Electronic Invoicing is No Longer an Option, But an Extreme Necessity!
Electronic Invoicing is No Longer an Option, But an Extreme Necessity!
discover | Thursday - 10 / 10 / 2024 - 3:37 pm
“Prediction is difficult – particularly when it involves the future.”
– Mark Twain.
This quote by Mark Twain also applies to electronic invoicing, but it concerns more about “when” rather than “if” electronic invoicing will widely replace paper invoicing. Day by day, electronic invoices are becoming the norm in companies, but more importantly, they are a legal requirement in many countries.
At first glance, the goal of electronic invoicing seems to be to reduce invoice processing costs. And perhaps that was one of the biggest benefits of electronic invoicing: electronic invoicing allows for significant savings. This cost reduction is due to two factors:
– Elimination of paper-based processes (paper, envelopes, packaging, stamps, etc.).
– Reducing (or even completely eliminating) manual invoice management, which saves time for accounting team members and allows them to focus on more strategic tasks.
Because at Logix we deliver more than expected and strive to help you create smarter, more efficient workflows that adapt to your needs, we have developed Logix AI system with an “AI-powered electronic invoicing” feature.
How does this feature work?
Understanding how it works will give you insight into its efficiency and accuracy. Let’s dive in…
Step 1: Data Collection:
Obviously, our system will start by collecting invoices in various formats (PDF files, scanned images, emails, or even handwritten documents). The remarkable thing here is that this will happen automatically, from multiple sources such as email inboxes, document management systems, or cloud storage platforms.
Step 2: Optical Character Recognition (OCR):
Once data is collected, the artificial intelligence (AI) within our system applies Optical Character Recognition (OCR) to convert text from scanned images and PDFs into machine-readable data.
Unlike manual data entry, which can have an error rate of up to 4%, AI reduces errors by 90%, ensuring high accuracy. This technology adapts to various layouts and structures, ensuring efficient processing of non-standard invoices.
OCR technology is essential for extracting important information from invoices, such as vendor details, invoice numbers, dates, line items, and totals. Our system uniquely utilizes advanced OCR technology. This advanced technology handles various fonts and even low-quality scanned documents, ensuring highly accurate data extraction. As a result, businesses enjoy faster invoice processing, lower error rates, and consequently direct savings in costs and improved operational efficiency.
Step 3: Data Extraction and Interpretation:
Here, AI algorithms extract relevant data points from the invoice. This goes beyond simple text recognition, as the AI within the Logics AI system can understand the context and relationships between different pieces of information. For example, it can differentiate between line items, identify taxes, and link invoice details to corresponding purchase orders or contracts. Again, this contextual understanding of AI allows for accurate data extraction from complex or non-standard invoices.
We know the importance of matching invoices with their corresponding purchase orders, receipts, or contracts, but it is undeniable that this is a tedious task! However, there is no need to worry, as AI helps you automate this process by linking data across different documents to ensure consistency. For example, the system verifies that the quantities and prices listed on the invoice, as well as the total amounts, match the corresponding purchase order. In case of discrepancies (such as mismatched amounts or unauthorized charges), the AI system flags the issue for review by the relevant human personnel. This automated matching accelerates the approval process and ensures the accuracy and compliance of payments with the organization’s policies. By reducing manual oversight, your organization can reduce errors, avoid overpayments, and streamline its payment accounting workflow.
Step 4: Verification and Error Handling:
Errors in invoice processing can lead to significant financial losses and operational inefficiencies. AI significantly reduces these errors by identifying and automatically correcting mistakes in invoices.
In addition to AI’s ability to detect discrepancies between the amount listed on the invoice and the purchase order and flagging them for review before making payments (as mentioned earlier), if specific data fields are missing or incorrectly formatted, AI can request corrections or, in some cases, make them based on historical data.
This proactive approach reduces the risk of costly errors and ensures that invoices are processed correctly the first time.
Over time, the AI system learns from past mistakes, which in turn improves its ability to detect and automatically correct errors. The result is a more reliable invoicing process that requires less manual oversight and reduces the likelihood of delayed payments or disputes.
Step 5: Classification and Sorting:
Once data validity is verified, it is automatically classified and sorted. Artificial intelligence systems classify invoices based on criteria (such as department/expense type/project identification number). This automated organization facilitates later invoice retrieval for purposes like auditing, report preparation, or financial analysis. By reducing the time spent on manual sorting, AI simplifies workflow and ensures proper invoice storage at all times.
Step 6: Workflow Automation Approval:
In many organizations, the invoice approval process often involves multiple approvers (department managers, supervisors, etc.), leading to delays if not managed efficiently. AI improves this process by automating invoice routing to appropriate individuals or departments for approval. The system can be configured with rules determining the necessary approvals based on criteria like department, expense type, or amount. Invoices below a certain value require only one level of approval, while larger amounts require multiple levels. AI tracks each invoice’s status and sends reminders to authorized parties (approvers) in case of delays. This ensures quick and efficient invoice approval, reducing bottlenecks and enabling timely payments. Transparency is present in workflow automation approval, allowing stakeholders to easily track invoice progress and identify any delays.
Step 7: Detecting Duplicate Invoices:
Duplicate invoices are a common occurrence in accounts payable, often leading to overpayments if not detected on time.
Logix AI system addresses this issue by detecting duplicate invoices before they are processed. The system analyzes key invoice details such as vendor name, invoice number, and amount, comparing them to existing records to identify potential duplicates.
If a potential duplicate is found, the AI flags it for review, allowing your organization’s accounting team to investigate and verify whether it is a legitimate invoice or a duplicate submission.
This is particularly beneficial for companies that deal with a large volume of invoices, as it can be difficult to manually detect duplicates.
By preventing duplicate payments, AI helps companies avoid unnecessary costs and maintain more accurate financial records.
Step 8: Predictive Analytics:
Logix AI surpasses other electronic invoicing systems through its predictive analytics. The AI embedded in the system can identify trends and patterns that provide valuable insights into future financial behavior by analyzing historical invoice data.
AI can predict cash flow needs based on recurring invoices, highlight seasonal spending trends, or forecast potential budget overruns. These insights enable companies to make more informed financial decisions, such as optimizing payment schedules, negotiating better terms with suppliers, or identifying cost-cutting areas.
Predictive analytics also helps identify bottlenecks in the invoicing process, allowing companies to address issues proactively before they impact cash flow or supplier relationships.
This strategic use of AI-driven insights transforms invoice processing from a reactive task into a proactive tool for financial planning.
Step 9: Integration with the Accounting System:
Once approved, the AI system automatically transfers the approved and validated invoice data to our accounting system. This seamless integration eliminates the need for manual data entry, reducing the risk of errors and accelerating the financial closing process.
Step 10: Report Generation and Analytics:
One of the key advantages of AI-powered electronic invoicing is the ability to generate real-time reports and insights. AI systems track various metrics, such as the number of invoices processed, the time taken for approvals, and any discrepancies identified.
These insights enable companies to optimize their accounts payable process, manage cash flow more effectively, and make informed financial decisions.
Step 11: Fraud Detection:
Invoice fraud can be a costly problem for organizations, often going unnoticed (until it’s too late!). AI enhances fraud detection by continuously analyzing invoice data to identify patterns of suspicious or unusual transactions.
For example, Logix AI’s electronic invoicing system can identify invoices originated by new or unapproved vendors, detect duplicate orders, or pinpoint inflated charges. By comparing current invoices with historical data, the AI system learns to recognize normal behavior and can quickly identify deviations that may indicate fraud.
This proactive approach enables organizations to detect fraudulent activities early, preventing financial losses and protecting the organization’s assets.
Over time, as AI processes a larger number of invoices, its ability to detect fraud becomes more accurate, making it an invaluable tool for safeguarding financial operations.
Step 12: Compliance Verification:
Compliance with regulatory requirements is crucial in invoice processing, especially for organizations operating in industries with strict financial regulations. Artificial intelligence, by automatically verifying invoices, helps ensure compliance with both external regulations and internal organizational policies. AI system can verify that invoices contain necessary tax information, appropriate license signatures, and adhere to organizational guidelines such as payment terms or spending limits.
Any deviations are “flagged” and thus subject to necessary review, ensuring that errors are detected before they lead to compliance violations. By automating these checks, companies reduce the risk of incurring hefty fines or legal issues (while maintaining accurate financial records).
Additionally, AI can be updated to accommodate regulatory changes, ensuring that compliance processes remain current and effective.
Benefits Your Organization Will Gain from AI-Powered Electronic Invoicing:
A manual worker may take several hours or even days to complete the same amount of work that AI can accomplish in minutes.
Using AI to improve and maximize workflow efficiency has many benefits:
- Automated payment calculations can make your workflow up to 7 times faster! There is no doubt that AI-powered invoice data capture solutions are faster than manual data entry. We don’t want to state the obvious, but the fact is that AI-based methods are many times faster than manual data entry. For comparison, processing a single invoice manually takes about three and a half minutes, while AI can do it in about 30 seconds on average, which is seven times faster. AI also becomes smarter and faster as the number of invoices it processes increases.
- Automation has become more accurate over time: The ways of capturing cognitive data use self-learning AI models, and these models become more intelligent with the increase in the amount of data they process. This will eventually lead to AI becoming self-reliant and capable of processing large datasets with little to no human intervention. Accuracy is of paramount importance when dealing with financial data such as invoices, and AI-powered invoice data capture solutions are trained to excel in this area. Continuously trained machine learning algorithms, working with templates, can produce highly accurate extracted data, with accuracy ranging from 80% to 99%, and this accuracy improves over time.
- AI can help your workforce maximize their productivity. A large part of this increase comes from the cost savings we discussed through the reduced need for clerks and managers in your accounting department. This leads us to the next major benefit of applying AI in accounting – productivity. By freeing your employees from the tedious task of manual data entry, you allow them to focus on other important aspects of their jobs that need attention, such as financial planning, budgeting, analyzing insights and performance, and strengthening customer relationships.
- Improved efficiency is transferred to other related operations, as the use of AI solutions maximizes the efficiency of the accounting process and other departments, such as purchasing and marketing, that work closely with the accounting department. This, in turn, simplifies the entire process and helps these interconnected operations achieve higher productivity while working together. Other benefits of using AI include real-time analysis and planning of capital and spending, faster payments, and improved business relationships with suppliers.
Electronic invoicing is no longer an option, but an extreme necessity:
With Logix AI’s advanced features, you can fully automate your invoice processing workflow, from data extraction to approval, and this will enable you to save time and reduce costs.
Whether you manage large volumes of invoices or seek to enhance accuracy, Logix AI offers a robust solution that adapts to your needs and helps you stay ahead in a competitive market.
