As companies grow, their invoicing processes have to solve an increasing variety of factors. This is especially true for international billing, cross-border payment operations, and companies that utilize popular usage-based pricing models.
Invoice automation software and more broader accounts payable (AP) and accounts receivable (AR) automation tools are crucial to modernizing B2B billing processes. They help streamline the entire financial lifecycle from vendor bills to customer collections.
What is invoice automation software?
Invoice automation software streamlines the creation, validation, approval, and payment of invoices with little to no manual data entry.
How does automated invoice processing work?
Many sales teams work off antiquated systems that rely on manual entry of offline data to reflect a variety of contractual terms. These data points are shared with financial teams and then go back to the sales team and, finally, on to the prospective clients.
These workflows can be inefficient and prone to user error. Automated invoice processing can significantly streamline these operations by reducing the procure-to-pay cycle, eliminating human error, and customizing workflows for improved productivity and efficiency.
“Ultimately, companies want to reduce manual effort and build more automation across their business,” Riya Grover, co-founder and CEO of Sequence, says on the Converge podcast. UK-founded SaaS startup Sequence helps to unify broader revenue operations, contract intake, and usage-based billing. “So if you think about the way a lot of B2B companies operate today, these activities across the contract-to-revenue process are pretty siloed. There’s a lot of duplication of effort.”
Invoice processing automation addresses these challenges by eliminating manual data entry errors, speeding up the approval process, and enhancing overall efficiency and accuracy.
Access to digital records and more data also enables companies to gather critical information about clients that can support upselling and opportunities for more accurate calculations of commissions for sales teams.
What is usage-based pricing, and why is it hard to bill for?
By automating usage-based pricing models users of a SaaS product pay varying amounts depending on their level of consumption.
These models are becoming very popular but can be difficult for sales teams and finance departments to track manually. Automated invoice processing software can simplify such challenges by:
- automating the invoicing process
- enabling custom workflows
- reducing manual tasks and errors
- streamlining operations
- facilitating mobile accessibility for future business growth
“If you have a very simple pricing model, just a pure subscription business, perhaps it’s not that hard to automate and track what each customer is paying you in a spreadsheet to set up billing for them. But if you now introduce these variable pricing models, [it] actually becomes quite complex to stay on top of everything,” Grover says.
“You should be billing and invoicing a customer and making sure you’re not missing revenue. The move to a modern pricing world and the adoption of these hyper-pricing models across the software space is acting as a big catalyst toward people coming and adopting [automated software tools].”
What is accounts payable automation?
AP automation is the use of software to streamline the invoice-to-pay process by replacing manual tasks with automated digital workflows. AP automation includes such steps as invoice capture, invoice data validation and matching, approvals, payment execution, and syncronization with accounting and enterprise resource planning (ERP) systems.
For example, Convera provides global payment solutions that integrate into AP automation systems. Rather than being an end-to-end AP software itself, Convera supplies the global infrastructure for executing international payments, foreign exchange, and compliance management within automated financial workflows.
Spend management is a prime function for smart, integrated automation. Invoice automation can help in consolidating silos and maximizing workflows by streamlining the AP process, enhancing the efficiency of financial operations.
Historically, companies have tried to implement such workflow consolidation in-house, but it’s been expensive and requires a lot of engineers.
Now, new and growing businesses are looking to maximize efficiencies right out of the gate. For them, AP automation is key to enhancing spend management and financial operations by reducing manual data entry errors and processing times. AP automation tools can help businesses set up and automate workflow in a couple of days, often using self-serve configurations.
Why are companies moving away from building billing systems in-house?
As more companies scale with an automated and adjustable billing system, many of them pass on opportunities to build their own systems in-house. Instead, they’re opting for experienced vendors who won’t build them something that’s high-maintenance or clunky.
Managing complex, rapidly evolving pricing models (such as usage-based pricing) internally creates high engineering overhead and operational bottlenecks.
On the other hand, modern billing solutions can significantly enhance cash flow by enabling faster payment cycles and reducing manual billing efforts, which is essential for businesses looking to improve their financial health and operational efficiency.
Grover notes that it’s important to build infrastructure that integrates with and embeds within a company’s tech stack.
“That means prebuilt integrations with CRM, your own product, your accounting suite, because we recognize that this is critical data that people are going to want to consume in other places,” she says.
New cash flow solutions to old challenges for corporate finance teams
As new as these challenges seem, Grover says they’ve been around for a long time. Some even predate the SaaS era altogether.
“We’re solving a lot of problems and a lot of workflows that have always existed for these customers,” Grover says. “These are all workflows that companies have been doing manually or in a siloed way for a long time.”
Ultimately, she notes, the CFOs and other heads of corporate finance teams will be the beneficiaries because automation will free them up to focus on more strategic initiatives. Plus, they’ll have more data to inform their decisions.
“I think we’re going to see the CFO or the finance person and the team become much more strategic, whereby they’re then taking the data that those products spit out … not spending their time doing the manual lower-value things, but actually looking at the data that those products spit out and thinking about how that actually influences their business,” Grover says.
Understanding the importance of revenue recognition is crucial for these teams, as it aids in accurate financial planning and compliance. For automated billing systems that support different invoicing periods, aligning with financial regulations and local accounting recommendations offers a sustainable path forward.
