For any firm, the Accounts Payable performance depends on how accurately it executes the invoice validation process. Regardless of the business vertical, invoicing is important. That’s why it is important to understand invoicing in order to achieve favorable full-cycle accounting performance metrics.
That said, let's first find out what an invoice is exactly.
A commercial document that enlists the goods/products sold by a seller to a buyer, indicating the quantities, agreed on prices, date of sale, and details of the items transacted thus, is called an invoice. In short, an invoice is a document that sums up a sale.
Invoices are extremely important as they act as a record, sort of, of a particular transaction having taken place.
Invoices carry all the details of a sale - however, there are 5 parameters that are vital from an accounting point of view:
Knowing whom to send the payment to is the first step of invoicing. The vendor's contact details, such as the name of the company, its address, zip/postal code, email address, phone number, and other contact details, need to be clearly recorded for the invoicing process to stay smooth. Recording this data helps accounts to keep all the invoices sorted.
An invoice ID number is unique to an invoice. These numbers act as identifiers when a payment from the buyer is initiated - it helps the vendor pinpoint the sale for which the payment is being received against an invoice. It helps in keeping the ledgers duly updated and categorized.
PO numbers are the same as invoice ID numbers, with one difference in protocol: PO numbers are issued when the transaction amount exceeds a certain pre-decided limit set by the purchasing company. They are usually used for high expenditure items, as a means of authority for approving an expenditure of such high value.
PO numbers are issued against Purchase Orders. These documents are a legal tender that binds the supplier to fulfill the delivery of the goods ordered by the buyer as per the terms and conditions mentioned in the purchase order.
The interval of payment release from a buyer to the seller is usually indicated in the terms of payment of an invoice. It tells the accounting department when to expect compensation for the goods sold; it also helps them raise a follow-up or concern in case the payment isn't received by the end of the timeframe stipulated in the payment terms of an invoice.
Every invoice contains detailed descriptions of the products sold, the quantity and unit prices, date of sale, etc. These details come in handy when a business is required to revisit a sale for reference or more information. It also helps in putting together a transaction history of a client.
An invoice carries more information than just the five parameters mentioned above; however, this extra information does not adversely impact full-cycle accounts payable.
a) Billing account number - This field carries information about the administrative offices of the buyer from where the payment against the invoice is received. It is helpful in case the buyer has branch offices.
b) Balance due - Any balance payments due from the last or previous transactions with a buyer show up in this field. It comes in handy in forming a big picture of the payment status of an invoice.
c) Credit - In case the buyer has paid for the goods in advance for a lot yet to be delivered, the invoice records it in the credit field. In addition, previous balance or current charges on an account also appear in this section of an invoice.
d) Extra information - Billing helpdesk contact information, links to resources, terms of the invoice, etc., can be accessed through this section. In case of any queries about the invoice, this is the section to seek.
Manual invoice processing requires long and tedious man-hours of reading and recording the data digitally, and maintaining safe copies of the invoice files in case of loss or damage. In addition, the invoice validation process may incur inevitable human errors. Manual invoice processing not only makes wasteful use of manpower but also returns less-than-accurate data, which can adversely impact the AP cycle performance metrics.
Automation in the workflow is a boon for the resources of a company if deployed effectively. For documents as central to a business as invoices, automation helps reroute significant budgets and resources to other arms of the business.
By using the Intelligent Optical Character Recognition technology, Docsumo is able to extract data from paper forms onto its digital database in a matter of minutes. This exercise is a lot less cumbersome than the traditional method of manual data entry.
Manual data entry is fraught with errors. On the other hand, intelligent software solutions have algorithms in place for error prevention - which is why automating the process of invoice reading helps create a highly accurate digital database.
Bringing an intelligent software solution like Docsumo into the equation drastically reduces the time required to complete a process. From sending an invoice into the system to be captured digitally through OCR, up until the process of invoice approval, the timeline is noticeably shortened.
Docsumo significantly reduces the manpower required to be employed for processing invoices, thus improving the cost-effectiveness of the whole operation. With minimal manual intervention required only to validate the anomalies detected while capturing data, Docsumo truly automates the entire invoice reading process.
Docsumo is a revolutionary software that enables a business to digitize its paperwork within a matter of moments, with high accuracy and minimal manual involvement. For more information about invoice processing automation, read our complete AP automation guide. To learn how we can help you automate document processing for your business, contact us today!
In today’s dynamic business world, filing and archiving official documents in the digital form makes it handy, and works wonders in the future or in unforeseen circumstances.
Optical Character Recognition (OCR) is the technology to convert an image of text into machine-readable text. It is the underlying technology for various data extraction solutions including Intelligent Document Processing. However, OCR is not smart enough to figure out the context in a document - it works simply by distinguishing text pixels from the background and finding a pattern. This limitation could cause inaccuracy in captured data that could directly impact the output of your data extraction model.
Accounts payable is a key financial function for any business. Corporations can have thousands of suppliers; even for relatively smaller businesses, the number of suppliers could be in hundreds. All the invoices they receive from these suppliers come in multiple formats, layouts, and templates - some semi-structured, some unstructured. Therefore, firms expend time and resources to capture invoice information through manual data entry and verification of accounts payable. Manual data entry is not feasible in the long run, definitely not on a large scale. Before we talk about how intelligent invoicing solves the problems associated with manual invoicing, let’s discuss the challenges in much detail.
As most of an organization's information is available in an unstructured format, processing it requires an automated system that can handle documents with minimum human interaction. OCR is one such technology, but its scope is limited as it requires human interaction and is highly dependent on the layout and structure of the document to be processed.These limitations are overcome by Intelligent Data Extraction.Using artificial intelligence, the Intelligent Data Extraction technology extracts data from documents and transforms it into useful information through the extraction process. It functions as a singular tool for extracting information from any type of document and aids in optimizing company operations.