A cleaner bill of health.

Automatic Invoice Processing can cut the rising paper/data mountain down to size--but only when it's done right. Colin Dean of document management and data capture specialist ITESOFT UK takes a look at the issues:

Every single working day you are swamped by incoming web, faxed, paper and email invoices that have to be sorted, prioritised and distributed, this takes time--lots of time, which costs money, creates delays and keeps you away from your real work.

Automatic invoice processing such as EDI (electronic data interchange) have proven a big help, but its only solved part of the paper chase. Large businesses for example retail, manufacturing and supermarket chains successfully manage known supplier invoices by operating tight contractual agreements with suppliers--70 per cent of invoices follow set rules and therefore can be automatically processed.

But not everything is so simple--what about companies that by the very nature of their business are unable to implement such agreements and even companies with these rules in place are unable to control the 'casual relationships,' the 30 per cent of unknown invoices that still require manual processing, an error prone process that averages 25 days per invoice.

Time in hand

Businesses often believe they have implemented automatic invoice processing--but they haven't. Unless they have been implemented within the last 24 months, most invoice management solutions are typically a hybrid of imaging devices such as printers, scanners, copiers and faxes that combine with enterprise content management software. At best they automate only a part of the overall AP process.

Most companies receive the majority of their invoices on paper. Some will scan into a "key from image" system; others will key directly from paper originals into the corporate accounting system.

Mistakes or mis-keying at the manual keying point are common, cause queries and discrepancies at a later stage--even after payment in some cases. The cost of these errors in reprocessing and the effort of referring back to original documents can be onerous.

Outside of a small group of efficient retailers and manufacturers, an average invoice costs between $15-$50 to process. To measure the true cost to an enterprise of processing invoices, you must look beyond the cost of keying data. What happens to an invoice after data capture? The paper invoice is compared with purchase orders, and in exceptional cases, when for example the value is high, or the PO's don't tally, the invoice will be sent to the original purchaser for approval, signed and returned, a process prone to delay and loss of documents. Queries and disputes often demand retrieval of paper documents--a costly exercise. The process is inefficient and storage space is invariably at a premium. Information at the point of enquiry may not be sufficient to enable accurate retrieval.

The paperless transaction remains a myth

Given that paper is unlikely to become obsolete any time soon, businesses must continue to look for ways to manage it more intelligently and refine how paper and electronic document tools work together across the business process. However businesses continue to operate to varying business rules, this non-conformation means that automatic invoice processing technology has struggled to achieve the efficiency that has been expected from it. But advances made in the last two years mean that this does not have to be the case.

The Great White Hope

Attempts have been made to automate at least part of the supplier invoice process. EDI was touted as the wonder application, but in most cases it has failed to eliminate paper from the process, as supplier invoices continue to arrive on an ad hock basis from a whole host of businesses.

Such invoice solutions work extremely effectively on invoices that meet the strict criteria laid out by the business--but what about the 30 per cent that don't? A good example is European car manufacturer, PSA Peugeot Citroen Group, who until recently were receiving 1.5 million supplier invoices a year of which of nearly 500 thousand invoices still required manual processing. However ITESOFT's automatic invoice processing technology that incorporates OCR (optical Character recognition) technology eliminates this costly process.

Leading the way

Today OCR technology is able to read 100 per cent of all in-coming invoices. By eliminating manual data entry and cross checking PO's against delivery notes there are significant cost savings to me made.

New invoice technology is able to process up to 90 per cent of all incoming voices within six months of installation from either known or unknown suppliers depending on the quality of the invoice emerging from the purchase to pay process. The real issue is not if the technology works but how well the surrounding processes work.

Luminar Leisure, one of Europe's largest late night event companies receives over two hundred thousand supplier invoices per year. However much purchasing activity is decentralised and this means that it is difficult to operate the tight contractual agreements previously discussed. But with ITESOFT's automatic invoice processing software, ITESOFT. FreeMind for Invoices, the constant problems they previously had with fixed invoice templates in both quality of data capture and control have been eliminated--data is now in an accessible electronic format that can be fed into the businesses workflow environment.