Invoice Capture: An Easy but Comprehensive Guide for 2021
Digitisation and data capture has revolutionised the way businesses operate over the last decade or so, helping many to automate time-consuming processes that were once pain points for them.
One such process is invoice data capture.
This is a growing area of artificial intelligence (AI) and one that has quickly become popular with organisations. And with good reason! Invoice capture solutions are easy to integrate, and they have a number of significant benefits.
If you’re considering implementing invoice capture solutions in your business, then this guide is for you. In this easy but comprehensive guide, we’re going to answer the following seven questions, to help you get a better grasp on these tools:
- What is invoice capture?
- What challenges were accounting teams facing before?
- What are the benefits of invoice capture and how do these tools solve these issues?
- What are the different types of invoice capture solutions?
- What key features does an invoice capture tool need?
- What types of companies provide invoice capture solutions?
- How should you choose your invoice capture solution provider?
What is invoice capture?
Invoice capture (sometimes also referred to as invoice data extraction or invoice OCR) is the process of extracting data from invoices through automated methods. These could be in paper or digital formats, and this is often the first stage of invoice processing for the accounts department.
While digitisation has traditionally helped businesses to automate processes, these mostly focus on rule-based software. Invoice capture is different in that it involves the reading of both the invoice text using optical character recognition (OCR) and then applying machine learning to understand its context.
What this means is, optical character recognition software is used to scan an invoice and extract data, which it then turns into a readable and editable format that can be used with other applications.
As businesses across the globe continue to embrace and adopt artificial intelligence and machine learning, accounts teams can expect invoice processing to keep evolving and becoming more automated and intelligent.
Of course, while these tools are continuing to grow in intelligence, businesses must still set up quality assurance processes to flag any inaccurate or strange data. And invoice capture is no exception.
Otherwise, they might find that without checking inconsistent data, wrong payments could be made, or fraudulent invoices might be paid when they shouldn’t be. What’s more, it might be the case that humans still need to review transactions beyond a certain limit.
What challenges were accounting teams facing before?
Before clever solutions like invoice capture were as sophisticated as they are today, accounting professionals and those dealing with payments faced a number of challenges. These included:
- Receiving invoices in a number of different formats, including hard copies, emails, fax, Word documents, PDFs and more. This made gathering the data a much more time-consuming and complicated task
- There was also an increased risk of human error, largely due to all the different formats
- Considerable delays in invoice processing
- Higher risk of miscommunication between vendors and suppliers
- Lots of paperwork that needed to be organised and filed
- Sharing invoice details with others in the department could be tedious and increase the risk of error
- Finally, as the scale of operations grew, manual invoice management meant it was difficult to scale up quickly and affordably
Keeping these challenges in mind, we can see how digitalisation, automation and invoice capture solutions have made the invoicing process much quicker and more efficient for businesses.
What are the benefits of invoice capture and how do these tools solve these issues?
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So now we understand the key challenges that accounting professionals were facing, we can look at how invoice capture helped to solve these issues. Below, we’ve put together some of the key benefits of these types of solutions:
- Invoice capture helps to reduce back-office costs by cutting down on the need for manual data entry
- It also frees up the time of employees to focus on more important, higher-value tasks
- It reduces the risk of errors when processing invoices, especially when having to share data with other members of the team
- It is more efficient and allows for quicker turnaround and, therefore, quicker payment
- It allows for more efficient and accurate auditing
- Finally, it helps to improve compliance with data regulations such as GDPR. Something which is very important as invoices hold a lot of sensitive information
So as you can see, there are a number of significant benefits that come from implementing invoice capture systems. These have also managed to solve many pain points for accounting professionals, making the whole accounting process a lot more efficient and cost-effective.
What are the different types of invoice capture solutions?
In the invoice automation landscape, it’s not a one-size-fits-all approach. In fact, there are three different types of invoice capture solution. These are:
Template-based solutions were popular before the rise of machine learning solutions. However, now they are limited in their capabilities. Because the end-user must input the document structure into the software, this is additional work that should now be taken on by automation.
However, this type of solution might be more useful for organisations that deal with a limited set of invoice formats. This is because using templates creates a codebase that needs to be maintained.
2. Pre-trained machine learning
Pre-trained machine learning is used to capture data from a variety of formats and forms and, therefore, the automated invoice capture systems can handle millions of invoices. However, these can run into problems if the tools come up against invoice formats they have not encountered before.
3. Continuously trained machine learning (AI-based OCR solutions)
Continuously trained machine learning, also known as AI-based OCR solutions, tend to be the best solutions on the market. They can handle millions of invoices and continue to ‘learn’ to recognise unknown documents and invoice formats. This ensures a high level of accuracy, credibility and less need for manual intervention.
Known Vs unknown invoice formats
It’s also worth noting at this stage that there are two different types of invoice formats which we’ve mentioned briefly above. These are ‘known invoice formats’ and ‘unknown invoice formats’.
Known invoice formats are when a company deals with a fixed set of suppliers and vendors, and the invoices that are being processed are typically the same every week/month. Such companies can use template-based or pre-trained invoice capture solutions.
On the other hand, unknown formats require smarter tools that are able to recognise and therefore processes these. Even if they haven’t come across that format before.
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What key features does an invoice capture tool need?
Whether dealing with known formats or unknown invoice formats, there are several features that you want your invoice capture solution to have.
Below, we’ve pulled together a list of some of the vital features that you should look for in invoice capture tools:
- Fields captured: There are certain key fields that must be extracted by your invoice capture tools. These include vendor details, invoice details, buyer details, tax information, product details, total amount, etc.
- Key-value pair match: A key-value pair is the variable and its associated value. For example, in the case of an invoice, the key could be ‘invoice number’ and the value could be ’12’. You want an invoice capture tool that can accurately recognise these key-value pairs to pull the data accurately.
- Table capture and extraction: Most invoices layout transaction data in tables. As such, a good invoice capture tool must be able to recognise the various types of tables and columns and then extract the relevant data from them.
- Simple user interface (UI): Despite being automated, there is still a certain amount of human intervention needed in invoice capture. So you want a software that is going to be easy for employees to understand and operate.
- On-site deployment: Although not absolutely crucial, lots of businesses prefer an invoice capture solution that they can deploy on-site. Often this is because they are dealing with sensitive information and on-site solutions make it easier to comply with regulations like GDPR.
- The ability to customise: If you need to add new fields to your invoice capture, you want a tool with flexibility that allows you to do this.
- The ability to integrate: Invoice capture is not the final stage of processing. As such, you want to be able to integrate this tool with other systems like accounting software and CRMs.
- Pricing: Not strictly a feature, but you want to choose an invoice capture solution with transparent and fair pricing. You might also wish to find a provider that offers a free trial.
- Customer support: And finally, you want a provider that cares about their customers and offers the best possible support. For example, 24/7 on-chat functionality.
What types of companies provide invoice capture solutions?
If you’re looking to implement invoice capture in your business, you’ll need to find the right provider. There are several different types of companies that provide these invoice capture solutions, and these are:
Since AI has become more commonplace in businesses, more and more startups have begun leveraging the power of machine learning for flexible solutions. And a major part of this has been extracting data and automating time-consuming activities.
Established account payable (AP) tech companies were amongst some of the first to provide invoice data extraction solutions. However, because of this, these are often quite dated now and rely on a template-based invoice capture solution.
What’s more, tech giants like Amazon have created their own invoice capture solutions, some of which allow companies to completely outsource their document processing.
How should you choose your invoice capture solution provider?
Choosing an invoice capture solution is an important investment. Therefore, this isn’t a decision to be taken lightly. Because of this, you need to choose the right solution provider.
To help you do this, the final section of our guide will look at what you need to consider and how to choose the perfect invoice capture solution for your business.
Consider the costs
First and foremost, you need to make sure you have a budget in mind for how much you can invest in invoice capture. Without this, you might find a tool that you love but later realise you can’t afford.
So before you begin getting into the finer details, it’s a good idea to get a feel for the prices of these solutions and put together a budget for your company.
Once you’ve done this, you can begin to think about the important, finer details of the tools themselves.
Look for a solution provider that’s in line with your data privacy policies
Data privacy policies can make or break a business’s reputation. Especially when it comes to handling sensitive data such as financial details.
And this is particularly true in the era of GDPR.
Therefore, you need to look for an invoice capture solution that is in line with your policies and that puts security and privacy at the forefront.
Again, it might be worth looking for one that offers on-site deployment to help you to do this.
Find out about the false positive and manual data extraction rates
The idea of invoice capture and any other automated data capture tools for that matter, is to make processes smoother and more efficient. For this reason, it’s a good idea to ask about false positives and how often manual data entry and extraction is required.
Because let’s face it, if these rates are too high, you’d be better off looking for a different, more accurate solution provider.
Choose a solution that is capable of learning
You need to look at how different solutions learn about new invoice formats. The best solutions have an interface for allowing your team to help guide the solution, but they also leverage machine learning to make this a more efficient process.
So keep this in mind when looking for the right provider.
Evaluate the ease-of-use
Like we’ve said above, there may be times when human intervention and manual data entry is required. Therefore, you want to find a solution that is easy to use and won’t be hard to teach to your accounting staff.
The last thing you need is a complicated interface that causes no end of stress to your company’s back-office personnel. Because this sort of defeats the whole point of implementing these automated systems.
Ask the right questions
Finally, before you jump in and invest in an invoice capture solution, you need to put some time in with the provider’s team. This gives you a chance to see demos, request free trials and also to ask plenty of questions. So before you choose a provider, be sure to ask them:
- How widely adopted is your solution?
- Have you got any customer reviews or testimonials?
- What is your customer support like and are other customers happy with it?
- What are the options to integrate with other systems?
- What advanced processing options do you offer?
- Will the prices change at any point or are these fixed?
And, of course, any other questions that might come to mind as your conversing with them. This will help to ensure you have all the facts before investing. This will help you to make a more informed decision.
There has been a lot to take in throughout this guide, but hopefully now you have a much better understanding of invoice capture. That said, we thought it would still be helpful to pull together some of the key points you should take away from this guide. These include:
- Invoice capture is the process of extracting data from invoices through automated methods. Typically, this software is used to scan an invoice and extract data, before turning it into a readable and editable format on the computer
- There are three types of invoice capture solutions and these are template-based, pre-training and continuously trained machine learning
- Before clever solutions like invoice capture, accounting professionals faced challenges such as lengthy manual data input, delays in payment processing and higher risk of human error
- But thanks to automation and invoice capture solutions, they have reduce back-office costs, made accounting and invoicing processes more efficient and cut down on the risk of an error or incorrect payment being made
- When choosing an invoice capture solution, there are certain features you need to look out for. These include field capture, key-value pair match, table capture, integration and more
- Because of this, you need to take your time when choosing the ideal invoice capture solution provider. Be sure to look out for a provider that includes all of the relevant features, is fairly priced, offers great customer support and offers an easy-to-use system
If you’d like to know more about the different uses and methods for data capture, you can check out some of our related reading below:
- Data Capture Form: Everything You Need to Know
- 10 Best Data Capture Methods and Strategies in 2021
- Data Capture Tools in the Banking Industry
- How to choose the best data capture solution in 2021
- Data Capture Systems: All you need to know in 2021
- Mobile Data Capture: The Ultimate Guide
- What is invoice data capture? Methods, examples and techniques