The question of what is a business’s greatest asset is one that CEOs and managers have long enjoyed debating. ‘Customers’ is a common answer – your business exists to serve them, and their satisfaction is your organisation’s success or failure. ‘Employees’ is another oft-cited response, and rightly so – they are the driving force, the engine room of any business. And now, in a truly digital era, ‘information’ is increasingly rearing its head too.
Information, after all, is what underpins (or should underpin) every business decision. Without it, you’re guessing. With it, you’re strategizing.
Software applications have opened up new possibilities to organize and analyze vast quantities of data, granting businesses access to insights that would previously have gone unnoticed and unexplored. However, there is still a need for business leaders and managers to identify potential sources of information – and to take the time to harness them in an intelligent and informed way.
Invoices as a source of business intelligence
One source of potentially valuable information that many businesses are waking up to is the data within their supplier invoices.
There are at least two ways in which the information within supplier invoices can be harnessed to drive tangible business improvements. First, it can be the driver of a genuinely end-to-end, automated accounts process. If that information can be automatically extracted and fed into the right accounting software platform, then the business can dramatically reduce its reliance on slow and error-prone manual methods, and paper. In a highly competitive business environment, with growing awareness of the importance of an environmentally friendly stance, this can be hugely valuable.
Second, the information within supplier invoices can be fed into enterprise resource planning (ERP) software, analysed and used to develop tangible business insights in relation to areas such as cash flow, supplier reliability and the allocation of business funds. Current ERP systems have limitations when it comes to, say, processing tail-spend invoices and tracking the associated performance of different departments. They may also struggle to complete three-way matching between purchase order, invoice and delivery documents, which in turn can prevent vendors from accessing elements like early payment discounts. Analysing purchasing behaviour, whether from major and regular vendors or for one-off tail-spend purchases, can be incredibly valuable for business strategy, but ERP systems will struggle to provide these insights without access to information from invoices.
However, harnessing this valuable data relies on being able to extract the relevant information from supplier invoices and transfer it across to those separate platforms – and this comes with several challenges.
100% accuracy – or failure
One major challenge when it comes to extracting data from supplier invoices and loading into an ERP system is accuracy.
Optical character recognition (OCR) technology is a widespread option for enabling AP departments to automatically capture and digitise the information held in a PDF or paper invoice, but its accuracy is typically only around 98.5%. That might sound impressive – in many ways it is – but it simply isn’t good enough if the aim is to harness valuable information for use in business analysis and planning.
Automatic data extraction and import with 100% accuracy is the benchmark, then – but this requires specialist tools.
National standards and frameworks
Another challenge relates to to national standards and guidelines around invoicing. Europe, for example, has a range of EU and nationwide initiatives to developing electronic invoicing standards, across both the public and the private sector. These initiatives aim to not only reduce organisations’ reliance on paper, but also to integrate vendor and buyer systems more closely. This is helping to streamline the flow of data from invoice to accounting or ERP platform.
In the United States on the other hand, there is the Electronic Data Interchange (EDI), which incorporates several technical standards. However, not all organisations are yet equipped to meet those standards and follow a genuine e-invoicing process.
Then there’s the simple – but significant – challenge of invoice format. Vendors typically output invoices in an electronic format and email the invoice to buyers. Many organisations struggle to input emailed invoices into their ERP or accounting systems, however. They enter the data manually or use outdated legacy OCR software that has limited capabilities and integration issues.
The solution is to use technology which can read and convert emailed invoices in PDF, XML, EDI and other electronic formats, and then enrich that information to a format required by the destination ERP. And now, tools are available which can achieve this.
Tackling the challenge
Palette has joined forces with CloudTrade to address these challenges. CloudTrade operates as the delivery vehicle, extracting and enriching relevant data from the invoice, whilst Palette provides an AP automation platform which enables the end organisation to access and interpret this information. Collaborative approaches are essential for making intelligent use of the data within supplier invoices.
Capturing invoice data with 100% accuracy – and then analysing that data in terms of broader business information and planning – can open up huge opportunities for businesses in terms of intelligent decision-making, efficient internal processes and smoother cash flow. Faster payments to vendors are, of course, always to be welcomed – but here they are backed up with genuine business intelligence.