Magazine Article | July 23, 2008

Revisit Invoice Processing

Source: Field Technologies Magazine

Could the increasing adoption of ERP (enterprise resource planning) systems be sparking new interest in line item capture capabilities?

Integrated Solutions, August 2008

Over the last several years, automated invoice processing has gotten a lot of attention. Why? Because the need to pay bills is an unpleasant task that every business must deal with on a daily basis. Opening invoices, sorting invoices, verifying invoices, and ultimately cutting checks to pay each invoice — each step one time-consuming endeavor after another. Automating this process through the use of technology can reduce some of this burden. A recent discussion with a few industry experts indicates that invoice processing solutions have come a long way in just a few short years, driven by improvements in capture technology and integration and the continued appeal of a tangible ROI.

Many invoice processing solutions in service today have evolved to include templates and zonal OCR (optical character recognition) to capture invoice data. While this method is effective, it is cumbersome to maintain. Every time a supplier changes the layout of an invoice or the location of specific information, the template must be revised. Not only are these revisions a hassle, they are often expensive. Multiply this occurrence by just a handful of different suppliers, and the pain point increases dramatically. Furthermore, these template-driven solutions often capture only basic invoice information, such as vendor, purchase order number, and invoice amount. An AP (accounts payable) clerk still faces a fair amount of manual data entry to load detailed invoice information into an accounting database or ERP system prior to cutting a check for payment. Full-page OCR and rules-based capture strategies have reduced some of the reliance on templates, but line item capture is becoming one of the top trends in new invoice processing implementations.

"Lately, we've seen a surge of customers taking advantage of the ability of invoice processing software to capture line item details without the use of templates — as opposed to capturing only summary information from incoming invoices," says Samuel Schrage, president of AnyDoc Software. Line item details represent the per-unit breakdown of the invoice grand total, with each line listing data relative to a specific item, such as item number, quantity shipped, and price. Capturing these details is reliant on a combination of advanced algorithms, business rules, and a more accurate full-page OCR process. "Although line item capture has been available for some time, this ability has kindled new interest in utilizing two- and three-way matching of captured invoice data to other key business systems, such as accounting or inventory control," says Schrage. "We attribute this rise in customer interest to the corresponding growth in the implementations of enterprisewide ERP systems."

The two- and three-way matching Schrage refers to represents the interaction between an automated invoice processing solution and back end business systems such as ERP and receiving. Although validating invoices against back end systems isn't a new concept, doing so by capturing line item data enables invoice processing solutions to achieve tighter integration with these systems. This can result in a reduction in the number of exceptions that require manual intervention and data entry.  "Advanced filters for data matching with back end systems, combined with automated workflow rules, enable transactions to either be approved automatically or routed for exception handling," says Neil Snowdon, VP, portfolio management and software development at BancTec. "This allows validated [matched] transactions to flow cleanly into the ERP system." As an example, capturing line item details enables the cost for a specific item on an invoice to be automatically compared to the expected cost on the corresponding PO in the ERP system.  In addition, that same line item detail can be compared to the receiving document to verify the quantity ordered matches what was actually signed for on the POD (proof of delivery) document. If all paperwork is in agreement, the invoice flows automatically into approved status for payment. In the case of a data mismatch, an exception will be generated with the line item detail that caused the exception already identified. Without line item capture, a mismatch between the grand total of an invoice and the PO in the ERP system will generate an exception, but an operator will have to view the image of the invoice in order to identify the cause of the discrepancy and manually update that information in the ERP system. 

Anthony Macciola, CTO at Kofax, agrees that line item capture can drive tighter integration, but he feels this integration also must encompass additional methods of assimilating invoice information into the automated processing workflow. "With the increase of e-invoicing, the ability to accept invoices from more formats than just traditional scanned documents must be addressed," says Macciola.  In a typical AP department, invoices arrive in a variety of electronic formats, including via fax server and as e-mail attachments. "It's a hybrid world, and you have to be able to deal with both," says Macciola. "Companies shouldn't need one system to deal with electronic and another for paper."                

The ability to accept data in a wide variety of electronic formats for import into the processing workflow enables businesses to reduce the amount of paper arriving in the AP department, as well as the costs associated with handling paper invoices. In addition, e-invoicing compounds the advantages of traditional automated invoice solutions, such as the elimination of manual data entry. Factors such as these contribute to the positive ROI results of automated invoice processing and the continued adoption of these solutions.

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As the economy tightens, companies are continuing to look at ways to cut operational costs.  Invoice processing technology has accomplished this goal for many years.  Unlike some technology solutions, the benefits of an automated invoice processing are tangible and often end up going straight to the bottom line. For example, efficiency improvements often lead to the reduction or reassignment of full-time employees. Faster invoice processing times lead to the ability to pay suppliers quickly, leading to an often unrealized ability to take advantage of early-pay discounts. Reducing the paper involved in the invoice process can lead to a reduction in hard-copy storage costs. Invoice processing can lead to all those things and more. It is beyond just being more efficient.  It is about lowering expenses and driving profitability.