Invoice Capture: What is it and Why is it Important?

Over the last few years, businesses have been forced to shift operations to digital methods. This is largely in part due to the pandemic preventing employees from working in the office and the following effects it had on supply chains and inflation. Modern organizations are well-equipped to avoid downtime, regardless of what’s going on in the world.

However, an area that’s struggling to catch up with the rest of corporate America is how businesses handle their invoices. You’ve probably seen it or experienced it for yourself - a pile of documents burying everything underneath, each one waiting to be manually dealt with.

Try to consider exactly what happens when an invoice lands on the desk of one of your accounts payable (AP) staff. Whether you understand the process inside-out, or you don’t have any idea what goes on beyond that, it’s more than likely a drawn-out, complex series of steps that takes up too much time and causes too many errors.

The results of an IOFM survey showed that 75% of AP professionals had reported higher volumes of invoice processing and half said they have no choice but to work longer hours just to keep up. Consequently, plenty of employees are facing burnout, but invoice capture is a way in which you can help your AP teams operate more efficiently.

Invoice capture explained

Invoice capture is a process carried out by AP teams in which information is collected from an invoice and entered into an enterprise resource planning system (ERP). From there, it’s processed for bookkeeping purposes.

In other words, invoice capture means all of the tasks that were previously taking your AP teams far too long to complete can now be automated. Humans can still be involved in the final approval process, but most of their day-to-day time can be diverted to more important duties.

Why invoice capture is vital

Invoice capture is a crucial part of keeping an accurate record of your organization’s expenses. Precise and efficient data management is vital because it directly affects how a business operates.

Paying the correct amount - on time - should be a priority for any business, both to prevent a backlog and to strengthen relationships with clients and suppliers. Moreover, accurate and fast invoice capturing is integral for avoiding late payment penalties and will help your business to scale, with increased productivity and a reduction in costs.

What are the challenges of invoice capture?

Businesses often carry out invoice capturing in different ways. For some, the process is completely manual, whilst for others it’s automated. Every AP team will eventually run into an obstacle along the way, so here are some of the most common issues to look out for.

1. Invoice mistakes

Whether your organization implements manual or automated invoice capture processes, mistakes happen. In fact, entering data manually has been shown to create an average exception rate of up to 23%.

However, it’s not the errors that are a big problem, but the ramifications that often follow. It takes a lot of additional time and resources to resolve late or duplicate payments and your business could incur late fees and higher processing costs.

2. Inefficient manual process

For a lot of AP departments, invoice capture is done manually, meaning that employees have to type in all of the data. Moreover, the approval process can often involve a paper copy moving from one desk to another.

In a smaller business with fewer invoices to process, this might not be a big problem. However, when your company grows, it suddenly becomes a time-consuming, inefficient and error-prone method, leading to late or duplicate payments.

3. Delayed payments

Your approach to invoice capture can have a significant impact on meeting deadlines. Many issues can lead to delayed payments and it only causes bigger problems. You’ll likely be hit with a late fee, but if it becomes a pattern, vendors will be discouraged from working with your organization. If you have a track record of delayed payments they may even refuse to do business with you in the future as every time you fail to meet a deadline you’re affecting somebody else’s bottom line.

4. Poor visibility

If your employees are manually processing invoices, they must be using outdated methods for data collection, like spreadsheets. The issue with these kinds of tools is that they don’t offer dynamic methods to contextualize information and, often, even ways to search through it.

Consequently, it’s much more difficult to identify issues before they become a big problem. Additionally, decision-makers are faced with a challenge when it comes to analysis and planning for the future, as the useful information they require is difficult to find and access.

5. Weakened relationships with suppliers

If your business has ineffective AP processes, it might lead to weakened relationships with suppliers. This can include poor visibility, having to repeatedly check on the status of a payment or delays caused by inefficient procedures.

Maintaining solid relationships with your suppliers is integral to the success of your organization, as a breakdown can mean supply chain disruptions become common.

What are the key capabilities of invoice capture?

Invoice capture allows your business to automate the process AP teams carry out, from receiving an invoice to processing payments. Incorporating artificial intelligence and machine learning technologies, you can scan invoices immediately as they arrive and extract all the essential information, as well as highlight anomalies and keep track of financial records.

Importantly, your AP team isn’t infallible. Regardless of how efficient they may be, there will always be times when they need more information than a basic invoice offers. For example, additional data from the supply chain or specific bank account details.

When you utilize invoice capture, you can configure validation rules to best suit the complexity of your vendor invoice processing. This means your accounts payable automation can be as smooth as possible, helping your employees to feel less pressure, avoid repetitive tasks and allow them to concentrate their efforts on more important issues.