AP invoice automation insights by Medius

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Why Invoice Data Capture is Critical to Transform your AP Department

Invoice data capture is only a small part of automating the accounts payable process, but it is a critical part of AP department operations. Especially if you want to create visibility into the company spend where you receive paper invoices, most commonly the indirect material and services.

“In God we trust. All others must bring data.”- W. Edwards Deming, Statistician

The modern view of the accounts payable process is far from the transaction-oriented back-office function it used to be. Today most companies know that accounts payable can be the knowledge center for much of the business-critical information that impacts the CFO agenda. However, if you want to be a credible hub for business intelligence, the one thing you must do is to provide and sustain quality in the business data. Thus, accurate  invoice data capture is crucial to improve the operations of your AP department.

For accounts payable providing quality data can be translated into detailed and accurate AP invoice information. And, not just on header level, if you want to deliver real business value the invoice details need to be captured for each line item and regardless of what invoice format in which the invoice was originally received. Only then, accounts payable can support full spend transparency and other critical information that is needed to optimize working capital and improve cash liquidity.

How you capture invoice data is the foundation for spend transparency

One strategy that businesses use to secure spend transparency, i.e., to gain an understanding of what we are buying (items, volume and price) from whom we are buying it (suppliers) is to try to capture that information on the order rather than the invoice. However, this strategy is a very cumbersome way if your primary objective is to improve spend visibility. A full Procure-to-Pay (P2P) implementation usually requires a complex project and considerable change management effort compared to an accounts payable automation project. One reason is that the target audience for a P2P system is every buyer in your organization. And “every buyer” is not limited to the employees you have in your procurement department. If you include indirect material and services, then your target audience is anyone who buys something at any point in time in your organization.

Another way of securing detailed invoice information is to implement technology like EDI (Electronic Data Interchange), including XML invoices sent through VAN operators (Virtual Area Network). 2018 is considered the year of e-Invoicing in the European Union. The expectation is that the use of e-invoicing will be widespread, per the objective of Directive 2014/55 /EU, which requires member states of the union to use e-documents in public procurement processes as of November 2018. In the US the e-invoicing memorandum was issued by the Office of Management and Budget (OMB) in September 2015. The initial wording sounded very promising. By the end of the fiscal year for 2018, all government agencies were to transition to electronic invoicing for all federal procurements. However, this memorandum was never pushed forward to realization, and the US will continue to struggle with different AP invoice formats and standards for some years to come.

An additional strategy is implementing a supplier portal where you let the suppliers key in the detailed invoice information. However, onboarding all your suppliers on a supplier portal and getting them to submit invoices in the correct format is challenging. Also, this approach is troublesome for the suppliers as they must deal with different portals for different customers. 

Wouldn’t you rather let suppliers submit invoices in whatever format they prefer and instead make sure that the process that you control on your side can function regardless of what format suppliers submit their invoices?

The devil is in the details 

Invoice data capture is only a small part of automating the accounts payable process, but it is a critical one. Especially if you want to create visibility into the company spend where you receive paper invoices, most commonly the indirect material and services.

Today (2018) paper invoices still make up a large part of the invoices companies receive. According to PayStream Advisors, 2018 Payable Insight Reports, the top three workflow process challenges listed regarding invoice management are: Manual data entry and inefficient processes, loss of missing invoices, and majority of invoices received in paper format (32% of respondents). 

If there were only one thing to think about when automating your accounts payable - it would be to make sure you invest in technology that can provide detailed invoice information even if your invoices are sent in paper format. Because even if there are a limited number of capture solutions out there that can automate detailed invoice capture, there is technology in the forefront that can do this - don’t settle for less!

Other things you might want to consider is to find a provider that has a capture solution within the accounts payable workflow to avoid having to train AP department users on dual systems, and, more importantly, to keep an unbroken audit trail from receipt of the invoice  to posting in your ERP (and payment). Also, make sure you reap all technical, business and financial benefits of having a true AP cloud solution, such as machine learning for invoice interpretation and KPI benchmarking capabilities. 

The Future of Invoice Data Capture - Applying Machine Learning 

The advancements within machine learning will bring further transformation of the data capture and invoice management process in the next couple of years. Expect functionality such as suggestions of coding for non-PO invoices, proactive solution optimization, suggestions to improve process performance indicators, superior supplier identification with connections to GL and spend categories and fraud detection algorithms to become standard functionality.

With machine learning a transformation of accounts payable to a knowledge center and hub for business-critical spend information will accelerate with impressive benefits such as higher efficiency, faster processing times, and more powerful data insights. Join the future of AP automation and invoice data capture. Do not settle for solutions providing technology that is part of the first or second generation. 

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