Quite simply, invoice scanning and automation reduces the manual tasks that an organisation needs to take after receiving an invoice, to ensure that payment is made correctly. However, there is more to it than just that simple description.
How Does It Work?
Modern business practices are highly automated. Gone are the days when paper invoices would arrive in the post to be dealt with by an accounts clerk, who would need to identify what the invoice referred to before passing it on to the relevant person for authorisation, who would then pass it to the finance department for payment, who would then need to record the payment on the relevant purchase records before passing the invoice and payment details for archiving.
This was time consuming, costly and had many opportunities for human error to create problems. In the current working environment invoices can arrive by any number of means, such as email, fax or post. Simply scanning the invoice and utilising invoice capture and processing software allows:-
- The invoice to be digitised and filed for future reference
- Key data fields such as supplier name, invoice number, date or net amount to be extracted and uploaded to financial systems
- The invoice information to be verified against business information e.g. supplier database, purchase order records
- Automatic matching against the corresponding purchase order. Allowing incorrect invoices to be flagged for attention and manual intervention, for example if there is no purchase order or the invoice amount is incorrect.
- Invoices to be automatically sent to the relevant person for authorisation, following which it is electronically submitted for payment.
- Throughout this process the risk of human error is virtually eliminated, whilst at the same time the speed and efficiency of the operation is improved.
All of this can be achieved because of advances in invoice processing software that recognises text characters in scanned documents. Optical Character Recognition software has been around for some time, and enables digital documents to be searched easily. Invoice automation and processing software uses technology to extract, identify, verify and match specific information, such as reference numbers and the amounts of payments required. This information does not need to be submitted in a preset format, as the software will learn to recognise a variety of invoice formats and information. Once it has identified the necessary information the software is able to start the invoice on its road to payment.
Invoice scanning and processing really does save businesses valuable time and money. Whilst there are undoubtedly initial purchase and set up costs for such a system, all analysts agree that the efficiency savings produced repay the initial costs in a fairly short time, and lead to greater cost benefits in the longer run. Some outsourced scanning bureaus offer invoice processing services as an add on service, enabling businesses to benefit from automated invoice processing with no initial investment.
The Larger Picture
In the modern working environment most organisations use some form of Enterprise Resource Planning software (ERP). ERP is a package of functions that brings together all of the financial, managerial and human resources information that an organisation will need in order to maintain control of its operations. In a manufacturing company, for example, the ERP will monitor and report on production costs, sales, payroll etcetera, whereas in a charity it will be more important to monitor receipts from fundraising against operating costs and charitable activities. The ERP can be set up to report whatever is important to an individual organisation. Invoice processing and scanning is an integral part of ERP because as soon as the invoice is received and scanned it is automatically included in the financial management information, and as the invoice passes through the stages of its payment process it is transferred from one record to another, allowing the overall financial picture to be accurate at all times. This may not seem greatly important for one individual invoice, but many organisations regularly receive hundreds or even thousands of invoices every week, which can take anything from a couple of hours to a few weeks to process. Having an invoice scanning and automated processing system in place, linked into the organisation’s ERP, ensures that at any given time the management information available is totally accurate, and decisions can be taken with full knowledge of the current operating conditions for that organisation. The invoice scanning and ERP software package mean that this situation will have been achieved without a large commitment of staff time and expense.
Document Storage and Retrieval
Once an invoice has been processed and paid, that is not the end of the story. Every organisation needs to maintain an archive of invoices along with all other financial and management documents. These need to be available for inspection during audits, or when submitting tax returns. Invoice scanning and processing includes the electronic archiving and storage of all the documents produced during the receiving and payment process, including the original invoice, payment authorisation, and record of payment, allowing for instant retrieval should they be required.
