In today's fast-paced business world, submitting invoices in procurement can be a real struggle for many companies. From a lack of standardization in the invoice submission process to difficulties with invoice tracking and management, several issues can cause delays and confusion. In addition, problems such as inaccurate invoicing information, poor communication between departments, and difficulty obtaining approvals can make the process even more challenging.
By implementing automation and digitalization of their invoice process, setting up clear standard procedures, and improving communication and collaboration among teams, businesses can overcome these struggles and streamline their procurement process. With cost savings top of mind for many procurement leaders, our team decided it would be worthwhile to consider some of the alternatives to invoice submission to see how the others stacked up.
Email vs. OCR vs. Invoice Elimination
When submitting invoices, there are a few different options available to businesses. These include email encryption, optical character recognition (OCR), and invoice elimination. Each invoice submission has its benefits and drawbacks, and it's important to understand their differences to make the best decision for your team.
Email & Email Encryption
Using email for submitting invoices is a common and convenient method for many businesses. Some of the advantages of using email and email encryption for submitting invoices include the following:
- Ease of use: Email is a widely used communication tool, and most employees are familiar with it, making it relatively easy to use and understand.
- Speed: Email allows for quick and easy transmission of invoices, which can help to speed up the payment process.
- Accessibility: Email can be accessed from anywhere with an internet connection, which makes it easy to submit invoices remotely.
However, email is not the perfect option for submitting invoices. Below are some disadvantages:
- Security: Email is not a secure method for transmitting sensitive financial information and can be vulnerable to hacking, phishing, and other forms of cyberattacks without email encryption.
- Lack of tracking: Email does not have built-in tracking capabilities, making it difficult to ensure that invoices have been received and processed.
- Cluttered inbox: Email inboxes can quickly become cluttered, making it difficult to locate specific invoices.
- Misplacement: Emails are easily lost in spam folders, deleted or misplaced, making it difficult to ensure that teams are processing invoices in a timely manner.
While email is a convenient and widely used method for submitting invoices, it does have some limitations, and businesses should weigh the pros and cons carefully before deciding to use it. They should also consider implementing security measures, such as email encryption, to protect sensitive financial information.
Optical Character Recognition
Optical Character Recognition (OCR) is a technology that can be used to digitize and process invoices, making it an option for submitting invoices in procurement. Some of the advantages of using OCR for submitting invoices include the following:
- Efficiency: OCR technology can help to automate the process of digitizing invoices, reducing the need for manual data entry and making it faster and more efficient to process invoices.
- Searchability: OCR technology can convert invoices into searchable digital documents, making it easier to locate specific invoices and access the information contained within them.
- Reduced errors: OCR can reduce the chance of human errors when submitting and processing invoices, as it automatically converts the information into digital format.
Like the methods mentioned above, there are some downsides to using OCR for submitting invoices:
- Cost: OCR technology can be costly to implement and maintain, especially for small and medium-sized businesses.
- Limited accuracy: OCR technology is not always 100% accurate and may require additional manual verification and correction.
- Complexity: OCR technology can be complex and difficult to set up and manage, requiring specialized software and additional training for employees.
Taken together, OCR technology can be a useful tool for digitizing and processing invoices, but businesses can't overlook the drawbacks. They should also consider if the cost and complexity of OCR technology is worth the benefits it provides for their specific needs and resources.
Invoice elimination, also known as evaluated receipt settlement (ERS), is a process where a company's internal invoice processes are streamlined and made more efficient. The main advantage of Invoice elimination is that it can significantly reduce the number of invoices that a company needs to process, which can lead to cost savings and increased efficiency. ERS can be done by automating the invoice process, implementing purchase order matching, and utilizing digital receipts. By eliminating invoices, companies can decrease the administrative workload, reduce the risk of errors, and speed up the payment process.
Another advantage of Invoice elimination is that it can provide real-time visibility into spending, which can help organizations to better manage their financial resources and make more informed purchasing decisions.
However, there are also some downsides to Invoice elimination:
- Complexity: Implementing Invoice elimination can be complex and may require significant changes to internal processes and systems.
- Dependency on technology: Invoice elimination heavily depends on the technology and automation; if there is a technical issue, it can slow down the process
- Lack of flexibility: Invoice elimination may not be suitable for all types of purchases, such as one-time or irregular purchases.
- Dependency on supplier: Invoice elimination depends on the supplier's ability and willingness to provide digital receipts, which may not always be possible.
Overall, invoice elimination can be a useful tool for streamlining internal invoice processes, although it may not be feasible and cost-effective for the organization if they are looking at enterprise-level solutions.
When Does the Invoice Matching Not Work?
When weighing each method, businesses will find that one key area becomes crucial to the success of any are the process of invoice matching. Invoice matching is the process of comparing an invoice to the corresponding purchase order and delivery note to ensure that the products or services have been received correctly and that the invoice accurately reflects the agreed-upon terms. Unfortunately, invoice matching isn't foolproof.
- If the purchase order and invoice formats are not standardized, the system may not be able to match them correctly. This can occur if different departments or suppliers use different formats for their invoices and purchase orders.
- 2 If there are errors in the purchase order data or the invoice data, the system may not be able to match them. For example, if the invoice amount is different than the amount on the purchase order or if the invoice date is different than the date on the purchase order, the system may not be able to match them correctly.
- If there are missing data fields in the purchase order or invoice, the system may not be able to match them. For example, if the purchase order number or invoice number is missing, the system may not be able to match them correctly.
- If the Purchase order and invoice data fields are not matching or are in a different format, the system may not be able to match them correctly. This can occur if the company uses different field names, abbreviations, or labels on their purchase orders or invoices.
- If the invoice or purchase order data is not properly inputted, the system may not be able to match them correctly. This can occur if the invoice or purchase order is not input correctly in the system or if there are typos or errors in the input data.
- Suppose your company has complex invoices and purchase orders. For example, if the invoice and purchase order have multiple line items, the system may not be able to match them correctly.
It's important to take into consideration these cases and make sure to have proper data governance and standardization to ensure the invoice matching automation process runs correctly.
So, What's The Best Option For Your Business?
In conclusion, businesses should evaluate their business problem and consider automation and invoice elimination in countries where a physical invoice is not necessary. Email and OCR are common options for submitting invoices, but they come with their own set of advantages and disadvantages.
Email is easy to use and fast, but it is not secure and lacks tracking capabilities. OCR can automate the process and reduce errors, but it can be costly and not suitable for all businesses. Invoice elimination is a newer option that can eliminate the need for invoicing altogether, but it requires good communication and collaboration among teams.