Digitize Incoming Invoices: Our Step by Step Checklist

Published: July 9, 2024

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Digitize Incoming Invoices: Our Step by Step Checklist

Switching to digital business processes can sometimes seem complex and time-consuming. Solutions have to be compared with each other and checked for feasibility. Integrations into the existing infrastructure must be set up and financial, personnel and time resources must be invested. Last but not least, employees need appropriate training for the new system.

Too many companies therefore hold on to outdated processes for too long – and miss out on enormous savings and improvement potential as a result. For example, the digital processing of documents not only reduces the processing time and the costs incurred per document, but is also much more error-free and transparent for all employees.

Nowadays, implementing a digital solution for invoice receipt is straightforward and can be done relatively quickly. With the right solution, the automatically scanned invoices are posted seamlessly in the subsequent ERP or financial accounting system. Within just a few weeks, a company can benefit from the advantages of digitization and lay the foundation for further automation steps.

We explain how easily companies can digitize their incoming invoices and benefit from the numerous advantages.

From Manual to Digital Invoice Processing: the Advantages 

A look at the advantages of digital invoice processing makes it clear in how many areas there are positive effects for the company:

  • Reduction in workload and time: Manual processing of incoming invoices often involves a considerable amount of work. Each invoice has to be recorded, checked and processed individually. Digital systems, on the other hand, automate many of these steps. Incoming invoices in an unstructured data format (paper, PDF, image files, etc.) are scanned (if necessary) and read using OCR. With the help of artificial intelligence and machine learning approaches, most of the relevant data is captured intelligently within a short period of time without having to train specific layouts, invoice types or document types. The manual transfer of data is completely eliminated. This not only saves time, but also frees up employees, who can concentrate on more important tasks instead. Overall, the entire process is made faster and more efficient, allowing companies to make better use of their resources.

  • Error reduction: A major advantage of digitization is the reduction of errors. With manual processes, typing errors or transposed figures can easily sneak in. Or information is overlooked and transferred incompletely. Automated solutions, on the other hand, use algorithms and automatic checking and validation mechanisms to minimize such errors. Modern software solutions work with high precision and consistency, checking and correcting the entered data immediately if necessary. They also recognize if the quantities written out in the order and delivery do not match, or if total or individual amounts are incorrectly noted. Overall, this leads to a significantly lower error rate and ensures higher data quality and accuracy in accounting.

  • Secure and scalable in the cloud: Modern cloud services use advanced encryption technologies and security protocols to protect data from unauthorized access and loss. In addition, regular backups and disaster recovery plans ensure that data can be restored at any time. Cloud solutions also offer the advantage of scalability, which means they can grow with a company’s growing requirements. For more detailed information on secure cloud solutions, visit our product page.

  • More up-to-date and faster accounting: When companies digitize their incoming invoices, their accounting is not only faster, but also more accurate. Invoices are recorded and posted promptly and accounting is always up to date. With the help of this real-time data, decisions can be made more strategically and better. In addition, monthly and annual financial statements are prepared in a more targeted manner and financial management always has the best possible overview of the current status. In turn, responsive accounting has a positive effect on the overall (financial) health of the company.

More Benefits

Save Money

By reducing lead times, discount deadlines, for example, can be met much more effectively. This not only saves money but also promotes a positive relationship with the supplier. At the same time, you save on reminder fees due to invoices that have been outstanding for too long.

Transparency

The employees in charge have access to the document at all times and an insight into the status quo of the approval process. This means it is possible to see exactly which department/person is currently in charge of the next step. Even documents that have already been archived can be found much more quickly.

Mobile

Digital processes are location-independent. Neither the documents nor the people responsible need to be at a specific location to complete their task. Approvals, queries or archiving are possible on the desktop and on mobile devices. This saves additional time and provides flexibility and freedom at work.

What Should be Considered Before?

First of all, think about how incoming documents are received, checked, approved and archived in your company. Analyze the workflows and identify potential for optimization. Map the entire process as specifically as possible for your company and also think about the communication for the individual documents, special cases, signatures, work paths, etc.

Choosing the right software is crucial to the success of digitization. It is important that the software is user-friendly and can be seamlessly integrated into existing systems. It should have automatic data capture, error checking and process automation functions. It is also an advantage if the software is scalable so that it can grow with the company. We present such a solution here.

Last but not least, you should also think about data protection and the legal requirements. Your workflow must guarantee correct processing under data protection law – this includes secure processing and storage of personal data. In addition, the legal requirements for archiving invoices must be met, such as audit-proof archiving and documentation of the audit trail.

Step 1: Check and Digizite Analogue Incoming Invoices

Invoices in an unstructured data format can still be received on paper, as a fax or as a digital file, e.g. in a PDF format or as an image file. Paper invoices are first scanned or photographed and converted into an image file. The files are then read using OCR (Optical Character Recognition). Artificial intelligence and machine learning approaches can support and optimize this process. This allows all relevant invoice data to be automatically extracted and digitized without having to specifically train the system beforehand.

After digitization, all invoices must be checked for accuracy and completeness. The formal check verifies that the criteria for input tax deduction are met. With the right software, this can be automated. Compliance, consistency and validity of the amounts and, if available, the order reference of an invoice are also checked. Any discrepancies or errors are detected by the software and flagged for manual correction.

Digitizing your incoming invoices significantly reduces the amount of work involved and the susceptibility to errors. Incoming invoices are processed efficiently and reliably. For an optimal solution, you should also plan for structured data formats such as ZUGFeRD or XRechnung. These are also playing an increasingly important role in invoice exchange, regardless of company size, thanks to legal regulations (including EU regulations on electronic invoicing to authorities; B2B e-invoicing obligation in Germany). It is therefore best to use a solution that can process all these formats uniformly.

Step 2: Automate The Following Approval Process

With digitized invoice data, the subsequent approval process can also be implemented much more flexibly, independently of location and more quickly. Invoices must be fact-checked (i.e. their content must be checked for correctness) and approved by superiors before they are forwarded to the accounting department for payment.

The entire approval process usually involves several approval levels, departments and people. Whereas with analog invoice processing it is still necessary to physically take all invoices to the responsible persons and have them signed, this can be done completely digitally with the right software. This saves an enormous amount of time, invoices are no longer lost and every person involved can easily view the status of each invoice at any time. You also benefit from practical software functions such as mass and item approvals, mentions, automated reminders and an integrated chat option for a quick exchange in the event of queries or corrections.

Important: the entire approval process must be documented and archived together with the invoice so that it can be presented in the event of any audits by tax authorities, for example. These audit reports are created automatically during digital invoice processing and attached to the invoice.

We show here what such a workflow can look like.

Step 3: Accounting of the Incoming Invoice

Finally, the accounting department determines the accounts to which the documents should be posted. Smart software learns the rules applied and therefore provides account assignment suggestions, which makes this step even easier.

The electronic invoice workflow then enables seamless posting in the subsequent financial accounting or ERP system.

Step 4: Archiving Incoming Invoices in an Audit-Proof System

Finally, the invoices must be archived in an audit-proof manner, i.e. unalterable, traceable and complete. The duration of the statutory retention period can vary depending on the country; in Germany, for example, it is 10 years, in Austria 7 years. During this time, the invoices, together with the audit report, must be kept available for inspections by auditors or tax authorities, for example.

Special digital archiving systems meet the requirements of audit security and offer functions such as automated logging, access controls and encryption. They save space and storage costs and have the great advantage over physical storage in filing cabinets or folders that documents can be found in just a few clicks. With their help, the entire invoice processing procedure from receipt to archiving can be implemented digitally and therefore without media discontinuity. With the right add-on, Microsoft SharePoint, for example, can be used as an archiving system.

Invoice Processing Simply Digitized: with the Right Software

Digitizing incoming invoices offers considerable advantages and represents an important step towards optimizing operational processes. By reducing workload and time, employees can be relieved and resources can be used more efficiently. Automated processes minimize errors and ensure higher data quality and accuracy in accounting. By using a cloud solution, the solution can scale flexibly as the company grows and can be used efficiently even with a small number of invoices per day (10+).

Consider the following points when selecting the software:

  • Processing of unstructured and structured invoice formats

  • Integration into common financial accounting and ERP systems

  • User-friendliness and simple application

  • Documentation of the audit trail

  • Subsequent digital and flexible approval process

  • Digital archiving system
  • Data protection requirements

  • and cloud capability if required

Today, implementing a digital solution is straightforward and can be done quickly, allowing companies to reap the benefits quickly. With a cloud solution, a go-live can be implemented within a few weeks.

We are happy to answer any more questions you might have or to show you a live demo of our solution.