What’s it like in the document exchange world right now?
Think about the paper-based document exchange for a second and how it’s the cause of plenty of struggles for so many of today’s companies. If you send and receive hundreds (or even thousands) of unstructured invoices each day, there will be mistakes, no doubt about that – and some of them will cost you a lot of money, time, and energy (no doubt about that either). After all, all it takes is one person from your accounting department to go on vacation and forget about an invoice that landed on their desk a few days prior – ‘Houston, we have a problem’. Paper invoices are lost easily; or forgotten by the time they reach the recipient, while suppliers get upset very easily when, instead of money, they get more paperwork.
Some companies are trying to fix this situation, but they only make things worse by playing a hit-or-miss game with their payments. Hence, some of them lose control and sometimes transfer the money twice for a single invoice (or don’t send money at all). Others, trying to mimic document exchange automation platforms, set different thresholds for invoices over which they have zero control over, which leads to all sorts of problems down the line and is prone to fraud. Of course, one of the biggest problems is that it’s almost impossible to do spend forecasting when there’s no structure to your cash flows; when it takes a few weeks to process the documents manually, and no one seems to know when (or if) they will get paid.
Fortunately, with the use of modern technologies, not only you can solve the problems listed above, but you can also introduce various improvements to your supply chain network processes and, ultimately, build stronger relations with your business partners. Of course, some of those technologies/data processing methods are better than others. The question we will now try to answer is – which of them is the best?
So, without further ado, here are three tech-based ways for processing invoice data:
1. Optical Character Recognition (OCR)
The first and probably the most popular method/technique for extracting information from unstructured documents and processing it is OCR, which is a software-driven engine that identifies characters in each text and turns them into computer code. Capable of collecting data from both paper and pdf invoices (and various other documents), OCR can help you automate some data exchange processes and reduce operational costs (by some margin) by comparing the information it gathers with the master data, performing the “three-way match,” and guaranteeing easy onboarding. No wonder that is has become so popular among today’s companies and institutions.
Still, OCR has its fair share of limitations. For instance, you cannot be 100% sure that the data OCR extracted from a particular document is fully correct. If you have any doubts, then you need to check if the information presented in the digital version matches what was printed on the page. If you don’t verify that, errors may occur. And if they occur, someone will have to fix them, either at the OCR stage or worse – when the accounting department gets involved. That alone can turn a dream into a nightmare.
Then, you need to consider the fact that – in the long run - OCR is more expensive than some of the solutions we’ll discuss later. Not to mention that there may also be some problems with documents written in languages other than yours (especially when it comes to the ‘right-to-left’ languages, which many OCR systems do not support).
So, at the end of the day, OCR appears to have what it takes to get the ‘invoice data extraction’ job done, yet it doesn’t seem to be the most optimal document management solution. Let’s move forward, shall we?
2. E-invoicing
This one is self-explanatory. The second method/technique involves using a data management system or a portal for exchanging electronic invoices prepared in the proper format. No more paper = no more big problems. Most of your data exchange processes are automated, your data is securely stored, and you can access it whenever you like. Plus, with e-invoicing, you can be sure that each e-invoice will reach its recipient.
You’ve probably noticed that many countries (especially in Europe) have already introduced regulations, due to which B2G e-invoicing has become obligatory. Most companies support those changes because they know that going digital means making their lives easier. Therefore, it is expected that, soon, mandatory B2B communication will also be introduced in many parts of the world.
Because of this ‘electronic invoicing revolution’, governments are working hard on developing and introducing their e-invoicing portals and document standards. That doesn’t mean, however, that there are no alternatives. Vendors such as Comarch have created their systems that can automatically validate and convert every invoice you send or receive and that are fully compliant with the latest legal regulations. So, you can use those to automate your AP/AR invoicing processes as well.
It’s also important to point out that with e-invoicing, partner onboarding can cost you next to nothing. At the same time, the quality of your data and your business relationships can improve significantly.
If there’s any problem with e-invoicing, we’d say it has to do with having one agreed document format per country. Why? Because some formats may not be in line with your trading partners’ requirements. E-invoicing works only when all parties follow the same rules. So, the question is – is there a way to make things better? It seems like there is.
3. Electronic Data Interchange (EDI)
The last method/technique for extracting and processing invoice data is using an EDI system. With EDI, you get the highest quality of data. In other words, you can be sure that the documents you send and receive are correct and fully compliant with trading partners’ requirements.
Also, EDI is considered the least expensive solution (in the long run) out of the three presented in this article.
For EDI to work, trading partners must choose a single communication channel (e.g., sFTP, AS2) and document format (e.g., XML, flatfile, IDoc). Typically, one partner agrees to use the format the other prefers, or they both choose an industry-specific one. What’s also great about EDI is that attachments provided in a structured form (flat files, CSV, or Excel files) can be processed and validated automatically as well.
Onboarding can take some time, and the setup may be a little pricey, but as we said – in the long run, EDI is more economical. Thus, you can think of getting an EDI system as making an investment that pays off. And for those who want to avoid the system implementation process, there’s always an option of using a web-based EDI application.
By and large, with EDI, you receive all the benefits of a modern e-invoicing platform and a lot more. An electronic data interchange system is the best option for all large enterprises and organisations, for sure.
And the winner is…
EDI. It’s got to be. Considering how robust, reliable, secure, and innovative today’s EDI systems are, it is our opinion that you can’t go better than that. Of course, that does not make OCR or e-invoicing worthless as they both are highly efficient systems/techniques. In the end, it all depends on your company’s requirements, needs, and budget.
Although, it also must be said that even the best data exchange system in the world will not work miracles if your company’s (and your partners’) processes and policies are somehow flawed. Therefore, before you start using any of the solutions we discussed here, you need to create a structure to your communication with suppliers, that is create rules that will help you streamline your document flows. And make sure they are good rules – after all, the success of your business endeavours depends on it.
About Piotr Jagiello
Piotr Jagiello graduated from Ruprecht Karl University of Heidelberg. He has been working for Comarch since 2013 and in his current role as Consulting Director, he is responsible for the DACH market, specializing in EDI, e-invoicing, and master data management systems.
About Comarch
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