8 Major Invoice Processing Challenges and Solutions for Manufacturers

Every manufacturing unit needs to make critical investments in procuring raw materials, consumables, machinery, and equipment. They manage a vast supplier-vendor network across geographies. If invoices aren’t paid within timelines, it can frustrate suppliers, jeopardize inventory levels and create production bottlenecks.

It’s important for both the payer and the payee to have a clear idea about amounts, payment cycles, accepted payment methods, descriptions, rates, quality standards, quantities, etc. Any discrepancies in these terms create risks of late payments or deliveries. Legacy systems, or any confusion felt by accounts teams, can delay payments.

Resolving such confusion can be cumbersome and time-consuming, and often burns a hole in the cash flow.

Most mid to large-sized manufacturers have a wide range of suppliers who submit various types of invoices in different formats and to different people. Processing thousands of invoices monthly is arduous and invites errors leading to late or incorrect payments.

Affected vendors shorten payment terms or lower supply, service or quality standards. This potentially hampers your production line and erodes goodwill and brand reputation.

A leading logistics company suffered heavy dents to its brand reputation due to erroneous invoice records and subsequent late payments. HabileData stepped in to create a centralized repository and a structured workflow to ensure flawless payments.

Companies process hundreds of thousands of invoices each year. Many of these are complex and contain a huge number and range of data points. Missing out on any critical data hampers communication, routing, and invoice approval.

Using manual methods to process massive amounts of invoice information and supplier data is a grueling task. It gets worse if there’s missing information or blurry invoice images.

Managing multiple invoices from vendors can create massive confusion. Most suppliers don’t send invoices regularly, thus upsetting the planning and scheduling of payouts. Also, there are chances of receiving and approving duplicate invoices from the same supplier that can cause excess payments, and subsequent recovery hassles.

In the absence of a streamlined payment process, the friction between Accounts Payable managers and suppliers results in unpaid invoices. Eventually, it obstructs optimal cash flow.

Cost in terms of time, effort and money poses a major challenge in invoice processing. According to a report by IOFM, the average cost for manufacturers handling up to 100,000 invoices per year is about $6.10 per invoice when processed manually. For manufacturers that process 20,000 or fewer invoices, the cost is a staggering $15.97 per invoice.

The cost spent per invoice and purchase order can vary from one manufacturer to another depending on the factors that are included in this calculation. Following a manual approach will have higher processing costs when compared to other manufacturers using an automated process.

A global supply chain solutions company, receives thousands of bank transfers daily from its multiple partners. It was a major challenge for them to handle payment processing manually.

To get rid of duplicate entries, cut down on processing time and accelerate payments, they automated certain processes through custom tools to collect information, identify duplicate entries, and automate approvals. Automation helped to increase processing productivity by 70% and reduce turnaround time by a factor of 10.

Disorganized invoicing processes and outdated systems create information silos and provide poor to no visibility. The absence of a unified information management process deprives manufacturers of critical insights on spending patterns that can be used for budgeting, inventory and supply chain planning.

Maintaining contractual, legal and policy compliance is crucial when invoices are exchanged between two parties. Elements like authenticity of origin, integrity of the content, storage and legibility have to be in accordance with local legislation or rules. Not harmonizing with the legal compliance requirements can lead to a rise in the ratio of disputed invoices to total invoices and price paid to actual price quoted.

Manufacturers are increasingly partnering with invoice processing companies to use customized bots for data extraction from unstructured invoices available in multiple formats. Intelligent business rules and algorithms help streamline and pace up processes. Some applications of bots and algorithms for invoice processing solutions are:

• Data capture, extraction and retrieval from multiple invoices
• Data standardization and collation in structured databases
• Routing of invoices to appropriate channels for approvals
• Prioritize invoices for payments
• Reconciliation of invoices against purchase orders
• Invoice classification by date, vendor name, amounts, etc.
• Detect, tap and index various electronic channels like email boxes, web portals, etc. for incoming invoices at regular intervals
• Compress and display digital invoices in popular formats like JPEG, PDFs, etc.
• Archive data for future audit and compliance requirements in a single database

Defining and automating workflows streamlines invoice processing across stages including invoice data entry, validation, prioritization, categorization, approval and payments. With smart and agile workflows, the accounts payable team can:

• Reduce duplicate invoices and payments
• Cut down the cost of manual invoice processing
• Classify and prioritize invoices based on criticality of material, vendor type, amount, payment due date, etc.
• Track various checkpoints, such as invoice receipt, expense approvals, records, ledger entry, queries, scheduling etc. for easy payment processing and retrieval
• Establish better and transparent collaboration between vendors and sales departments
• Maintain a balance of incoming cash flow
• Leverage data-driven insights on liquidity planning and forecasting

Granular and drilled down reports through interactive dashboards help the accounts payables team to get visibility into spends across various functions. By configuring dashboards to meet specific needs, manufacturers can easily:

• Track key KPIs and metrics like paid invoices, pending time to payment due date, invoice processing time, invoice volume, etc.
• Leverage critical and authentic information on working capital, utility costs and more.
• Get timely alerts and notifications to reduce chances of missed, forgotten, late or false payments, etc.