While it’s common to see invoice data capture guides for accounts payable teams, there aren’t many helpful resources for business owners.
And if you own a small business, dealing with invoices and other docs can be stressful, especially if you have loads on your plate. From managing finances to overseeing day-to-day operations and handling sales and marketing, to name a few.
Spending time on manual invoice processing is the last thing to do. Not to mention correcting small but annoying mistakes that slow down the document processing.
Luckily, some technologies can make your life easier. Read the article to learn how to automate your business’s invoice data capture.
What is Invoice Data Capture?
Invoice data capture is about pulling important information from invoices, including the invoice number, amount, and line items. You can do so either from a paper invoice turned digital or straightaway from the digital format of your documents.
You have two options: to capture data from invoices manually or automatically.
While manual data capture can be okayish for five invoices a month, it becomes time-consuming and error-prone when done for more significant document amounts. Here, you should consider automating the process.
As we talk with our customers, the need to get an invoice data capture tool arises when having 30-50 monthly invoices to process.
Invoice data capture is a niche that belongs to the document data capture topic. Here, the idea is similar – getting information from various documents.
To help you visualize what invoice data capture is all about, let’s see an example.
Say you own a bakery and must order various ingredients from your suppliers to manufacture your delicious breads, rolls, and pastries. Your suppliers will send you invoices in different formats.
One sends you PDF files, another emails with attachments, and the third sends printed invoices for your ordered raw goods.
It’s challenging to keep track of all the invoices, right? After all, you must ensure the amounts or product quantities are correct as you ordered. In this case, manual data capture takes away the time you could spend on, say, baking.
Automating invoice data capture can reduce the time and effort required to manage invoice data. With the support of an invoice data capture solution, you get the necessary information in seconds and send it to other tools after that.
Imagine how much of this frustration could be taken out of the equation every week. But you may ask, “How does this whole process look?” Read on to get the gist.
What Are The 4 Stages of Data Capture?
Let’s see step-by-step how the process of invoice data capture looks.
- Document scanning: The first step is to transform your invoice from a physical format into a digital format like PDF or PNG. It’s necessary to convert the document into electronic format to make it easier to process it further. You skip this step if the invoices you get are already in the digital format.
- Invoice data extraction: Thanks to Optical Character Recognition (OCR) technology, the relevant information from the invoices is extracted and converted into machine-readable text.
- User supervision: After extracting desired information from the invoices, you can accept or edit data. This supervision is a necessary step to ensure data accuracy and completeness of your data.
- Data integration: Now it’s the right time to do something with your data, right? Now, you can export it in various formats (e.g., CSV) or send it via. Zapier to your accounting tool, ERP, or Electronic Data Interchange (EDI) system.
While the stages seem easy, it can be challenging to get accurate information and get it in the correct format. Let’s see the most common problems with capturing data from invoices.
Common Challenges in Invoice Data Capture
Manual Data Entry Errors
Manual data entry errors are among the most common challenges in invoice data capture. Mistyped or misinterpreted data leads to discrepancies or delays and makes you feel frustrated.
Does this situation sound familiar?
Invoices arrive from your vendors, and one of your employees has to sort them by due dates. Say an employee named Frank mistyped the invoice number – ‘INV12435’ instead of ‘INV12345’ – due to distraction.
While cross-checking invoices with purchase orders, you reveal the mismatch. As the vendor seeks clarity, everything gets delayed, and you have to correct the data after some back-and-forth.
As a result, the payment processing takes longer, the vendor gets frustrated, and you’re stressed. Such an incident could be prevented thanks to an accurate invoice data capture solution.
Why do most companies prefer net 60 or 90 terms over net 30? Because manual processing of all these docs and sending payments takes time. Especially when it’s done manually.
Imagine putting enormous amounts of data from your documents into your systems. It slows down your workflows and takes valuable time away from more strategic tasks. Painful, right?
From our experience, it takes 15-20 minutes to process one document, depending on the complexity. We checked how long an AI-based tool takes to process one invoice. It’s just a matter of 10 seconds for a single invoice. Well, you do the math.
Various Types, Sources, and Languages of Invoices
If you do business internationally, you may face another problem – various invoice formats, languages, and source countries.
Each invoice layout is different, as well as field placement and terminology. For instance, one vendor might use a different term for “invoice number” than another. The challenge may come from the regulation of every country.
Let’s visualize this as an example.
Say you’re a construction company that orders raw materials internationally, and you cooperate with a copper supplier in Chile. Electronic documents, specifically invoices from Chile, have a unique RUT number indicating taxpayer identification number.
Take a look at the example of the Chilean invoice below (especially the upper right-hand corner):
Here, a flexible invoice data capture tool should adapt to different formats and extract information not typically present on other invoices.
For example, this invoice processed by Alphamoon needs review because no “Buyer name” and “Buyer tax ID” are filled in on this invoice. But as you can see, the tool recognized that the RUT number is the taxpayer number well.
As we talk about data capture challenges, let’s discuss common myths (that can seem to be a challenge). So it’s a good idea to bust some of the popular myths.
4 Automated Invoice Capture Myths You Shouldn’t Believe in
Have you ever heard that Artificial Intelligence or automation will replace you? Or that it’s accessible for very technical people? Well, if yes, let’s separate facts from fiction.
Myth #1: Automated Invoice Capture is Complicated and Difficult to Implement
Some people may avoid automation because it’s too much of a puzzle. And while it’s true that invoice capture tools use machine learning and AI, they are usually easy to set up and use.
That’s the case with SaaS automation tools like Alphamoon. You just get the license, create your account, and set up your first invoice processing workflow. As a result, you don’t have to worry about customization, updates, or maintenance.
You just have to:
- Create a new process
- Upload a document or a collection of docs
- Wait for the tool to process them and get the data that you need
- Check the accuracy of the extraction as part of user supervision
Continuing with the Alphamoon example – you can literally process any type of document in the tool without a single line of code. Simple, right?
On top of that, you have Zapier integration.
Zapier can be used in a no-code manner, and in case you have concerns, there are many tutorials online on how to connect apps. Also, if you have any questions about Zapier, contact our support team — they’ll help you set everything up!
Myth #2: Automated Invoice Processing Solution is Only for Large Organizations
We often heard, “Well, the volume of invoices is around 50, and it’s okay to process them manually for now.”
You’re right; as a small business, you may deal with fewer documents than a large enterprise. But in SMBs, it usually starts with said 50 invoices, which triggers an inflow of other documents.
Because there are HR documents that need to be in order, contracts, tax forms, etc. If you’re ordering goods, add to these purchase orders. It can also happen that an unhappy customer files a complaint – there you have another document.
As a result, your SMB doesn’t deal with 50 invoices but many other transactional and non-transactional documents that you must also take care of.
With limited resources, dealing with all that can get easier only with process automation. Especially since there are tools on the market that are tailored to small businesses and offer affordable pricing options.
Myth #3: Automated Invoice Capture is Expensive
Yeah, we all know that smaller businesses are pretty price-sensitive. However, the costs of implementing automated invoice capture are often significantly lower than hiring new employees.
The long-term benefit is that you’ll scale your business faster, keeping the teams relatively small. Another thing is that when you eliminate manual data entry, you can significantly minimize errors that could result in payment discrepancies or late payment penalties.
Myth #4: Invoice Automation Software Will Steal Your Job
It’s very, very common to hear that “one day, AI will replace (put whatever you do here).” While it may cause your heart to beat faster, it’s also a good idea to think about it more in-depth.
In the case of document processing, automation can’t replace humans in the process because every tool needs user supervision. Instead, automation can save time and help you with repetitive tasks that must be done anyway.
Having myths addressed, let’s see the benefits of automating invoice data capture.
Benefits of Automated Invoice Capture Software for Small Business Owners
Small business owners can reap several advantages from implementing automated invoice data capture, such as:
- Time savings: Small business owners are usually busy. Like, very busy. Thus, by automating the data capture process, you can save valuable time. And you can take care of more critical aspects of your business.
- Cost reduction: Let’s give a practical example of invoice processing costs. Say you need 10 minutes of your employee time to process one invoice. At the same time, an automation tool can do it in 10 seconds. Let’s assume you pay your employee €12.5 for an hour of work, and you must pay €49 for the tool a month to process 250 documents. If you have 250 invoices to process, it will take a human over 40 hours (250 invoices x 10 min = 2500 min = 41.6 hours). So, for processing 250 docs, you’d pay a human €520. For the tool, you’d pay €49. That’s €471 saved. Remember that someone will have to supervise the tool and dedicate one or two hours a week – still, the savings are there.
- Better supplier relationships: Everyone loves working with customers who pay fast (or at least on time). By automating the invoice data capture, your invoices get processed more quickly, leading to quicker payments and strong vendor relationships.
- Elimination of human error: Mistakes made by employees are often small but delay the whole process. Usually, it’s about forgetting small things, not checking the amount, or not correctly matching the invoice with the purchase order. Those mistakes can be addressed with automated invoice data capture that reaches 99% accuracy.
- Improved decision-making: Accurate data and real-time data transfers generally help your business make more agile budgeting, forecasting, and planning decisions.
As you can see, automated invoice data capture offers many benefits to small business owners.
Well, we also mean that it offers loads of benefits for accounts payable teams. It’s just that sometimes you’re a jack-of-all-trades, and simply, you don’t have such a team right now. But you, anyway, have to deal with AP workflows.
So why not make life easier and smoothen this process?
Use Case Scenarios for Invoice Data Capture
Now, the most practical part. Automated data capture from different types of invoices. If you want to do it by yourself, register for free in Alphamoon and process 50 docs for free.
Capturing Data from a Standard Invoice
The bread and butter of any small business – processing invoices. They provide a detailed breakdown of goods or services and corresponding costs. Thanks to optical character recognition (OCR) technology, you can accurately extract critical information such as invoice numbers, vendor details, line items, and total amounts.
Let’s see an example of an American invoice and how it got processed in Alphamoon Workspace.
All the fields were correctly extracted, including line items in the table. When you see a red dot close to the field, it means that you need to supervise this part.
Here, just click accept the field or edit it if you want to remove the “$” sign from the total amount. You can also verify table data extraction by pressing the “Items Table” field and editing according to your needs.
Capturing Data from Credit Invoice
Credit invoices (also called credit memos) are a less common example. Still, if a vendor needs to correct an error or provide a refund, you’ll see this document coming. Usually, you’ll have to process this document as data from credit invoices helps maintain a transparent financial trail.
Suppose you want to capture data from a credit invoice with Alphamoon. In that case, you will use a custom process and choose the information you want to extract.
In the below example, you see that we got the following information:
- “Credit note date”
- “Credit note number”
- “Customer name”
- “Purchase order number”
- “Total amount”
Thanks to automating the data capture from a credit invoice, you ensure that all the adjustments to your financial records are done accurately and timely.
As a result, your business is more transparent, keeps good relationships with partners, and makes vendor payments on time.
Capturing Data from Timesheet Invoice
Suppose you use external help from consultants or freelancers in your small business. In that case, you’ll get timesheet invoices. These invoices typically include detailed time entries, employee names, and total pay they should get.
Capturing data from timesheets is crucial for accurate billing and project management.
Here, you can automatically extract information like employee name, time on Wednesday morning, total hours, and more.
As there is no template for timesheet invoices in Alphamoon, you should choose a custom process and which information you need to extract.
Thanks to capturing information quickly, you save time on managing external contractors and make sure you pay them accurately for their billable hours.
Choose the Right Data Capture Tool so You Can Deal with All Your Documents Easily
Understanding the basics of invoice data capture is very beneficial for your business. Your company can use AI-based automation technologies to improve document processing, reduce errors, and increase overall efficiency.
If you’re considering investing in automation, you must know that it’s not only about choosing an AI tool. Explore what types of documents the tool can handle so you can handle different processes with one tool.
Because you know that small businesses deal not only with invoices, try out Alphamoon, which can help you with any document type without manually dealing with information capture.
- What is data capturing?
Data capturing refers to converting physical or analog information into digital format for more accessible storage, analysis, and manipulation on computers or electronic systems.
- What is data capturing in accounting?
In accounting and accounts payable, data capturing involves transforming financial data from sources like invoices, receipts, and transactions into digital data. This digitalization streamlines record-keeping, analysis, and reporting within financial systems.
- What is an example of data capture?
For instance, consider a business that receives numerous paper documents. Instead of using a manual invoicing process, they use an optical character recognition (OCR) tool to scan and convert the paper data into digital information. This process exemplifies data capturing – converting physical documents into a digital format for efficient management and processing.