Every business irrespective of nature or size involves in selling and/or purchasing goods and services. These transactions mean invoicing. A business has to draw and/or receive invoices. According to the studies, invoices are the most used commercial document. The most used document means the most processed as well. This means every business deals with invoices frequently, these invoices can be inward, outward, or both ways. In business, it is very common to have credit invoices. It can be safely said that a significant number of the invoices generated are credit invoices, which means payment is due on some future date. This period can be shorter or longer depending upon the nature and terms of business. All this journey of procuring to payment within a business is called ‘Invoice Processing’.
Invoice processing is usually a multi-tiered and lengthy process depending upon the nature and volume of invoices. Initially, all the invoices were processed manually which was a very tedious, hectic, and lengthy process and involved many challenges. These challenges include but are not limited to;
- Error-Prone Process
- Workload Intensive Process
- Unnecessary Costs of Process
- Delays In Process
- Hampered Productivity
- Lost/Missing/Duplicate/Fake Invoices
- Higher Process Cost
- Transparency/Trust Issues
- Tracking/Monitoring Issues
- Reconciliation Issues
* A separate article on these challenges can be found here.
To handle all these challenges, Invoice Automation was introduced. Invoice automation drastically changed the speed and accuracy of the process. It removed most of the unnecessary lags and significantly reduced the processing time. It also addressed most of the human and procedural errors and mistakes caused by manual processing. Nowadays most of the businesses with a significant number of invoices are using invoice automation fully or at least partially. Most of the specialized invoice processing solutions work as an add-on module with the existing accounting package or ERP solutions.
Invoice Automation solutions delivered a lot in terms of speed, accuracy, and efficiency over manual invoice processing. The overall improvement was very significant and it made invoice processing automation inevitable for most of the industry. But as the businesses evolve, so do the challenges, Invoice Processing is no exception to this. Increasing volumes and complexity of transactions have once again pushed invoice processing automation solutions to the limits. Unprecedented growth in e-commerce and growing dependency on remote services have tested the existing solutions to the fullest. This has revealed lots of shortcomings of traditional invoice automation solutions in wake of the new business realities. With the extensive use of invoice automation software for many years, a lot of new challenges have been identified which are beyond the capacity of a traditional invoice automation solution. Even today, automated invoice processing solutions have some inherent flaws. Some areas can’t be dealt with even by the best available automation solutions of the industry.
Following are the areas where the traditional approach is not enough to effectively address the issues
- Data Silos
- Cross-Organizational Efficiency
Let’s elaborate on these issues one by one
The legacy database solutions inherit data silos problem. A centralized data repository under single control is a perfect recipe for data silos. As the database is a must for every enterprise financial software, so all the invoice automation solutions bring data silos with them. These data silos obstruct the independent information flow within the organizations.
The nature of traditional financial solutions is centralized. The center in this case is the organization implementing the software. The organization has total control over the software. All the 3rd parties connected to the software can only get the information the way the principal organization wants them to see. This leads to a lack of transparency.
As discussed in the previous paragraph, the traditional invoice management solutions are controlled by the principal organization. They have total control over the data and can manipulate information in a manner to suit its interest. This creates a trust issue with the concerned parties which are not part of the organization.
Due to the lack of trust and transparency and centralized control over the software, the traditional invoice processing system is still exposed to frauds like fake, under, and over-invoicing, As there is no independent monitoring and tracking mechanism, it is very difficult to trace these kinds of frauds.
The simplest form of invoicing is between two parties, the one drawing the invoice and the one invoice is being drawn upon. But that’s not the only scenario. Many public sector organizations, donor agencies, NGOs, and non-profit organizations often involve more parties in the invoice review, approval, and payment. Due to the centralized control of the software with principal organization, traditional invoice processing software doesn’t allow the efficient participation of multiple organizations in the process.
Traditional invoice processing software is vulnerable to security threats. There is no specialized security layer.
The centralized nature of traditional invoice processing software doesn’t allow an independent audit. The manipulative control over the database obstructs the independent audit.
All of the above issues lead to the conclusion that traditional invoice processing automation software doesn’t address all the invoice processing challenges rather it creates few newer challenges as well.
The question that arises here is “What can be the solution for all these challenges created by traditional invoice processing challenges?”
Let’s find the answer to this question.
If we look at the above issues, most of the issues arise due to a single reason and that is centralization. The centralized control over databases and software leads to many issues of trust, transparency, and functionality. So we need a solution to address the problems of centralization. This is where blockchain comes into the picture. Blockchain is the answer to the problems caused by centralization. Interestingly blockchain not only addresses all the invoice processing issues related to centralization but also the other issues discussed above relating to security and efficiency. Let’s see how blockchain address these issues
The blockchain in its very nature is decentralized. Blockchain stores data among multiple independent nodes creating a transparent, unified data repository without any centralized control. This addresses the data silos issue at the root level.
One of the most prominent features of blockchain is the enablement of the trust layer. Blockchain is a decentralized network of independent nodes. All the operations happening on the blockchain are visible to all the concerned people without compromising the privacy and security of data. So all the concerned parties of a transaction can have independent access to the related record.
Due to the inherent transparency of blockchain, all the concerned parties don’t have trust issues with each other as well as the process. All the parties are aware that none of them can manipulate the data on their own.
As all the concerned parties are connected to a decentralized blockchain and can verify the data at any stage so it is not possible for individual actors to get away with fictitious data. Fake, duplicate, under and over-invoicing cannot go unnoticed in blockchain-based solutions.
Blockchain data structure comes with inherent security features. This security is achieved by cryptography, decentralization, and consensus. All these features make blockchain resilient and secure. There isn’t even the remotest possibility of data being destroyed.
As all the data is stored on the public blockchain having all the necessary security features, so it is possible to delegate access to multiple 3rd party organizations without having any risk of unauthorized access beyond the delegated one.
The blockchain ensures transparency and trust at all levels that make it always verifiable and auditable. As all the relevant information is always available for all the concerned parties, so the possibility of discrepancy is already eliminated.
We have seen that we need an out-of-the-box solution to address the problems of traditional invoice processing systems. Blockchain is revolutionizing the fintech industry with its unmatched inherent features like trust, transparency, security, decentralization, and much much more. That is the reason why futureproof fintech solutions like InvoiceMate are changing the meanings of process automation. This is going to be the future of automation, the Automation 2.0
InvoiceMate is the future of Invoice Processing. It is the first and the only invoice management solution which is built around blockchain. InvoiceMate offers an end-to-end solution that covers the whole journey of invoice processing on the blockchain.
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