The Digitization of the Workplace Marches On

Did you know that many tools in the business world were originally invented to overcome a physical limitation? For example, digitized scanning in its infancy enabled blind people to hear the written text, opening up a world of literacy for them [1].

By 1992, this technology evolved into the scanning of handwritten text, and as recently as 2019, the dream of scanners recognizing text and numbers in any language is becoming a reality [2].

Today, this technology is a cornerstone of accounts payable automation in business. Invoice scanning has reduced the data capture function to seconds instead of 3 or more minutes, making it a highly desirable adaptation to accounting workflows.

The Humble Invoice Ignites a Data Processing Chain

A typical data entry workflow begins with a document containing information that must be fed into a system to centralize record-keeping and complete a process, such as paying a vendor for goods and services delivered to your business.

The most processed document in a business is an invoice, and it drives two key processes:

• Accounts Payable: An invoice is received from a vendor.
• Accounts Receivable: An invoice is issued to customers who have received goods or services from your business.

Let’s focus on accounts payable to explain invoice scanning.

Invoices can be received physically or via email from vendors. Manual data entry requires a person to extract key invoice data and load it onto a spreadsheet or into the accounting software the company uses. Processing time can range from 3 to 5 minutes, depending on the data capturer's skill and the amount of information.

Manual processing is prone to risks like lost documents, delays, and errors. To overcome these limitations, businesses are increasingly considering invoice automation.

The Role of Invoice Scanning in Accounts Payable

Choosing technology before perfecting your workflow is like putting the cart before the horse. Invoice scanning can be the first step to automation, growing more sophisticated as technology supports your workflow.

Payvy offers high-velocity accounts payable solutions to speed up processing and manage your cash flow.

Typical Steps for Introducing Invoice Scanning into a Workflow

Businesses rarely move from spreadsheets to fully automated invoice processing in one leap. Many improve their workflows step-by-step:

1. Minimize the use of spreadsheets and purchase accounting software.
2. A bookkeeper manually uploads invoices into the software.
3. Documents are passed around for authorization with stamps and signatures.
4. Cheques or bank payments are loaded.
5. Paper documents are filed for audits.

Over time, businesses can move towards:

• Scanning invoices to PDFs, emailing them for approval.
• Bookkeeper or accountant checks the extracted data.
• Bank payments are loaded and approved within the software.
• Documentation is stored digitally in cloud storage or a central drive.

Eventually, businesses may fully centralize their systems:

• Invoices are scanned into the software, where data extraction occurs automatically.
• Automated workflows notify the right people, and data validation ensures the process flows smoothly.
• Payments are scheduled, and notifications are sent for authorization.
• OCR (Optical Character Recognition) technology is used to identify complex information from diverse invoice formats.
• Vendor portals allow vendors to submit invoices and check payment status.

How Does Invoice Scanning Work?

Automated invoice scanning software integrates with your accounting software, allowing you to scan, convert, and extract data from invoices. You can digitize invoices, receipts, and statements using either an invoice scanner or a smartphone.

Specific data fields are automatically populated with relevant information, offering a cost-effective solution for small businesses.

Data Extraction with Invoice Scanning

Key data extracted from invoices includes:

• Vendor name
• Vendor banking details
• Date of invoice
• Date of payment due
• Invoice number
• Details of goods or services

OCR technology recognizes text in different languages and converts it into a machine-readable format, ensuring accurate and efficient data extraction.

Benefits of Invoice Scanning

Adapting business processes to new technology ensures alignment with the evolving practices of customers and vendors. Some direct benefits of invoice scanning include:

1. Cost savings on storage and more efficient processing.
2. Building better vendor relationships through faster and accurate payments.
3. Reduced human error by eliminating manual data entry.
4. Faster processing times, reducing the time taken to process an invoice from 3 minutes to around 30 seconds [3].

Why Businesses Invest in Automated Invoice Capture Software

Dr. Robert Cialdini’s research into consumer behavior suggests that social proof influences buying decisions [4]. Here's why other companies invest in invoice scanning software:

1. Eliminate lost or damaged documents early in the workflow.
2. Reduce courier expenses and inter-business routing.
3. Centralize capturing and processing of invoices.
4. Standardize business rules to automate approvals and workflows.
5. Reduce non-value activities, like manual reminders and document handling.
6. Improve audit trails with detailed information about access and authorizations.
7. Integrate with other enterprise systems to centralize information.

Basic Invoice Scanning Software Features

There are many options available for invoice scanning software. When choosing one, consider the following features:

• Integration with existing systems
• Modern, easy-to-use interface
• Automatic data extraction
• Expense and vendor management
• Reporting capabilities
• Reliable customer support

Costs of Invoice Scanning Software

The cost of OCR software depends on the type of data being extracted. Here are some general options:

• Freeware: Basic scanning and output in formats like JPEG or PNG.
• PDF OCR Converters: Convert scanned images to PDF. Costs around $100.
• Standard OCR: Converts scans to Word, Excel, or HTML formats. Costs $100–$200.
• Corporate OCR: Offers advanced features and integrations. Costs $200–$500.
• Enterprise OCR: Handles specialized documents with complex formats. Costs $1,000+ [5].

Limitations of Invoice Scanning Software

Although some providers claim 98% accuracy, several factors can affect the performance of invoice scanning software:

Data Interpretation Constraints

• Difficulty reading handwriting
• Blurred scans
• Unrecognizable fonts (e.g., Comic Sans)
• Tilted text

Multiple Invoice Formats

• Challenges with non-standard formats.
• Scanning software works best with standardized templates from Word, Excel, or Google Docs.

The Future of Invoice Scanning: Preparing Your Business

Artificial Intelligence (AI) and Machine Learning (ML) are making significant strides in document scanning.

AI-driven software can learn, reason, and correct itself, improving processing speed and efficiency. OCR recognizes text, but AI understands what to do with it.

In the future, accounting departments will shift from manual data entry to analyzing data and making real-time decisions, as AI and OCR handle more processes autonomously.

Payvy takes the headache out of vendor management with its AI-powered accounts payable system. Learn more here.

If you haven’t started integrating invoice scanning software into your business yet, now is the time.

Footnotes

1. Optophonic Reading
2. OCR Technology
3. Invoice Processing Time
4. Principles of Persuasion
5. OCR Software Pricing