Invoice Processing: Definition, Challenges and Automation

Ashutosh Saitwal
Ashutosh Saitwal

Founder CEO - KlearStack AI

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[vc_row][vc_column][vc_column_text]Companies frequently order and sell raw materials, goods, services, etc., in bulk. When buying and selling goods worth hundreds and thousands of dollars, it is crucial to ensure that payments are made on time. 

There should be no discrepancies or inaccuracies in the invoice as it may negatively affect business relationships and the influx of goods. As a result, invoice processing is the most important component. 

In this blog, we will discuss what invoice processing is, the limitations of manual invoice processing, and what automated invoice processing is along with its benefits. 

What is Invoice Processing?

An invoice is a commercial document issued by a seller or supplier to a buyer or customer. It serves as a formal request for payment, providing a detailed breakdown of a transaction for goods or services provided.

Basic Components of an invoice:

  • Invoice number
  • Invoice date
  • Buyer’s information
  • Seller information
  • Product name, description and quantity
  • Unit price and subtotal
  • Payment method, terms and bank details
  • Payment instructions
  • Return policy

Invoice processing refers to the receival, verification, approval, and payment of invoices, typically overseen by the accounts payable department. These tasks ensure that incoming invoices are accurately processed and paid following established procedures and terms. It’s the final step in the procure-to-pay process, ensuring smooth financial transactions for your company.

Challenges Associated with Manual Invoice Processing

Manual invoice processing commonly faces challenges such as manual data entry leading to errors and late payments—which can result in inefficiencies and compliance issues.


Manual document processing is very time-consuming. One has to enter and verify every single data point manually which is a very tedious task. 

Errors and Discrepancies

Mistakes in data entry and unmatched purchase orders can lead to disputes and costly rework. It impedes workflow and damages supplier relationships. This may result in financial penalties.

Late Payments

Inefficient processes can cause delays in invoice approval and payment, risking late payment fees and strained supplier relationships. This can lead to potential financial penalties, damaged supplier trust, and decreased cash flow.

Lost or Misplaced Invoices

Paper-based systems or disorganized digital storage may result in lost or misplaced invoices. This results in delays in payment, disputes, and difficulties in record retrieval.

Inefficient Approval Workflows

Complex or manual approval processes can cause bottlenecks and delays. This leads to lengthy processing times, reduced efficiency, and potential late payments.

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Automated Invoice Processing: Definition and Steps

According to sources, a mid-sized company takes about 25 days to get their invoices processed manually. Whereas, automated invoice processing does this task in just 3-5 days. 

Manual invoice processing can be very time-consuming and also result in a high margin of error. Moreover, there is always a threat of fraud and scams. 

Automated invoice processing completely streamlines your accounts payable invoice process. From scanning and extracting invoice information to vendor processing, it automates the whole process. This helps you save an incredible amount of time and errors while decreasing the risk of fraud significantly. 

How Automated Invoice Processing Works?

Step 1: Once you receive an invoice, it is automatically scanned and the necessary data points are extracted with the help of OCR. 

OCR converts the scanned information into machine-readable text.

Step 2: The extracted data is automatically categorized into predetermined fields. 

Step 3: Once data is categorized, the automated invoice software stores and validates important data such as vendor name, billing address, purchase amount, etc. 

Then it automatically compares it to previous orders or invoices to ensure that there is no error or duplicate. 

Step 4: The software notifies the concerned parties for review and approval. This is done through the software or through email.

Step 5: After approval, the invoice processing software will notify the buyer to make the payment. The payment is usually done through the software or can be scheduled to be transferred electronically to the vendor’s bank account. 

Step 6: Once the payment is done, the software notes the date of payment. This invoice is then stored in the company’s digital repository. An automated invoice processing software can easily be integrated into your company’s cloud or AP system. This streamlines the whole process and ensures that payments are done on time without any hassle. 

Benefits of Automated Invoice Processing

There is no doubt that automated invoice processing saves you significant time and money. 

Its main objective is to streamline your invoice processing by making this lengthy process fast and easy. 

Automated Invoice Processing has several benefits, such as:

  • Save time and manual effort

Manual data entry is dull and monotonous. Companies usually end up spending a lot of resources on manual jobs. Automated invoice processing saves you ample time by creating a faster turnaround time. You do not have to waste your time and resources in entering basic details and cross-checking at every step.

  • Reduction in errors

Tedious and never-ending manual data entry and processing results in a lot of inaccuracies. A client may end up receiving the wrong or incorrect invoice. With automated invoice processing, errors and inaccuracies are eliminated.

  • Invoice is trackable

Usually, when it comes to manual invoice processing, invoices are stored in a folder. It becomes difficult to retrieve it again when needed. With automated invoice processing, all invoices are stored digitally which makes it very easy to track and retrieve them.  

  • Better storage

Piles and piles of physical invoices are difficult to manage and store. Automated invoice processing stores all of your invoice data digitally. Now, you do not need to worry about invoices getting lost or misplaced. All of them can be stored and retrieved on your computer. 

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Manual Invoice Processing vs. Automated Invoice Processing

Almost 70% of businesses have partially automated their invoice processing workflow. 

Automated invoice processing has transformed the way businesses deal with their payments and cash flow.

Manual Invoice Processing Automated Invoice Processing with KlearStack
Error-prone 99% accuracy with AI
Heavy cost of labour Cost savings up to 90%
Tedious manual work Reduced manual data entry
May get misplaced or lost, potential danger of fraud Files are stored digitally, completely secure and encrypted
Time-consuming Significantly less time-intensive, enables you to work on other productive tasks.

Automated invoice processing addresses the limitations of traditional data processing by leveraging technologies such as Artificial Intelligence (AI), Machine Learning (ML) and Optical Character Recognition (OCR). 

This enhances accuracy, decreases processing time and optimizes the overall financial management of your company.

Is Manual Invoice Processing Causing You a Headache? KlearStack Has the Cure!

Klearstack’s Automated Invoice Processing software simplifies data capture and offers enhanced efficiency and accuracy. Through its AI-driven OCR and Intelligent Document Processing, it extracts data from all types of invoices regardless of their structure or layout.

KlearStack offers a template-less solution. Regardless of the type or layout of your invoice, KlearStack’s self-learning automation solution easily scans all invoice layouts. This results in significantly less human intervention. 

From vendor details to payment information, it has got you covered—with over 100 data fields to extract.

✓ Achieve 99% accuracy, 

✓ Reduce costs by up to 80%

✓ 500% Operational efficiency 

✓ Completely secure and encrypted

✓Significantly reduced human interventionWhat are you waiting for?
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