AP automation for manufacturing industry – Challenges & Solutions 2024

Challenge nr. 1: Volume of invoices

The invoice amount for manufacturing companies can rise to hundreds of thousands of invoices per year. With these numbers, everything that can be done to make the AP automation process smoother is important. Invoice data is an important factor when it comes to automation as most of the AP automation solution’s functionality is based on information on the invoice such as PO-number, contract number or reference number. With global vendor networks and different invoice formats, it is important to make sure the needed invoice information can be found on every invoice.

Handling multiple invoices at once

With a large number of incoming invoices, it is good to be able to handle multiple invoices at once. In Rillion, this is possible in all phases. In invoice log, multiple invoices can be matched and transferred at the same time. If an invoice is already in the workflow, a user can also approve multiple invoices at once. This is especially helpful in situations where one role needs to give the final approval stamp to large amounts of invoice. These invoices have already been checked and approved by other roles. These mass handling permissions can be edited in Rillion.

Challenge nr. 2: PO-invoices & Invoice Data

Depending on the business model, up to 90% of the invoices can be based on purchase orders, which makes the PO-matching nr. 1 most important tool for ap automation. In Rillion one invoice can contain items from multiple purchase orders, and one purchase order can be matched to multiple invoices, whether they have been delivered in part or in full. However, to make the ap automation process as smooth as possible, manufacturing companies need to communicate clearly to vendors what information the invoice should have and in what format the invoice should be sent.

Different Product Numbers

Based on our experience, it is common for manufacturing companies to utilize different product numbers in their internal purchasing procedures compared to those used by their vendors. Consequently, this can lead to the presence of distinct product numbers on both the purchase order and the incoming invoice. Rillion has solved this challenge for multiple customers by importing the product numbers used by vendors to Rillion.

Challenge nr. 3: Non-PO invoices or cost invoices

There are several approaches to automating the processing of non-PO invoices. For these types of invoices, it is crucial to ensure that the necessary information for automation, such as a contract number or reference number, is included on the invoice. If your company frequently receives PDF or paper invoices, you can train your invoice scanning software to identify the appropriate fields, such as the reference number, but it is more efficient to have the information consistently placed by all vendors.

Like with PO-invoices, it is essential to communicate the requirements for invoice information to vendors at the outset.

Challenge nr. 4: Complex supply chains

One of the major challenges facing the manufacturing industry in terms of accounts payable (AP) automation is managing the complexity of their supply chains. With multiple vendors, distributors, and suppliers involved, the process of tracking and reconciling invoices and different contracts can become quite daunting. In many cases, suppliers may be in different countries and use different languages and have different invoice information.

Vendor guide

No matter where in the world the vendor is, it is crucial to provide vendors with clear instructions regarding the required information to be included on the invoice. This information is essential for automatic handling to work seamlessly. To facilitate this, it is advisable to provide vendors with these instructions during the early stages of the negotiation phase, to simplify the automation process later. Automated processing is often based on multiple fields present on the invoice, making it essential to have good vendor instructions that cover all the necessary information. By prioritizing clear and thorough communication with vendors, organizations can ensure the success of their AP automation efforts.

Communication to existing vendors

When dealing with established vendors, it may be more convenient to request that the individual who maintains regular communication with the vendor convey any necessary modifications to the invoice information.

Internal guide

As we know, the automation journey for vendor invoices starts from the order. Develop comprehensive invoicing guidelines for your organization and ensure that everyone with ordering privileges is familiar with the procedures and guides. This includes providing clear instructions on which cost center or reference numbers should be included on the invoice to facilitate efficient processing.

Contract management

To keep track of all vendor contracts in a centralized way. Store documents in Rillion and make them searchable to the right people at the right time. Link documents to invoices to see needed information before payment. You can also set up automatic reminders when a contract is about to expire to make sure new negotiations can take place.