Article Summary
Invoice processing can be full of bottlenecks – from manual data entry errors to slow approvals and even outdated OCR systems that miss details. In this article, we identify the top five accounts payable challenges and provide practical solutions (like automation) to fix them, helping you streamline your AP workflow.
The most significant invoice processing challenges stem from a reliance on manual work. Heavy data entry introduces persistent errors, approval bottlenecks cause payment delays, and high processing costs per invoice drain resources. Even basic OCR tools often fail to solve these common accounts payable issues, as they struggle to interpret varied invoice formats accurately. These inefficiencies directly lead to financial errors, damaged supplier relationships, and wasted time.
At their core, these problems are rooted in manual processes that limit your team's productivity and negatively impact your company's bottom line. This guide is designed to provide a clear path forward. We will identify five specific challenges that AP teams consistently face. For each one, we will outline a practical, actionable solution to help you overcome it.
The first challenge many finance teams notice is the most direct: the significant financial drain caused by inefficient and costly processing workflows.
Challenge 1: High Processing Costs and Inefficient Workflows
One of the most significant accounts payable challenges is that manual invoice processing is not just slow-it is expensive. A critical performance indicator for any finance team is the "cost per invoice," and when your process relies on manual work, this cost can be substantial. The expense is driven by the cumulative hours your team spends on repetitive tasks like manual data entry, chasing internal approvals, and correcting the errors that inevitably arise in any manual Accounts Payable (AP) workflow.
These inefficiencies directly result in slow processing cycle times. When invoices take weeks to clear instead of days, it can damage vendor relationships, lead to missed early payment discounts, and reduce your business's overall agility.
The most effective solution is to implement automation that drastically reduces the manual labor required to process each invoice. A purpose-built tool directly lowers your cost per invoice and shortens cycle times. For example, a dedicated data extraction platform can reduce invoice processing costs by an average of 80%. You can start realizing these savings immediately by using a permanently free plan to process up to 50 pages per month. For higher volumes, you can see pricing, but the free tier provides a direct way to prove the value.
While lowering costs is a major benefit, these high expenses are often just a symptom of a deeper, more persistent problem: the errors inherent in manual work, which we will explore next.
Challenge 2: Persistent Errors from Manual Data Entry
One of the most persistent manual invoice processing problems is its vulnerability to human error. The task of manual invoice processing is repetitive and detail-intensive, requiring staff to key in hundreds or thousands of data points from varied invoice layouts. This environment makes Data Entry Errors almost inevitable, regardless of how diligent your team is.
The impact of these errors is significant. A single mistyped digit in an invoice total or an incorrect number for Purchase Orders (PO) can lead to incorrect payments, strained supplier relationships, and serious compliance issues. The result is hours of wasted time as your team hunts down the source of the error and performs painstaking reconciliation.
The most effective solution is to replace manual keying with automated invoice data extraction. A purpose-built AI tool can read and capture invoice data with near-100% accuracy, minimizing the need for human intervention. Unlike generic tools, a specialized platform is designed to handle the specific complexities of financial documents. It can process large batches of up to 1,500 mixed-format files at once and accurately extract data from complex, multi-page PDFs. If you want to learn more about the specifics, you can read about how to automate invoice data extraction or Start for free to test the process with your own documents.
However, even when data is captured perfectly, the invoice can still get stuck. The next bottleneck in the process is often getting the invoice to the right person for approval.
Automatically extract financial documents to Excel with near 100% accuracy
Challenge 3: Approval Bottlenecks and Damaging Payment Delays
A familiar story for many finance teams involves an invoice arriving and then disappearing into a black hole. The manual approval process often looks like this: a paper invoice is physically carried from one desk to another, or an emailed PDF gets buried in an inbox, leaving everyone uncertain about who needs to approve it next. This friction is a primary cause of significant invoice approval delays.
The consequences of these bottlenecks are both financial and relational. When invoices are stuck awaiting approval, your business misses out on valuable early payment discounts. Worse, you may incur costly Late Payment Fees, directly impacting your bottom line. Beyond the immediate financial penalty, consistent payment delays can strain and damage relationships with your most important suppliers. In fact, financial industry experts at American Express warn that a reputation for late payments can cause suppliers to sever ties, potentially affecting future terms and service levels.
The solution is to implement an automated approval workflow. However, you cannot automate the workflow until you first automate the data capture. The most critical first step to enabling any kind of automated routing is getting clean, structured data out of the invoice the moment it arrives.
By eliminating the initial delay caused by manual data entry, invoices can enter your approval system, whether it's a simple email chain or a dedicated platform, on day one. This means the clock starts immediately on the approval process, not days or even weeks later after someone has finally keyed in the data.
These delays are often made worse by a lack of a central, real-time view into where every single invoice is in the process, which introduces the next major challenge: a lack of visibility and control.
Challenge 4: Lack of Visibility and Increased Compliance Risk
When your accounts payable process relies on paper documents and manual handoffs, invoices can easily fall into a "black hole." Once an invoice is received, it becomes incredibly difficult to track its status, physical location, or processing history. This lack of a central view creates significant operational friction and business risk.
The consequences are tangible. You cannot provide quick answers to supplier inquiries about payment status, potentially damaging relationships. It becomes nearly impossible to accurately forecast cash flow when you don't have a real-time view of outstanding liabilities. Most critically, this manual approach fails to create a clear audit trail, leaving you exposed during financial reviews and making compliance difficult to prove.
The solution is to establish a centralized, digital record of all invoice data. When you extract key information from every invoice and organize it into a standardized, structured format like an Excel spreadsheet, you create an instant and searchable log of all AP activity.
This structured data provides immediate visibility into your entire invoice lifecycle and forms the foundation of a reliable audit trail. For example, a purpose-built tool provides a perfectly structured Excel file where every single row of extracted data includes a reference back to the source file and page number. This creates an instant and verifiable record, making it simple to cross-reference any data point with its original document for audits.
While digitizing your invoice data is the essential first step toward gaining control, many companies find themselves hitting a new roadblock with outdated technology. This brings us to the final, crucial challenge: the limitations of traditional OCR.
Challenge 5: Why Traditional OCR Fails to Solve Invoice Data Extraction Challenges
When seeking to fix manual processing issues, many organizations turn to automation. However, it is critical to understand that not all automation technologies are created equal. Many early or basic solutions are built on traditional Optical Character Recognition (OCR), a technology that presents its own set of invoice data extraction challenges.
In simple terms, traditional OCR converts an image of a document into machine-readable text. While useful, it often lacks contextual understanding. This leads to significant OCR limitations when processing financial documents. The technology typically relies on rigid templates, meaning it struggles to interpret invoices with varied layouts or find data that appears in an unexpected location. Accuracy drops significantly with low-quality scans or complex multi-page files, creating a high volume of exceptions that your team must then manually review and correct. These persistent issues are a key reason why traditional OCR often falls short, as the constant need for rework defeats the primary purpose of automation.
The solution is to use a purpose-built, multi-model AI system designed specifically for financial documents. Unlike a simple OCR wrapper, a modern AI platform like Invoice Data Extraction is built on a proprietary, multi-model AI engine. This system doesn't just read text; it understands the document's structure and the relationship between data fields. For example, it reliably distinguishes between an "invoice date" and a "due date" regardless of where they appear on the page. This contextual intelligence allows for far higher accuracy across any invoice format without relying on inflexible templates, leading to an ~85% error reduction compared to manual and traditional OCR methods.
Moving from Challenges to Solutions: The Path to an Automated AP Process
Throughout this guide, we have examined the most common invoice processing challenges that hold finance teams back: from the high costs of inefficient workflows and persistent manual data entry errors to damaging approval bottlenecks, poor visibility, and the fundamental failure of traditional OCR to deliver reliable data.
Overcoming these issues does not require a massive, disruptive overhaul of your entire department. Instead, the most effective approach is to view the transition as a strategic move to solve these specific, painful bottlenecks. The foundation of any modern, efficient accounts payable process is the ability to get fast, accurate, and reliable data from your documents. When data extraction is solved, everything that follows becomes simpler and more effective.
Implementing Workflow Automation is an accessible and high-impact improvement that puts your team back in control. It frees up valuable time, improves data integrity, and provides the visibility needed for better financial management. To see how you can begin this transition, you can read our step-by-step guide to automating invoice processing.
Automatically extract financial documents to Excel with near 100% accuracy
Cut your invoice processing costs by an average of 80% with our purpose-built software.