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Receiving and processing invoices may seem straightforward, but the importance of proper invoice capture and the variety of tools you can use to perform it are both much greater than what people generally estimate. In this blog, we’ll explore why invoice capture deserves more attention than it’s given, the pitfalls of manual invoice capture, and what software is available for optimizing this critical function of accounts payable (AP).

What Is Invoice Capture?

Invoice capture is the process of extracting the data contained in an invoice – such as dates, amounts, and PO information – and transferring it to company systems. It is generally a responsibility owned by AP departments, as they oversee the handling of organizations’ outgoing payments.

Invoice capture can be performed manually or with the assistance of invoice capture technology. Manual invoice capture processes require an employee to devote their time to gathering all invoices from all sources, inputting the data they contain into an ERP item by item, saving the invoice to a company folder, and then overseeing the approval process.

For organizations handling large amounts of invoices daily, manual invoice capture might not cut it. Invoice capture tools can be used to automate the collection, classification, and data capture of invoices. These tools often come with ERP integration capabilities, storage functions, and approval routing.

Why Is Invoice Capture Important?

Capturing invoices and accurately recording the information they contain is vital for a number of reasons:

• Accurate records: First, it’s a critical component of keeping accurate internal records of expenses, which is an important aspect of producing financial projections that impact accounting and the assessment overall performance.
• Maintaining good relations: Accurate invoice capture is also instrumental in maintaining relations with suppliers and partners, who can easily become frustrated with an organization that routinely mishandles payments by overpaying, underpaying, or not paying on time.
• Early payment incentives and late penalties: Many companies offer incentives for early payment of invoices as well as penalties for late payments. Over time, maximizing incentives and avoiding penalties can make a significant impact on the bottom line. If your capture processes are inefficient and slow, you could be missing out or even hurting your organization.

Problems with Manual Invoice Capture

Many organizations are still relying on manual invoice capture to keep their financial operations accurate and running smoothly. The typical manual AP invoice capture looks like this: The employee will search the department’s email inbox or physical mail for invoices, manually enter that data into an ERP, and then save the file in a company folder.

Although it’s free to manually capture invoices, you run the risk of experiencing one or more of the following issues:

• Lack of standardization: Without automated invoice capture in place, you may experience some confusion stemming from the variety of invoices you receive. Email, PDF, physical mail, and other forms make it difficult to standardize your capture processes which can lead to lost invoices, inconsistent capture formats, and inaccurate access authority designation.
• Time consuming and expensive: Manually capturing invoices can be a painstakingly slow process that is a highly inefficient use of AP employee’s time and can account for up to 30% of their working hours on data collection alone. When departments don't have the time, this can lead to them taking drastic and expensive measures, such as when this leading turkey manufacturer was forced to outsource it's capture processes for $140,000 a year.
• Leads to errors: Humans are imperfect, and if you are leaving invoice capture solely in their hands, mistakes will inevitably be made at some point. Small mistakes in invoice capture can have large consequences, as they can result in late payments, missed opportunities on early payment discounts, and a loss of trust between the company and its partners. This restaurant equipment and supply store chain is a perfect example of how manual entry errors as simple as miscalculations and poor handwriting can lead to tens of thousands of dollars in lost revenue.
• Manual classification: The first step in capturing an invoice is not extracting the information it contains, but rather classifying it as an invoice. Invoices are sent in a wide variety of formats and AP employees must have a keen eye for identifying all of the different forms, or else some will slip through the cracks. Classification alone can be so time consuming that organizations like this metal coil coating service have to employ temps to search for and scan invoices during busy periods.
• Tracking down missing info and correcting mismatches: If you receive an invoice that that does not match a PO that your organization has on file, or if the invoice has insufficient information, it is now your responsibility to acquire that information from the sender. This can be hard to keep track of and can easily result in unpaid invoices on top of lost time from an employee’s perspective.

Key Features of Top Invoice Capture Solutions

Whether you’re intending to simply pass along invoice data to an ERP or you’re looking to perform more complicated functions like document classification or validating data against existing databases, you want to make sure an invoice capture engine has:

• Out of the box classification/data extraction intelligence, such as optical character recognition (OCR)
• Training capabilities to make it smarter over time as you handle exceptions
• Configuration capabilities to create extraction rules for complexed document/invoice formats
• A technical interface for server management and a more intuitive interface for non-IT users

Invoice capture technology that possesses all three of these features is likely to be a leader in the industry. Organizations are looking for an invoice capture solution that will provide immediate value followed but can also adapt to the company’s unique invoice situation.