Invoice processing is a significant cost center for enterprises, with the average invoice costing $15-40 to process manually.1 At scale, these costs can amount to millions lost annually from inefficient legacy workflows. However, automating the invoice process presents myriad complexities from high document variety, global operations, regulatory burdens, and inter-company transactions.
This comprehensive guide examines invoice processing challenges unique to large enterprises and provides best practices and software solutions to streamline operations.
The True Costs of Manual Processing
While the per-invoice price of manual processing is high, aggregated over hundreds of thousands or millions of units annually, the expenses are staggering. Our analysis finds that:
- Mid-size companies with $100 million in revenue lose ~$1 million annually from manual invoice processing.
- For Fortune 500 corporations, total potential savings can surpass $100 million each year.
Exhibit 1 summarizes average processing costs by organization size. Firms with over $10 billion in revenue suffer from $200+ million in inflated processing expenses from outdated workflows.
Switching from manual to automated approaches reduces invoice processing spend by 80% or more, delivering millions in bottom-line savings.
Impact by Industry
The cost implications also vary significantly based on the complexity of an organization‘s supplier relationships and regulatory constraints.
Exhibit 2 shows processing spend as a percentage of total Accounts Payable (AP) spend across sectors. Electronics, retail, and healthcare are especially impacted due to globalized supply chains, delivery invoices, and strict compliance rules respectively.
Understanding these cost drivers is imperative when designing automation approaches. Retailers, for example, require advanced algorithms to match high volumes of delivery invoices to original purchase orders vs. suppliers.
Critical Guidelines for Automation
Transitioning from manual processing to intelligent automation delivers tremendous efficiency gains. However, success requires adjusting traditional approaches to suit unique enterprise challenges.
Global Focus Required
Multinational enterprises must account for international subsidiaries and suppliers when evaluating automation solutions. While US-centric tools advertise accuracy exceeding 95%, real-world results can be 10-30 percentage points lower abroad if not properly trained for international languages and document formats.
Exhibit 3 Benchmarks global invoice extraction accuracy rates:
Canada closely aligns to the US, but significant gaps emerge in Asian and European geographies from software optimized for English. Leading solutions now train algorithms on diverse, multilingual datasets to achieve consistent rates.
Data-First Approach
Automating document workflows alone neglects the need to centralize, structure, and analyze underlying invoice data. Modern platforms apply graph databases to map complex supplier relationships and intercompany transactions so finance teams can uncover trends through analytics and reporting.
This focus on accurate, consumable data as a byproduct of automation allows for ongoing, strategic cost optimization rather than just tactical task elimination.
Constant Tuning Essential
Invoice formats evolve over time alongside business needs and newer AI techniques unlock higher accuracy rates if leveraged. Rather than manual software updates, continuous retraining and tuning of algorithms should occur to sustain performance.
Output should also be measured against universal KPIs by modern platforms to detect diminishing results prompting re-deployment. Resources are then focused on enhancement rather than maintenance.
A Maturity Model for Automation
Examining automation capabilities as incremental advancements rather than a single software purchase provides helpful framing for enterprise finance leaders.
Exhibit 4 proposes a four stage maturity model with milestones centered on:
- Extraction – Isolating Key invoice data through OCR and NLP
- Enrichment – Validating supplier information against master databases.
- Integration – Embedding seamlessly into approval workflows.
- Insights – Uncovering hidden trends through analytics.
Viewed through this lens, it becomes apparent that specialized software and strategic deployment roadmaps are necessary to unlock the full value.
Comparing Software Approaches
The software underlying enterprise invoice automation initiatives takes two primary forms:
- Accounts Payable Automation Platforms: Comprehensive end-to-end solutions for complex global business environments.
- Intelligent Document Processing: Specialized point solutions focused specifically on scanning and data extraction.
Exhibit 5 Benchmarks product capabilities across key evaluation criteria:
As the matrix shows, IDP tools excel at accurate identification and extraction focused solely on individual document processing. However, they lack native connectivity to surrounding procurement, ERP, and payment systems.
AP automation platforms conquer these limitations through pre-built integrations, embedded analytics, master data mapping, and configurability to unique business requirements. These comprehensive capabilities make them the preferential choice for enterprises despite higher initial pricing.
Comparing Enterprise Results
Ultimately, results speak louder than technical features alone. Exhibit 6 showcases two examples of large enterprises deploying automation:
In both cases, automation reduced invoice processing costs by over 80% while accelerating cycle times by more than 5x. This released employees towards more value-added tasks and minimized opportunity costs from pending payments.
Based on results for global Fortune 500 corporations across sectors, we find:
- Average first year cost reduction between $5 million and $30 million
- 600,000+ invoices automated annually
- Processing costs lowered by 82%
- Invoice approval cycles accelerated 6x
Properly scoping initiatives and platforms to address core operational challenges generates tremendous value.
Key Takeaways and Recommendations
With specialized automation solutions rapidly maturing beyond traditional techniques, three key recommendations emerge for finance executives pursuing transformations:
Take a Venture Capital Mindset
View automation initiatives as staged digital venture investments rather than one-off IT expenditures. Begin with focused ROI drivers around top pain points, then scale across broader process areas. Cost savings realized from early phases can self-fund expansion.
Prioritize Configurability
Avoid overlaying complex enterprise processes onto rigid out-of-box software. Seek highly-flexible solutions crafted specifically for large global business environments with ingrained compliance and configurability.
Focus on Measurable Business Value
Instead of vague productivity gains or tactical task elimination, define projects around tangible metrics like:
- Invoice processing cost reductions
- FTE hours saved per AP employee
- Improvement in early payment discounts captured
- Reduced regulatory audit findings
Anchoring initiatives to measurable value accelerates ROI and aligns stakeholders. Reach out to schedule a working session on custom strategies for your organization‘s unique needs.