Manual vs automated invoicing: Is it time for an invoice management system?

Published 11 November 2025

Table of contents

• What is an invoice management system?
• Benefits of automated invoicing tools for small business
• Manual vs automated invoice management systems
• Automate invoice processing for accounts payable
• Using an automated invoicing system for accounts receivable
• 5 signs it's time for an automated invoice processing system
• Streamline your invoicing with Xero
• FAQs on manual vs automated invoice processing

Key takeaways

• Manual invoice processing wastes time and money, and creates errors.
• Automation speeds up the process, lowers costs, and reduces errors.
• Invoice management systems can automate incoming (accounts payable) and outgoing (accounts receivable) invoices.
• Automation makes it easy to receive, approve, and pay incoming bills and invoices.
• Automated invoicing systems also let you generate, send, follow up, receive, and process accounts receivable invoices.

What is an invoice management system?

An invoice management system is software that automates invoicing processes for your business. Invoice automation software helps you deal with invoices you send to customers (accounts receivables) and invoices (bills) your business needs to pay (accounts payable).

Although the process varies for accounts receivable and accounts payable (AP), the benefits are the same when compared to manual invoicing.

Benefits of automated invoicing tools for small business

Invoice automation tools offer significant benefits to small businesses.

• On-time payments – automation can help you pay your invoices on time, but it can also help you chase outstanding invoices so your customers pay you on time.
• More credibility – paying your bills on time with automated accounts payable software helps protect your relationships with your vendors. By automating your accounts receivable you can send professional invoices that give you credibility with your customers.
• Fewer errors – eliminating manual data entry helps reduce errors everywhere, from the moment you create an invoice until it's paid and recorded.
• Reduced idle time – manual processes depend on human labor. Unlike your team members, automated invoice management systems don't get sick or need breaks – they keep the invoicing processes going.
• Automatic approvals – tired of chasing team members and waiting for approval on invoices? The right tools automate approvals for your incoming bills and accounts receivable. And tools based in the cloud (like Xero) make it easy to collaborate with team members, wherever they are.
• Faster processing – automated invoicing workflows eliminate bottlenecks and speed up your invoicing process.
• Streamlined audits – automated invoicing software lets you see who did what and when. For example, see who created or entered invoices, who sent them out, paid them, and followed them up, and more. All this gives you visibility and oversight you simply can't get with manual processes.

Of course, you need the right software, which means paying for a monthly subscription and learning how to use the tools. But the investment is worth it – automation saves you time – and therefore, money – and gives you options, like helping you time invoice payments to optimize cash flow.

Manual vs automated invoice management systems

Manual invoice processes are slow, labor intensive, and prone to errors. Automating these processes can save you time, reduce errors, and free your staff for more strategic activities.

Check out the differences between automated and manual invoice processing solutions.

Automate invoice processing for accounts payable

AP automation tools create digital workflows for handling bills or invoices from your suppliers. These tools automate the entire accounts payable process, from receiving, approving, and paying invoices, to recording them in your accounts.

AP invoice automation can:

• Enter the invoice into the system – either by converting invoices and bills to a digital format, or accepting digitally invoices into the system directly from your suppliers
• Route the invoice to the right team, alerting the manager or department that an invoice needs their approval
• Approve or reject the invoice: – Letting the relevant team member verify the accuracy of the invoice for approval or rejection.
• Automatically pay invoices that meet certain criteria – for instance, invoices to a specific vendor that are less than a particular dollar amount.
• Process the payment by dispatching the payment to the vendor – potentially at just the right time to meet your cash flow needs
• Record the transaction by archiving the invoice for your records and updating the transaction in your accounting software.

Using an automated invoicing system for accounts receivable

You can set automated invoice management systems to automatically generate invoices as soon as you make a sale or need to bill a client. Your system can then fill in the invoice details for you (or just let your team do it). The system then sends the invoice to your customer by email, snail mail, or through your customer management system.

Most systems will let you add payment options to your invoices like online bank transfers or credit card payments. And once your customer pays, the software matches the payment with the invoice and updates your accounting records automatically.

Automation can:

• Create invoices – automatically generate invoices based on prepopulated details, by syncing with time management software, or through manual entry
• Send invoices – send the invoice to clients through email, mail, or using a customer management system
• Send automatic reminders – automatically send reminders to late customers and calculate late payment penalties
• Accept online payments – let customers pay online with a variety of payment methods
• Reconcile invoice transactions – once you’ve received the payment, the system helps you reconcile the amount with the invoice, and automatically updates your accounts

These systems can also generate reports that show you the invoices you’ve sent and which are outstanding – so you can prioritize certain customers and streamline your invoicing process. That means fewer errors, faster payments, and better business.

Here’s more on how Xero helps you manage your accounts receivables.

5 signs it's time for an automated invoice processing system

If you're struggling with the bottlenecks below, it could be time to think about invoice automation software.

• Time-consuming data entry: you're losing days entering invoices or paying staff to do things that could be automated.
• Long approval chains: you're spending so long chasing approvals that you’re paying your invoices late or missing early payment discounts.
• Too many mistakes: you're sending invoices with the wrong amounts or to the wrong customers, or recording invoices in your accounting software incorrectly.
• High costs: you’re spending more than $3 per invoice, which is what automated invoice processing typically costs.
• Late invoices and bills: if you're paying bills late, you're incurring late fees, and damaging customer relationships. And late-paying customers disrupt your cash flow and raise the risk of non-payment.

Streamline your invoicing with Xero

Xero's business automation tools help streamline your invoicing for both accounts payable and accounts receivables. Save time, save money, and reduce errors with Xero’s automated invoice management system.

Get one month free to get started with Xero today.

FAQs on manual vs automated invoice processing

Here are some common questions about manual vs automated invoice management systems for small businesses.

What are the bottlenecks in the manual invoicing system?

Human involvement! Unfortunately, people can input the wrong numbers on invoices, send them to the wrong customers, or not send them at all. Those mistakes may lead to delayed or missed payments, cash flow disruptions, or weakened customer relationships.

What is invoice management reporting?

This refers to reports that show how your invoices are being managed – you can see which invoices you’ve received, paid, you’ve sent out, or are pending. You can also see which team members handled which parts of the workflow.

How do small businesses manage invoices?

The main choices are manual and automated. Manual is when you generate invoices on your own, typically using a word processing or spreadsheet program. Automation involves purpose-built tools to receive invoices (accounts payable) or send them (accounts receivable) without human intervention.

How do I reduce invoicing errors?

It’s simple: stop relying on manual processes and switch to an automated solution. Do regular audits to uncover errors, then adjust your processes to reduce or eliminate them.