It may surprise you, but the data proves it: British businesses are still very poor at invoice management. Research says that a typical office worker spends 40% of their time looking for improperly stored company information, for example, while 3.6% of invoices that get manually entered into a finance system will contain an error.
This matters as it’s costing money. The average cost to process an invoice is between £3.50 to £8.60 – while problematic ones can cost more like £15. Worse, 56% of businesses contacted for one study experienced forecasting challenges due to invoice data gaps, while 58% had to make late payment charges to suppliers because of invoicing issues (source: AP Association [https://www.ap-association.co.uk]).
If you realise that there are 30 billion invoices processed per year in Europe, and that 95% are still done manually (source: Deutsche Bank) – then we have a problem. The good news for FDs is that a move to Digital Finance will help.
To consider the arguments in favour of this move, here are my ‘5 steps to invoicing bliss’!
Step 1: Extraction
Going digital means the data you need can be quickly, automatically and securely taken out of invoices. The soundest way to do this is via modern OCR (Optical Character Recognition), which has very high accuracy rates and is a very robust technology. Doing this will save huge amounts of time but also get the information into a data repository for all the other value-add things you will want to do with it.
Step 2: Workflow
Automated finance and accounts payable processes – using software in a structured way to speed the routing of invoices around the teams that need to see them – will speed things up, but also reduce to zero your chances of losing invoices. That will be a boon when it comes to any kind of dispute and needing to fire up CHAPS to settle a late payment.
Step 3: Archiving
If it’s digital, it’s in the system – which means it can always be brought up and looked at, by whoever needs to. HMRC states that you need to store invoices for six years anyway, so use that storage need to your advantage. Set up an electronic memory bank that means there is always a trail to show what was done, by whom, on what date, and what information was available at any one time. It’s also going to be of value to auditors, who will appreciate the faultless state of the record keeping.
Step 4: Integration
Again, if it’s digital, and properly captured on entry into an organisation, invoice data can be immediately piped into whatever finance or ERP system it needs to be stored in (remember, all the other useful things you will want to achieve with those invoice fields). This will also massively speed up internal information flows, or those between the firm and its supply chain or partners, as useful fiscal data will be so much easier to process and exploit.
Step 5: Reporting
Lastly, there are more and more reasons why financial directors need to be able to have total clarity about their invoicing process. It doesn’t apply to everyone, but there’s the reporting of payments system for bigger firms the government has set up (see a blog on thedmcollaborators on this topic here. But the principle applies to all organisations, public, private and SME – there will always be times (disputes) when you will want to be able to state without any possibility of doubt when and where x, y or z payment occurred (or was problematic).
It just makes sense to do digital finance, I am sure you agree.
George Haddaway is Document and Enterprise Content Management Specialist at EASY SOFTWARE UK
EASY SOFTWARE UK will be going into more depth on the issues George has raised here in a special webinar scheduled for March 14. Please go here if you’d like to sign up.