How to Automate Invoice Processing: 6 Best Practices to Know in 2025

Accounts payable (AP) leaders are under increasing pressure to do more with less. 

The demand for reduced overhead, improved accuracy, and faster cycle times is growing, while resources and budgets remain tight.  Traditional approaches to invoice processing, reliant on manual data entry and paper or email-based workflows are inefficient and unsustainable.  These outdated methods not only slow down operations but also expose organizations to costly errors and fraud. 

In 2025, the solution is clear: automated invoice processing.

This article explores the top challenges of manual invoice processing, the key benefits of automated invoice processing solutions, and best practices to ensure a smooth transition to automation.

The Biggest Challenges with Manual Invoice Processing

Manual invoice processing is fraught with difficulties that not only slow down operations but also create costly inefficiencies.  Some of the most significant challenges with manual processes are:

• High error rates.  Manual data entry, a cornerstone of traditional invoice processing, is prone to human error.  Manually entering invoice details increases the possibility of typos, transposed numbers, and duplicate payments.  Each of these errors can cascade into larger issues, requiring costly rework and, in some cases, resulting in strained vendor relationships.  Fixing these errors takes time and resources that could be better spent on strategic tasks.

• Slow cycle times.  Manual invoice processing is inherently slow.  From the moment an invoice is received, it needs to be physically sorted, routed for approval, and manually entered for payment.  This long, drawn-out process can lead to missed deadlines, late payment penalties, missed opportunities to take advantage of early payment discounts, and more inquiries from suppliers about the status of payments.  Worse, invoice approval bottlenecks make it difficult to accurately report on cash flows and expenditures.

• Inadequate visibility.  One of the most frustrating aspects of manual invoice processing is the lack of real-time visibility into the status of invoices.  Manually tracking down where an invoice is in the approval process or identifying what payments are due can be burdensome.  This lack of transparency can lead to delays, duplicate payments, lost invoices, and a general lack of accountability within the process.  Without visibility, it’s nearly impossible to make informed decisions about cash flow or to address potential issues before they escalate.
  
• High costs.  The cost of manually processing invoices goes beyond just paper and ink.  The administrative costs of sorting, keying, filing, storing, and retrieving physical invoices add up quickly.  In addition to these costs, the labor required to manage the process can be huge, especially for organizations dealing with high volumes of invoices.  As these costs accumulate, they create a financial burden that ultimately affects the bottom line.

• Risk of fraud.  Without segregation of duties, chain of custody assurance, and other controls in place, manual invoice processing leaves organizations vulnerable to payment fraud.  Paper-based processes can make it easier for fraudulent invoices to slip through unnoticed.  Additionally, the lack of real-time visibility and automated checks means that finance teams are less likely to catch suspicious activity before it’s too late.  Fraud can result in significant financial losses and reputational damage, making it a top concern for organizations.

Manual invoice processing is riddled with inefficiencies, high costs, and risks.  The challenges only become bigger as an organization grows.  That’s why it’s essential that organizations address these pain points with automation and avoid unnecessary expenses, costly errors, and higher risk fraud.

The Benefits of Invoice Processing Software

Switching from manual processes to invoice automation software offers a wide range of benefits.  By leveraging the power of technology, organizations of all sizes can simplify their invoice processing workflows and transform their AP department into an information hub.  Here’s a look at the benefits:

• Increased accuracy.  Automated invoice processing eliminates the need for manual data entry, significantly reducing the chance of human error.  Invoice processing software uses artificial intelligence (AI) with machine learning, optical character recognition (OCR), and other technologies to capture and digitize invoice header and line-item data, ensuring that key details such as vendor names, amounts, and invoice numbers are accurately recorded.  With fewer errors, there’s less rework, leading to smoother operations and more on-time payments.

• Accelerated cycle times.  One of the biggest benefits of automation is the speed at which invoices can be processed.  Automation digitally routes invoices through pre-defined workflows, eliminating delays caused by manual handoffs and lost or misplaced invoices.  Purchasers are notified of invoices awaiting their review and notified when invoices that haven’t been reviewed are approaching their due date.  Invoices that aren’t reviewed in a pre-set amount of time can be automatically escalated to a manager.  Digital processes eliminate the bottlenecks typically seen in manual processes.  As a result, organizations can pay suppliers on time, take advantage of early payment discounts, and avoid costly late fees.

• Complete transparency.  Automation provides real-time dashboards and reporting capabilities, allowing finance teams to instantly see the status of every invoice.  This improved visibility ensures that nothing slips through the cracks and enables better decision-making regarding operational performance, cash flow and spending.  With full transparency, AP departments can optimize their performance by tracking Key Performance Indicators (KPIs), such as average processing time, exceptions by supplier, and outstanding payments.

• Reduced costs.  Automating invoice processing reduces the administrative costs associated with manual work, such as labor, paper storage, and printing.  In addition to these operational cost savings, organizations can reallocate resources from time-consuming manual tasks to more strategic activities, such as data analysis, that add greater value to the organization.  Over time, the cumulative savings can have an impact on an organization’s profitability.

• Enhanced security.  One of the greatest concerns with manual invoice processing is the risk of fraud.  Automated systems have built-in security features that can detect and mitigate the risk of fraudulent activities.  For instance, automated invoice matching ensures that only legitimate invoices are processed.  Audit logging tracks the actions taken on an invoice.  And multi-factor authentication prevents unauthorized access to sensitive data. These enhanced security measures provide peace of mind and protect the organization’s financial assets.

The benefits of invoice automation are clear.  Increased accuracy, faster processing, and improved visibility all contribute to a more efficient and secure AP process.  By reducing manual errors, saving costs, and mitigating fraud risks, automation paves the way for a streamlined and reliable process.

How ibml’s Invoice Processing Software Works

ibml’s invoice processing software offers a comprehensive solution for automating invoice processing.  Using advanced technology, ibml makes the entire invoice-to-pay process faster, more accurate, and more secure.  Here’s a detailed look at how ibml’s invoice processing software works:

• Invoice capture.  ibml’s software begins by capturing all incoming invoices, whether they arrive as paper or in a digital format.  The system ensures that every invoice is digitized and ready for processing.  This step is crucial because it centralizes all invoices, reducing the risk of lost or misplaced documents, while speeding the processing of paper and digital invoices.

• Intelligent data extraction.  Once the invoices are captured, ibml’s software automatically extracts key information using AI, OCR, and intelligent character recognition (ICR) technologies.  This process eliminates the need to manually key vendor names, amounts, invoice numbers, payment terms, and line-item details.  The data extraction process is highly accurate, even for complex or unstructured invoices, significantly reducing the risk of errors.

• Automated workflow routing.  After extracting the header and line-item details from invoices, ibml’s software routes invoices through predefined workflows.  Invoices are automatically sent to the correct approvers and processed according to an organization’s business rules.  Exceptions, such as invoices that don’t match purchase orders (POs), are flagged and routed for additional review, while matched invoices are quickly approved.

• Real-time visibility and reporting.  One of ibml’s standout features is its real-time visibility into invoice status.  Through intuitive dashboards, AP teams can monitor the entire invoice lifecycle, from receipt to approval and posting.  This level of transparency improves control over cash flow and helps organizations manage their AP operations more effectively.

• Integration with ERP systems.  ibml’s software seamlessly integrates with leading enterprise resource planning (ERP) systems and accounting software packages, ensuring that approved invoices are automatically recorded in an organization’s system of record.  This seamless integration eliminates the need for duplicate data entry and ensures that all transactions are accurately and quickly reflected in the organization’s accounting records.

• Enhanced security.  ibml’s software includes features such as MFA, role-based access controls, audit logging, and fraud detection algorithms.  These security measures protect the organization from unauthorized access and ensure that sensitive financial data is secure.

ibml’s invoice processing software offers a robust solution that automates every step of the invoice process.  From document capture and data extraction to workflow automation and reporting, ibml’s technology ensures that businesses can process invoices more efficiently and securely. 

6 Best Practices for Automating Invoice Processing

To ensure a smooth and successful transition to automation, it’s important to follow key best practices.  Implementing these strategies will help maximize the benefits of automation:

1. Assess your current process.  Before implementing any automation solution, it’s crucial to evaluate your existing workflow.  Be on the lookout for bottlenecks, redundant tasks, and common errors.  By understanding your current pain points, you can tailor the automation solution to address these specific challenges, ensuring that it delivers maximum value.

2. Select the right software.  Not all automation solutions are created equal. When choosing an invoice automation platform, consider factors such as integration with your ERP, scalability, user-friendliness, and security features.  Look for software that offers customizable workflows and advanced data extraction capabilities, such as OCR and ICR.  Additionally, prioritize solutions that provide real-time visibility into invoice status and cash flow.

3. Automate approvals and exceptions handling.  Automation is effective for accelerating approvals.  Set up rules-based workflows to route invoices for approval and establish protocols for handling exceptions.  For instance, invoices that don’t match POs should trigger an alert and be sent for further review, ensuring that discrepancies are addressed promptly.

4. Proactively manage change.  Introducing new technology requires a cultural shift within an AP department.  To ensure successful adoption, provide thorough training for your finance and AP teams.  Make sure that users understand how to operate the software, troubleshoot common issues, and leverage its full capabilities.  And provide a refresher, when necessary, as ongoing training and support will help staff keep up with new features and best practices.

5. Monitor and optimize.  Once the automation solution is in place, continuously monitor its performance.  Use the reporting and dashboard features to track key metrics such as processing times, error rates, and outstanding invoices.  Regularly review these metrics to identify areas for improvement and adjust optimize the process.  And solicit feedback from frontline staff on the effectiveness of the solution.  Continuous improvement will ensure that the invoice processing system remains efficient and aligned with your organization’s goals.

6. Implement strong controls.  Security is a top priority.  When automating invoice processing, make sure that the software includes robust security measures such as encryption, role-based access, and fraud detection tools.  Protecting sensitive financial data from unauthorized access and fraudulent activities is essential to safeguarding the organization’s assets.

Automating invoice processing is a big undertaking, but by following best practices, organizations can ensure a smooth transition and maximize the benefits of automation.  Evaluating your processes, selecting the right software, and providing thorough training are key steps in the journey.

Conclusion

In 2025, invoice processing software is not just a convenience – it’s a necessity for AP departments looking to stay competitive in a digital-first world.  By addressing the challenges of manual invoice processing and leveraging the benefits of automation, businesses can improve their AP processes.  Whether you’re considering ibml’s powerful solution or exploring other options, automating invoice processing is a strategic move that will enhance efficiency, reduce costs, and mitigate fraud risk.