A smart strategy to save millions: the automation of invoice processing

Though organizations of all sizes have to deal with the processing of invoices on a daily basis, only a few of them are aware of which costs are related to this process. According to independent industry studies, the average manual processing of a single invoice can sum up to more than € 50. At a first glance, this amount may sound astonishing, but if one imagines the multitude of related manual tasks like opening, sorting, transmitting, data entry, exception handling, storing and retrieving, not to mention the inherent risk of losing prompt payment discounts, this number gets comprehensible.

If we now multiply this amount with the number of invoices organizations receive every month, it´s easy to understand, why inefficient processing or filing of invoices and related documents can translate into the loss of millions of Euros.

Despite a wealth of competitive and economical advances, most companies in the gulf region still lack automated processes. In recent years, companies made significant IT investments, especially around ERP implementations. Many firms still don´t exploit the full potential of their infrastructure and manual processing still appears the easy option. But on closer inspection the errors associated with manual labour can be both significant and costly.

As pursuing the manual path is obviously the wrong strategy to cope with the current fierce economical climate, organizations are forced to find a smarter solution, which ideally doesn´t “only” slash processing costs, but also enhances the organizations business relationships by faster and more reliable transactions.

Let´s now take a closer look at the invoice process in order to understand its complexity and to identify potential enhancements.

The main steps in processing an invoice are: receipt, verification/matching, approval and payment.

The costs incurred at each stage of the process look as follows:
5-8 €:         data entry, invoice approval, lost early payment discounts
16-31 €:    manual error handling, inbound and outbound calls, data cleanup
5-8 €:        buyer payments
1-7 €:        payment receipt process

In all these areas technology can increase efficiency and offer cost savings: Having the ability to electronically capture invoice data, regardless of its form, would help to eliminate errors that may be introduced by manual processing. It would also enable the automation of invoice data validation, contract matching and the integration with existing enterprise systems. Invoice data could be automatically classified, and then distributed in a secure, digital form without incurring shipping costs.

The Solution: Kofax Intelligent Capture & Exchange
This technology exists, and companies all over the world already have realized the enormous potential of automating document driven business processes by managing the capture, transformation and exchange of business-critical information. Relying on the award winning solutions from Kofax, the leading provider of Intelligent Capture & Exchange solutions, they have been able to cut down the costs for invoice processing significantly. Most of them have started with a phased approach starting at the beginning of the process and then expanded their solution incrementally.

Reviewing the steps they´ve taken, it gets obvious, where the savings arise from:

Step 1: Controlling the Paper Workflow
The starting point is the creation of central locations, where invoices arrive in order to eliminate the potential of an invoice being lost. Using Kofax Capture, these invoices then get scanned, paper gets translated into digital images which can be immediately delivered throughout the organization. This can happen centrally as well as in distributed and remote locations, regardless of volume. This first step, essentially necessary to feed in-house ERP line-of business applications, yields fundamental benefits: It eliminates lost invoices, decreases the processing time, enables storage in a secure form without paper filing costs, gains immediate access to digital invoice data and eliminates shipping costs.

Estimated cost reduction for step 1:  € 7.50 per Invoice

Step 2: Automate Data Extraction
Instead of the time consuming and error prone manual entering of invoice data into downstream applications, Kofax Transformation Modules automatically extract the invoice data. The captured data can then be fed into the same business processes in place to handle the scanned documents. The result is an efficient information capture process with manifold benefits like eliminated data-entry and labor cost, increased productivity, data security and staff responsiveness, reduced data entry errors and significantly decreased processing time.

Estimated cost reduction for step 2:  € 1.20 per Invoice

Step 3: Integrate Electronic Invoices
The next step could be the integration of suppliers with a software solution to process electronic invoices without setting up expensive EDI-projects. Kofax e-Transactions for Invoices enables this swift exchange of electronic at low cost. It plugs easily into the already existing capture infrastructure and hooks into the supplier’s computer’s print subsystem, automatically extracts relevant data when the invoice is printed, converts the data to XML, and sends it to the buyer, thus avoiding paper handling, sorting, scanning, or manual entry.

Estimated cost reduction for step 3:  € 1.20 per Invoice

Step 4: Enhance Process Transparency
The steps examined so far help to improve efficiency and accuracy, as well as reduce costs. The next logical enhancement of the existing capture infrastructure would be to establish an automated feedback-system to suppliers, that frequently place time consuming and expensive inbound calls to the AP department with basic queries about existing invoices. By deploying Kofax Communication Server, notification messages can be automatically send in all preferred formats as soon as the invoice information is extracted and validated thus saving further costs and enhancing process transparency.

Estimated cost reduction for step 4:  € 1.20 per Invoice

Step 5: Improve Data Quality
Even when invoice information is captured perfectly, there is no guarantee that the data itself is correct. This can be related to extraction issues, conformity difficulties, data errors or business logic errors. To avoid the costly manual handling of these exceptions, a Kofax software solution can automatically detect and resolve extraction-related data quality and conformity problems on the invoices by comparing the invoice information with the PO information already stored in a ERP system or send out an ‘exception notification’ to the vendor via email, if the system still cannot resolve the issue. Thus providing “Process-Ready Data”, the Kofax solution significantly reduces further costs.

Estimated cost reduction for step 5:  € 2.30 per Invoice

Deploying all 5 steps enables organizations to cut their invoice processing costs by more than 25 percent – a real smart strategy to save millions!

For more detailed information please visit: www.kofax.com.