Research on invoice processing by Billentis has shown that an organisation can reduce costs by between 50-80% and achieve an ROI within 6 months using a fully automated system.
Organisations, particularly for SME’s, there is a need for an automated invoice processing solution, here are the reasons why:
- The need for an automated workflow system: once an invoice is received, the workflow directs an invoice through a pathway i.e. to the relevant department for sign off and storage, automatically and quickly.
- The ability to swiftly search and retrieve invoices without hefty amounts of paper pushing and frantic searches through filing cabinets.
- Perform trend analysis on invoices. Examples could include an easy way to calculate and view how much invoicing is coming from a specific organisation in a given time period. Transparent data allows an organisation to question figures, identify inefficiencies and make cost saving decisions.
The drawbacks of manual invoice processing are far too many to name, here we present a few:
- Time consuming: Manually typing data from an invoice onto a financial system and going through stacks of papers to find a single invoice takes up large sums of time. Additionally, budgeting and forecasting becomes difficult for financial departments.
- Costly: The cost and legal implications for late payments and non-payments are grave and severe.
- Data accuracy: Manual data entry leaves room for human error, which increases the cost of exceptions handling, leads to discrepancies in balancing and result in time-consuming post processing and even missed/incorrect payments.
A practical view
In Europe there are over 22 million SME’s, and for the UK it is predicted that in 2015 15-40% of the market will using e-invoicing in a B2B, B2C and G2B setting. Europe-wide just over 15% of invoices are paid late directly because of incorrect information on the invoices. Poor data quality is a huge problem especially in those fields on an invoice that are mandatory as part of tax regulations. As mentioned, payment delays have many consequences and inaccurate data increases the costs of exceptions handling.
Research shows that invoice processing using manual methods can cost €17.60 per invoice. An automated invoice processing system reduces this cost down to €6.40. A cost breakdown can be seen below. The figure outside the brackets is for paper and within brackets is for an electronic automated system:
- Receive: €1.10 (€0)
- Entering codification: €3.00 (€0)
- Validation and matching: €4.00 (€1.20)
- Dispute management: €2.50 (€2.00)
- Payment and cash management: €4.80 (€2.00)
- Archiving: €2.20 (€0.80)
The cost for an organisation to issue an invoice through paper/manual means is €11.10 and only €4.50, over 50% less, using an automated system (per invoice). See cost breakdown below:
- Print send and envelope: €3.90 (€0)
- Payment reminders: €0.50 (€0.40)
- Remittance and cash management: €4.50(€3.00)
- Archiving: €2.20 (€0.80)
All figures are based on an actual customer case.
How does automated invoice processing work?
Paper invoices are scanned and digitised at their point of entry or directly imported if they are already in electronic form and the relevant data from the invoice is extracted. It is important to note this is more than just a simple scanning process, invoices are intelligently scanned and automatically classified on various parameters (supplier, region, country, amount etc.)
The extracted data is validated to ensure of its accuracy. Further checks in an invoices legal conformity is completed and the invoice is placed against the relevant transaction/purchase order. Finally, the invoice is sent to the relevant departments and/or decision makers who then review and authorise the invoice before it is digitally archived. It is important to mention that for organisations that require a more flexible solution due to staff working at remote sites, authorisation and sign off can be done via the web using secure log-ins. There is in addition, a mobile processing option.
What has now been achieved is a seamless and automated invoice processing and workflow mechanism, from point of entry (email, fax, and post), extraction (no manual entry), storage (digital storage) to finally processing (sign off and authorisation) and ending with digital archiving. Digitally archived invoices are fully searchable making it easy to retrieve an invoice. In addition the workflow element supports business-rule routing, costing centre splitting, escalation and exception handling. The allocation of incoming invoices can be executed more effortlessly, quickly and with flexibility. After choosing the correct value or the appropriate cost centre, the calculation of the corresponding tax value is determined automatically.
The benefits of an automated invoice processing system
- Increase in process transparency: Incoming invoices are digitised in an email inbox thus finance/accounting departments are notified immediately.
- Reduce costs and increased productivity: No more late fees, organisations can even benefit from the perks of early payment. The time freed up thanks to an automated system allows staff to focus on other productive tasks and activities.
- Optimisation of data accuracy: No more manual entry means no missed or incorrect payments nor balancing errors and post-processing.
- Cash flow and performance management: A finance department can optimally manage an organisations cash flow, which helps in budgeting and forecasting.
To learn more on invoice processing or to request a free demonstration of automated data capture technologies, please get in touch and contact us.