. Our team of experts all have backgrounds in accounts payable and ERPs and understand the challenges AP departments face.

Prepared for the evolution of AI in finance

Stampli innovates years ahead of the competition. It has the flexibility and power to adapt as your business evolves, and can handle new AI technologies, new AP policies, new people, ERP updates and migrations, and even M&A.

Ready to take the first step to reduce manual invoice processing? Meet with a Stampli expert to get started.