Invoice Data Capture Software

Transcription

1 Invoice Data Capture Software A Buyers Guide For Finance Directors Produced By Clean Accounts An e-docs UK Brand

2 Executive Summary New technology is driving organisa ons forward, improving sales, manufacturing and customer services to name but a few. Finance however is being le behind in many cases, s ll opera ng with manual processes that haven t changed, some mes in decades. It is not hard to understand why. The pressures on a finance director are immense, with changing fortunes and uncertain futures for UK industry, it s li le wonder that finding me and energy to modernise back-office func ons is difficult. But, it is these very pressures that are forcing Finance to change and become more cost effec ve and the upsurge in AP automa on solu ons is very significant. E-Invoicing is gaining trac on at not much more than a snails pace with more than 70% of invoices s ll received on paper or by . Specialist Data Capture so ware for invoices is now widely available but not without its pi alls. The purpose of this document is to guide the reader through a poten ally treacherous selec on process.

3 01 Software in Context Why Invoice Data Capture Software? Understand that Implementing an Invoice Capture Software solution is not fire and forget - It will need constant time and technical investment! The claims from so ware manufacturers that they can replace manual invoice entry with Data Capture from scanned images are hard to ignore. They claim significant benefits, including lower administra ve costs, reduced errors, faster processing, improved supplier rela onships and more produc vity per employee. Eye catching headlines such as reduce your AP processing costs by 50% are the norm, but how realis c are they? Whilst in some cases they may be jus fiable, in many others the full benefits cannot be achieved because the deployment effort required is underes mated and there is a lack of realisa on that these systems require constant tuning and maintenance. There is no doubt that the least efficient companies have the most to gain from deploying data capture solu ons. However, these companies have tradi onally been the most resistant to modernise with the lowest capacity for change management. A successful data capture deployment requires a commitment to change management at every level and careful product selec on to avoid failure and disappointment.

4 02 Claimed success rates Recognition Rates: Don t Be Fooled Data Capture so ware uses Op cal Character Recogni on (OCR) engines to read characters on images and convert them to machine readable text. The market leading products are all similar in this respect with many of them using iden cal OCR engines. TIP Provide a variety of your own documents for any demo system. Include good and bad documents, utilities and attachments if you plan on capturing these aswell. Look Deeper Unsurprisingly, the capture results will look great during the demonstra on as the supplier has complete control over the quality of the original documents which will probably have been printed using a LaserJet. However, a high propor on of invoices are s ll printed using dot-matrix printers so make sure the demonstra on includes these. Ideally, you should ask to see the results based on a selec on of your own documents. You should ensure that the supplier demonstrates different types of invoices, including single and mul -page, expense and stock. Also include u li es if you plan to capture these and a achments or suppor ng documents if you want these to be retained with the invoices. You should ensure that a few credit notes are mixed in as it is important that the so ware can recognise the difference between these and invoices. You must understand how the proposed so ware copes with the different types of documents and what manual overhead will be required to get the best results. Don t be fooled by the claims rela ng to recogni on rates. Not only are they likely to be exaggerated, they certainly cannot be substan ated. Achieving 95% recogni on out of the box sounds great, but ask the supplier what this really means.

5 03 Error Rates In Context A worst case Example Let s say that you have 10 invoice documents each containing a 10 digit number, 95% character recogni on effec vely means that 1 out of each 20 characters is incorrect. In prac cal terms this can result in the situa on displayed below: Claimed error rates have real world impact - make sure you explore this with your supplier. Fig 1.0 Invoice Capture Rate Examples In this example you can see that the 5 errors in 100 have resulted in five key data fields being captured incorrectly. In other words, there is a 50% invoice failure rate. This is of course just an example but it serves to illustrate that sta s cs do not always tell the whole story. Actual error rates achieved will depend on scan quality, print type and font. All of the major products can perform data verifica on by applying masks to formats such as dates so that only results that match the mask (e.g. DD/MM/YYYY) will be accepted. Key fields such as invoice numbers can be any length and format so masking is not generally possible without so ware coding for each supplier. Be sure to ask if this capability is available and assess how much development me will be required to code each document type.

6 04 What level are you happy with? How Confident Will You Be? OCR engines read individual characters and make best fit decisions based on the shape of the character. The data capture so ware should display characters where there is a degree of uncertainty in order that humans can confirm or correct - a process called verifica on. TIP Choose your top 20% (in volume) suppliers and test at least 50 documents from each. Understand the implication of confidence levels Some products have a feature called Confidence Level, a user-defined value that sets the level at which the OCR engine will accept the recogni on result or display for verifica on. If the level is set too high then more characters will need manual verifica on. If the level is set too low, then the capture will contain many mistakes. These mistakes are caused by the so ware unknowingly recognising a character incorrectly and are called False Posi ves. They will not be displayed for verifica on and could pass straight through to your accounts system. You will need to decide on the confidence level and determine how many errors you can cope with in your accounts system. Include Confidence tests Make this part of your acceptance tes ng and ensure that an adequate volume of invoices are tested. As a rule of thumb, iden fy your top 20% of suppliers in terms of invoice volumes and test at least 50 invoices from each as a first step. Follow this with at least two months full invoice volumes once your ini al confidence level is set.

7 04 Calculating Productivity Before and After Productivity You need to know how many invoices you will be able to process per hour per clerk. The Capture so ware is not 100% perfect and will certainly produce errors. Also, many invoices will fail some of the preset rules, such as the VAT being wrong because of rounding issues or the supplier is uniden fied. These errors will all need correc ng by clerks prior to the data export. Know your current productivity Be sure to know how efficient your current process is and the average number of invoices processed per man hour. You should know how many errors are occurring and how long is spent correc ng them. This informa on will be invaluable when pursuing a produc vity commitment from the so ware manufacturer. Number of invoices per clerk per hour Despite the definite reluctance from so ware manufacturers to confirm how many invoices per hour a clerk will be able to process, you should be looking for a produc vity commitment from them to include in your acceptance tes ng.

8 05 ed Invoices Understand the differences How does the software handle ed invoices? The con nual increases in postage costs are leading many suppliers to send their invoices via , usually as a achments. This is an area where par cular a en on is required. The main so ware suppliers have modules that claim to poll folders and import the a achments directly into the Capture so ware. You should ask suppliers to define the limita ons of these modules, which image formats can be automa cally imported, which formats are unacceptable and how excep ons are presented. Otherwise, you may find you need to buy addi onal so ware to convert the images or face the prospect of prin ng invoices just to scan them back in. Don t Forget about multi page and attachments You also need to understand how the so ware copes with mul -page invoices. Many so ware packages cannot iden fy the start and end of an invoice and will require you to either add bar-codes or insert separator pages during the prepara on stage. You should also find out how this works with ed a achments. Will you have to manually open each one just to establish how many pages are in it or will the image file contain mul ple invoices?

9 06 Understand The Workflow Duplicate Causes Data Capture product suites operate as workflow systems so that when a task is completed in one stage, the images and data are automa cally passed onto the next stage of the workflow process The main stages are: Scanning Character Recogni on Processing/Extrac on Valida on Matching captured data to a pre-defined rule-set to assess data accuracy Verifica on Presen ng known errors for manual interven on Release/Export crea ng an output data file for loading into you accounts system Back-Up You will probably be encouraged to process in batches of at least 50 invoices as this is the most efficient way to work. This sounds good in principle but what happens when an invoice fails and needs to be checked by a supervisor? You will need to understand your op ons at this point as this can have a drama c effect on produc vity and performance.

10 07 Workflow Continued Dealing with errors For example, if you match an invoice to a supplier database to ensure that you have captured the correct supplier data and no supplier data is found within the database for a par cular invoice, what are your op ons???? Can it be deleted? If so, you may have to find the original which can be an extremely me consuming process. Can it be parked to enable a supervisor to deal with it, while at the same me allowing the rest of the batch to be processed through to export. Does it have to be fully corrected before the whole batch can be completed, something that may delay urgent invoices from being processed on me. You need to understand the workflow and decide if it will be suitable for your opera on.

11 08 3 Simple Steps How Much Processing Power Will You Need? This is another area where suppliers are o en reluctant to divulge hard facts. TIP You will need Computer Power. Make sure to find out how much from the supplier. Failure to assign adequate resources will make hinder performance! Calculate how much me you have available to process your daily requirements and then ensure the manufacturer specifies the Server(s) and processing sta ons to meet this specifica on. You might be quoted a daily figure but there is every chance that this will be based on a 24 hour day, despite the fact that you may need to process all of your invoices in just six hours. In the real world, the post has to be opened and the contents scanned before the processors can start to extract and capture the data. Don t forget that your clerks will also have to correct the errors so sufficient processing power will be required to deliver the images to the clerks in a mely fashion. Do not forget to allow for peak volumes or else you may end up with a backlog that takes days to clear. Also, be aware that it is very easy to under-es mate your hardware requirements and have to make addi onal unbudgeted expenditures. This should also be built into your acceptance tes ng.

12 09 Add ons - Bolt Ons - Optional extras? Understand What You Are Buying With so many data capture packages available, it can be cri cal to your bo om line to fully understand exactly what is included in the suite. For example, some packages may only include the header field capture as standard (this will only include fields such as supplier name, invoice number, date, PO number, net and VAT). Other suites capture line items as well as header fields but charge a premium for this func on, whilst others are not able to capture line items at all. Find out what is included in the package and the potential cost for incorporating additional features. Most packages are sold on an annual volume licence basis. You will need to supply an annual invoice volume and then the manufacturer will quote a price based on this volume. Sounds easy, but be aware that some manufacturers licence on a per invoice basis whereas others are based on pages. Do you know how many invoice pages you receive each year? Be sure to discover the true cost of the license. Need line item capture? make sure its included in the license and not an extra.

13 10 Useful questions Important Questions To Ask What is the cost if you exceed the volume limit? Will the so ware stop working as soon as you reach your licensed volume limit? Does the licence cover both header and line items? How much are addi onal volume costs? Can you carry unused captures over to the next period? Even if your requirement is for basic low volume header capture at the me, it is wise to inves gate the poten al for service expansion both in terms of features and cost, par cularly important if you think that you may have a requirement to capture line item details in future. Alterna vely, you may be planning to implement a purchase order system and capture line items for your stock invoices. Having already made a substan al investment in data capture so ware, you need to know what the likely financial impact of these future requirements will be. Be very aware, that if you purchase a licence to process 500,000 invoices at header level only, you may find yourself having to purchase an addi onal 500,000 invoice licence for the line items even if you only require line item capture on 50% of you invoices. The manufacturer may not permit you to have different volumes on each licence so you have to buy the most expensive so ware for all of your volumes.

14 11 Roadmap Lastly, Get The Roadmap So ware manufacturers con nue to develop their products to meet new requirements and resolve exis ng limita ons so you should ask to be supplied with their development roadmap. If they don t have one you should be concerned. If they do, you should ask for a copy and obtain a guarantee regarding which planned developments are included in your annual support and upgrade fee, and which will be released as addi onal modules requiring the purchase of new licences. You must be clear about what you are ge ng from the 20% p.a. you will be paying. About The Author Colin Baterip is the Managing Director of e-docs UK and Founder of clean accounts, a company that specialises in outsourced invoice processing. With over 30 years experience of the document processing industry, he is widely regarded as being a leading data capture expert.