What Is Invoice Capture?

Businesses typically process hundreds of invoices each month. And as these businesses grow and the number of vendors they partner with increases, the number of invoices they receive often expands into the thousands. Processing invoices as quickly as possible is essential if companies are to pay their bills on time, receive early-payment discounts and maintain strong relationships with their suppliers. Now, consider a company that has to take each invoice it receives and manually enter pertinent information into its accounting system, such as the invoice number, what was ordered, the amount due and when payment is due — and it quickly becomes clear that the potential for mistakes and payment delays rises exponentially. Fortunately, invoice capture offers a way to master this time-draining accounting challenge.

What Is Invoice Capture?

Invoice capture is the process of extracting important information from an invoice, including customer and order data, so businesses can verify the information and issue payments. However, more than 68% of businesses are still manually keying invoice data into their enterprise resource planning (ERP) and accounting software, according to a global survey by the Institute of Financial Operations and Leadership (IFOL). Accounts payable (AP) teams also reported that handling the level of manual data entry and mitigating the delays caused by the amount of time spent processing invoice exceptions represented their top processing challenges — causing stress to AP teams, delaying the delivery of goods and services, and damaging relationships with vendors and suppliers.

New technologies are bringing automation to the invoice capture process, helping AP departments avoid the tedious practice of manually typing in data and saving companies time and money. While the IFOL survey showed that only 9% of AP teams were fully automated in 2022, two-thirds of respondents said they expect their AP processes to be fully automated by 2025.

Key Takeaways

Processing invoices by entering data manually is inefficient and prone to error, wasting time and money and causing stress for accounts payable teams.
Automating the invoice capture process reduces the burden on staff members, speeds the bill payment process and improves a company’s relationships with its vendors.
Invoice capture processes that integrate with enterprise resource planning and customer relationship management systems allow businesses to simplify how they keep track of payments to vendors.

Invoice Capture Explained

Invoice capture, also known as bill capture, is the process of extracting important information from an invoice: the payees, products, prices, purchase order numbers and so on. Payments can then be verified, approved and issued to vendors. By automating invoice capture, organizations can improve the accuracy of the information they collect and speed up the payment process.

Invoice processing is central to the smooth functioning of an AP department. But if the information in invoices isn’t recorded correctly at the start of the process —manually entering data from invoices into the accounting systems is the main culprit — errors can cause problems that affect downstream processes.

Optical character recognition (OCR) technology is the key to getting invoice information right from the get-go. The software parses the unstructured language in an electronic or scanned paper invoice, converts it to machine-coded text and flows the information into the payer’s ERP or accounting system — all within a matter of seconds, depending on the complexity of the invoice.

Benefits of Invoice Data Capture

The benefits of invoice capture ripple through the entire AP process. By automating their accounts payable systems, including the invoice capture process, companies can improve accuracy, reduce the cost of processing bills and speed up the payment of invoices. For example, suppose a local restaurant processes about 500 invoices per month from a variety of vendors. If the AP department uses technology to extract relevant data from those invoices as soon as they arrive, the restaurant can move invoices quickly through the approval process and issue payments to vendors more easily.

Digitized invoices can be integrated with ERP and CRM systems, allowing departments to share invoice details with greater visibility than is possible with paper-based invoice management processes. By accurately capturing invoice data, companies will need to make fewer adjustments to accounting journal entries along the way, which means they can speed the monthly close process, saving time and avoiding frustration. Here are some top benefits businesses can derive by automating the invoice capture process.

Increase AP Department Productivity

A manual invoicing and payment process tends to be full of bottlenecks. Paper invoices are hard to track and can get lost, sitting unattended on approvers’ desks for long periods of time. Manually matching invoices to purchase authorizations takes time, as does entering accounting codes, and both processes are prone to error. By digitizing the invoice capture process, companies can speed up the payables process and manage more invoices in less time, increasing the productivity of AP departments.
Reduce Data Entry Errors

Manual data entry keying errors occur frequently and can slow the accounts payable process downstream. According to one estimate by the nonprofit research organization APQC, fixing an invoice error takes an average of four days. Worse, if mistakes aren’t discovered early, incorrect payments may ensue. Automating data capture with accurate OCR technology reduces errors in the AP process.
Maintain Positive Supplier Relationships

Suppliers and vendors expect timely payments, and they especially love early payments. In fact, many companies offer early-payment discounts to expedite getting paid and charge penalties for late payments. Companies can keep their partners happy and save some cash in the process by leveraging digitized AP infrastructure to make all payments as early as possible.
Reduce AP Processing Costs

Manual processes are slow and often introduce errors, and those errors cost businesses additional time and money. Collecting necessary information quickly and getting the data right the first time help minimize the amount of processing time spent on each invoice. By using automated invoice capture, employees don’t have to spend extra time inputting data and can instead focus on less tedious and higher-value work.
Reduce Storage Costs

Paper is expensive to purchase, handle and store, whereas the incremental cost of managing and storing digital records is lower. Cloud data storage is not only far cheaper than storing reams of paper, but it’s easier to search through than a basement full of filing cabinets.

Invoice Capture Implementation Challenges

As with any significant change in corporate processes, implementing an invoice capture system may create some initial pain for businesses as employees get used to using the advanced technology and adjust to new ways of working. Some common challenges include:

Team Adoption

Procedural changes can bring some level of resistance, since employees may be reluctant to let go of entrenched processes, no matter how advantageous the new procedures may be. But with proper training to ensure that staff members understand how to use an automated invoice capture system, employees often see that the technology makes their jobs easier, and team buy-in typically follows.
Business Disruptions

Any major change in a core business process risks causing short-term disruption to normal business operations. It may be wise for business leaders to run the new automated process in parallel with the older manual process, until they are sure that the new process has been embraced by employees and is working smoothly.
System Integration

To get maximum benefit from an invoice capture system, it should integrate with a company’s ERP or CRM system. Choosing the right invoice capture solution — one that integrates seamlessly with a company’s current systems — is crucial to streamlining data entry and approval processes, among many other benefits.
Scalability

It’s important to make sure that any invoice capture system will adequately scale as the company grows. This may mean including the ability to read increasingly complex invoices, handle a larger number of payees or product lines, and accommodate changing procedures.
Regulatory Compliance

Some industries have data retention regulations they need to follow, as well as data privacy and security protocols to adhere to. A company implementing invoice capture needs to be aware of pertinent regulatory issues and demonstrate that any system it implements is legally compliant.

How Invoice Capture Automation Works

When selecting an automated invoice capture system, it’s helpful to understand all steps in the process.

Receive the invoice. The first step is accepting the invoice. It may arrive as an email attachment, in the body of an email, via electronic data interchange (EDI) or as a hard copy by postal mail.
Scan/import the invoice. If the invoice didn’t arrive in an electronic format, it needs to be scanned into the system. This requires OCR software, which is built into many advanced invoice capture systems.
Capture the data. A good invoice capture system will use OCR or artificial intelligence to identify and extract relevant data, such as the vendor’s name, address and account number; invoice number and date; line item details; amount due; and so forth.
Validate the data. The captured data needs to be validated for accuracy. That means ensuring that the billing amount and invoice match an existing purchase order, that no math errors crept in, that the invoice isn’t a duplicate, and that invoice numbers and vendor names didn’t get corrupted during the scanning/capturing process. Validating the data early saves the extensive time and effort that is required when a business needs to correct payment errors later.
Integrate the data. Data from validated invoices can get swept into ERP and CRM systems. The invoice can then be set up for approval and payment.
Archive the invoice. Once an invoice has been scanned, validated and processed, it should be archived for future reference and audits.

Key Features of Invoice Capture Technology

Every invoice capture system is slightly different, but businesses should look for a baseline set of features when evaluating which system to use. Here are some of the attributes that most businesses will require.

Optical Character Recognition

OCR software continues to improve with time. The systems from just a few years ago are much less capable of recognizing and processing a variety of data than more up-to-date OCR software. To avoid introducing errors into the invoice capture process, look for advanced OCR software that has a strong track record of requiring little human intervention and correction.
Automated Data Processing

Invoice capture should be a key part of a larger automated accounts payable system. The data pulled automatically from invoices becomes central to informing a company’s broader financial processes.
Error Checking

Invoice capture systems should easily catch scanning errors or mathematical mistakes. The earlier in the process that errors are found, the easier they will be to correct, whereas errors that introduce mistakes in payments can be difficult and time-consuming to resolve.
Data Validation

Data validation ensures that vendors’ names, addresses and tax IDs are correct; duplicated invoices don’t get paid; invoices are cross-referenced with purchase orders and receipts during a three-way matching process; invoices are legitimate; and anomalies get flagged for human intervention.
ERP Integrations

ERP systems manage a wide variety of a business’s core functions. Because it is a critical part of the accounting function, the data created and processed by invoice capture systems needs to integrate with existing ERP processes.
Workflows

Many invoice capture systems include features that automate the entire invoicing and payment workflow. In addition, companies may want to look for a system that allows for the creation of custom workflows.
Approval Processes

Every company has its own payment approval process. An invoice capture system should be flexible enough to accommodate its preferences in terms of routing the invoice to the appropriate person for approval. Depending on the amount of the invoice and barring any issues, approval could also be automated.
Reporting

Any financial system needs solid reporting functions, and invoice capture systems are no exception. Not only should the system integrate with existing ERP and payment infrastructure, but the reporting features should be robust enough to allow for status, audit and compliance reporting, as needed.

Never Miss a Payment With Invoice Capture in NetSuite

NetSuite Cloud Accounting Software simplifies the management of the accounts payable process, allowing for accurate reporting and greater financial control. By automating payables, including the invoice capture process, NetSuite saves time and increases efficiency, helping businesses make payments quickly.

The NetSuite accounts payable module digitizes invoices and automates review, approval and payment, giving companies greater control over the procure-to-pay process. The software maintains detailed vendor records and improves data accuracy by automatically matching invoices to the correct vendor and purchase order. Removing paper from the invoice approval process simplifies payables, providing a fast and secure way to process invoices and make payments directly through NetSuite.

When tedious, time-consuming manual processes are digitized, businesses can experience significant cost savings. Automating the invoice capture process reduces a company’s reliance on manual invoice data entry, speeding up the processing of payables, while increasing accuracy and accountability and avoiding late and missed payments.

An automated invoice capture system not only helps businesses extract and manage important financial information, but also allows them to remain up to date with their payments — which, in turn, helps them maintain healthy relationships with vendors.

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