How to Fully Code an Invoice With No Manual Data Entry

Let’s be honest, manual invoice coding is painful for accounts payable (AP) teams. From creating paperwork bottlenecks to causing late payments and often duplicate invoices, many headaches come out of manual data entry and invoice processing. It’s also extremely monotonous and mentally draining to enter data, constantly switch between documents, and crunch the numbers. And for many organizations, invoice volume is only increasing, which means more work to do, and often with the same amount of staff. The average invoice costs anywhere from $15 to $40 to process, and an AP team member at a large organization could be processing 1,000 invoices a month. Beyond the exhausting manual work, there is also a breaking point for financial leaders when the bills aren’t getting paid on time, numbers aren’t adding up, and everyone is in the hot seat to account for errors.

Luckily, there are many AP automation solutions out there. But, before diving into available options and potential time-saving capabilities, let’s break down exactly what invoice coding is.

What is invoice coding, and who is responsible for it?

When an invoice arrives at the company (either by physical mail, email, or a vendor portal), it must move through several steps (called the invoice process) before it can be paid. One of the most essential steps in the invoice process is coding. 

When the invoice is ready to be reviewed and processed, an AP team member will review the invoice document and make sure it has all of the correct information needed, such as invoice date, invoice due date, invoice terms, general ledger (GL) accounts, dimensions, line items, and amount due. The AP team member often needs to manually review these fields and compare them to existing records before confirming the invoice is correct.

Why is invoice coding important?

Invoice coding is important because it helps maintain accurate financial records and allows companies to track expenses and revenue every month. When invoices aren't coded properly, it can lead to issues such as duplicate payments, late payments to vendors, or more substantial errors that can impact cash flow forecasting. It can also result in overpayments or underpayments if the invoice isn't coded correctly.

In substance, invoice coding helps AP teams track which expenses have been paid and which are still outstanding. And, without a reliable invoice coding process in place, it may seem like your team can barely tread water to stay afloat of all the paperwork and manual review.

What makes an invoice ready to be paid and posted?

There are multiple steps that need to happen before an invoice can be successfully marked as “paid” by an AP team member. And, during a season with a high volume of invoices that need to be paid, the list of items that need to be completed can seem never-ending due to the tedious nature of AP.

A completed invoice needs: 

• Header data
• Entity information
• General ledger
• Expense
• Allocation codes
• Payment info

After an invoice is reviewed, manually coded with corrections made, if needed, the invoice moves to approval. This can mean manually routing the invoice for approval, emailing for approval, or sending via a system for approval. Once the invoice is approved, then it can be sent for payment to be processed and posted.

How can invoice coding be transformed from manual to no-touch?

There are many AP automation solutions on the market to replace the manual invoice process. Some are rule- or template-based, such as optical character recognition (OCR), or robotic process automation (RPA). While these solutions can reduce manual work and save time, there are often limitations to the technology, as not all invoices coming in have the same format, fields, or document structure. Often manual work is still required to supplement traditional AP automation solutions. 

Artificial intelligence (AI) solutions are making a substantial impact on the AP space, as AI can adapt and learn over time to ingest and process varying types and formats of data. In a recent article by Finextra, the use cases for AI in accounting and finance are prevalent, as there is an abundance of data processing and time-consuming work that can be addressed.

AI also allows routine and repetitive processes to be handled autonomously, or without human intervention. With autonomous invoice processing, time-consuming manual data entry can be eliminated, drastically reducing time spent coding an invoice. Some AP teams using AI-first software have reduced their time per invoice to just a few seconds, which can be a significant time savings on large invoice volumes.

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‍Using Autopilot for invoice coding

Vic.ai, an AI-first autonomous finance platform for invoice processing and bill pay, has a unique feature called “Autopilot”. Autopilot functions exactly as the name suggests: it automates the invoice coding process without ever needing human intervention. Vic.ai ingests and processes data, and continuously learns throughout the process just as a human would — through trial and oversight. Then, Vic.ai users can turn on Autopilot once the system becomes confident enough about it’s data predictions. The proprietary AI predictions indicate how confident the software is in coding an invoice.

The benefits of Autopilot invoice coding

There are many benefits to leveraging an AP automation solution with an AI-powered autonomous option for invoice processing, including:

Time savings - When the system can run “in the background” based on confidence levels, there is less manual work for the AP team to check and confirm data. The AI recognizes patterns and repetitive information on the invoices and can eliminate manual invoice coding. For Vic.ai customers, clients spend more than 80 percent less time on invoice processing and are able to increase processing volume by 350 percent.

Cost savings - Invoicing is one of a business's most error-prone, costly processes today. By switching to an autonomous process, AP teams can save an incredible amount of time and redirect efforts toward more strategic work. Many Vic.ai customers can see a return on investment in the platform in just 6 months, due to the accumulating cost savings per invoice. Some platforms, including Vic.ai’s, also have the ability to surface early payment discounts on invoices, which allows AP teams to positively impact cash flow for the business.

Team savings - No one likes to feel exhausted at work. With autonomous workflows, AP team members will reduce mundane work, experience a boost in productivity, and take part in more value-added tasks. 

Reputation savings - Lastly, streamlining invoice processing can positively influence your brand’s reputation. If you are consistently late paying vendors, making duplicate payments, or managing other errors, it paints your business in a not so positive light. More efficiency, accuracy, and transparency ensure bills are paid correctly and on time, every time. 

Scale for the future with AI-first technology for invoice processing

Hyper-automating invoice coding with AI technology ensures that every invoice is coded properly, while anomalies or inconsistencies are flagged for real-time correction and decision-making. Autonomous processes can also scale easily, allowing flexibility for business growth and expansion over time, without increasing headcount. Many AI solutions also integrate with existing ERPs to fill process gaps and augment existing workflows. And, by selecting a purpose-built AI solution for accounting, you can confidently embrace the AI trend.

This article originally published January 2023, and was updated May 2024.

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