Invoice data extraction: Everything you need to know

Extracting data and processing invoices are critical business functions, uniform for every organization, regardless of industry or niche. It is an integral part of every enterprise’s account payable department. A systematic approach to data capture from invoices removes backlog and transaction errors. Information about the invoice number, supplier name, address, amount, etc., is duly drawn out of the physical/digital invoices for further validation against sales receipts and POS before initiating payments. Finally, the figures are updated in the ERP/accounting system. Therefore, in simple words, invoice data extraction functions much like traditional paper ledgers.

What is invoice data extraction?

The global market economy produces approximately 550 billion invoices every year, which is expected to quadruple by 2035. These legally enforceable invoices are legit evidence of business between two entities and serve as a formal request for payment from clients/customers. Invoices are generated in the event of goods delivery from sellers to customers or during the purchase of items from suppliers. Such paper documents carry valuable business insights, including pre-decided and agreed-upon terms and conditions, the number of goods exchanged and the amount to be paid/received, names of vendors, dates of transactions, and other details. This information is essential, enabling buyers and sellers to track and record their payments and amounts owed easily. Therefore, timely extraction of such data and updating in a centralized accounting system helps businesses later in generating financial reports or building informed strategies for their growth and expansion,

Invoice data extraction is simply the process of drawing out data hidden inside invoices to ensure their availability as and when needed, for example, generating future invoices concerning the same parties, extending business contracts, renewing the terms, or simply closing the account.

How does invoice data extraction work?

A typical invoice comprises the following information:

Some invoices can be more detailed, consisting of other equally essential items such as terms and conditions outlined for the reference of concerned parties. All this data must be updated in the company’s account payable system without errors or omissions. Now, in the face of numerous invoices generated and processed daily, extracting and updating information can be a long-haul endeavor, exceptionally when executed in an old-fashioned manual way. The chances of mistakes remain high, and the subsequent challenges are numerous.

A few such challenges posed by manual invoice data extraction and processing would include the following:

Contrarily, an automated and AI-powered invoice data extraction software solution can be a blessing in disguise for both the AP team and clients. It eliminates human intervention and handles the entire process of generating invoices, processing them for approval and sharing with parties, extracting data, and updating the centralized system in seconds or minutes. The software tool follows the detailed instructions you give and pulls data directly from invoices without spending time typing, copying, and pasting each data separately. The platform also supports various formats for invoicing, enabling automated retrieving, reading, validation, and posting of invoices to the enterprise’s ERP system.

Nine primary benefits of invoice data extraction

From the business standpoint, an automated invoice data extraction process has its own set of benefits, from eliminating paperwork to reducing hours of manual work and improving employee productivity. Here’s a list of essential benefits of using an intelligent solution for invoices:

Enables a touchless, paperless process: In the presence of digital solutions, the need for paper-based invoices is omitted from the entire process. This approach supports a touchless, paperless, environmental-friendly, and labor-free business operation, which is the need of the hour.

Reduces storage cost: Paper-based invoices require extra space for storage. But digitizing the entire processing and invoice data extraction workflow eliminates the overhead cost incurred from purchasing papers and physical folders in bulk and the cost of storing them for later use.

Optimizes time, cost, and labor: As mentioned, digital invoicing removes the cost of purchasing papers, folders, and storage units. In addition, with lesser human involvement, productive hours and resources are better utilized for the company’s greater good.

Increases staff productivity: Any manual, long-haul, repetitive task involving extracting and entering datasets in volumes can quickly reduce the overall productivity of workers. By automating data extraction from invoices and other related tasks, employees are freed from the burden and focus on other critical, value-driven tasks.

Eliminates human errors: Time-intensive, manual tasks, especially related to data extraction and documentation, are vulnerable to human errors. Missing crucial data, overlooking fine nuances, or omitting critical insights during invoice data extraction can prove highly costly for the business, from issuing duplicate payments to missing payments, ruining relationships with partners/clients, and damaging the company’s reputation in the market.

Shortens invoice approval cycles: With a digital platform shouldering the whole invoice operation, numerous back-and-forth email exchanges are duly avoided. Furthermore, when all the digital invoices are available for quick access on a centralized ERP system, concerned department heads can easily verify and approve invoices without delay.

Elevates data quality: Minimal human intervention in invoice data extraction eliminates any possibility of missed or wrongly deduced data. So, the insights extracted by the automated system are high in quality, accuracy, and reliability.

Omits chances of unpaid or delayed invoices: Specific invoice data extraction software solutions share notifications to respective departments, alerting them of invoices requiring approval for processing and payment. In addition, the heads can easily access past records of earlier invoices to validate the accuracy of the current ones and approve and process payments as fast as possible. Such features standard in most intelligent software solutions negate any chance of missing/unpaid invoices. As a result, vendors get paid on time, and enterprises receive the services and products to continue their operations.

Streamlines the whole process: The operation of processing, documenting, approving invoices, and extracting data from them is streamlined and accelerated. Hence, the subsequent processes are sped up, ensuring efficient and effortless delivery of business objectives.

Critical invoice data and how they help businesses

Invoices are business records allowing companies to get paid for their services. These documents are legal evidence of agreements between parties and their attempt to respect those terms. Invoices are mediums used for requesting clients to make payments on time, maintain an account of sales and supplies, track business inventory, predict future revenue, and monitor business income for tax purposes. In addition, they help record business transactions.

An invoice comprises a range of datasets, including invoice number, supplier name and address, project details, PO number, and other critical details. As stated above, this information helps track goods and services obtained from vendors and suppliers. Hence, timely extraction and maintenance of each data in a centralized system help businesses stay informed, strategic, and competitive.

Invoice data extraction benefits businesses in million ways, for instance:

Seven steps to implement invoice data extraction

Invoice data extraction software solution works like any other tech-enabled data extraction platform. However, a one-size-fits-all approach doesn’t apply in most enterprise scenarios because of document complexities and domain specificities. Regardless, a purpose-built document extraction, processing, and comprehension platform powered by AI, Machine, and Deep Learning capabilities should be the ideal option.

For instance, the XtractEdge Platform can efficiently structure complex multi-document data and make it consumption-ready, ensuring owners unlock limitless business value quickly. As mentioned, the invoice data extraction platform functions like other document-related ones, and their successful implementation involves careful planning and identifying the best fit worthy of your investments. The following is a list of essential steps to ensure your implementation process goes as planned.

Step 1: Define your software objectives

Why do you need an intelligent software solution for your invoices? This should be your first question before rounding up vendors’ names and details. Understanding why you need technology’s help for invoice data extraction or whether an automated platform with basic features could suffice your needs can help you pick the right solution. Next, list essential requirements, from the volume of documents and data entering your system daily to types of documents, the minimum number of fields to extract, and how to organize documents or data for future purposes. All these elements factor into your decision-making and likely narrow your options.

Step 2: Decide your budget

In the case of invoices, hours of manual work can be saved, costs for papers and files eliminated, and expensive human errors avoided. The market has many free, paid, or semi-paid solution providers. So, take the step of comparing each vendor for their software features and prices before you make a purchase decision.

Step 3: Verify vendors before selection

Besides comparing vendors’ software features and price, verifying directly from their clients is essential. Obviously, you need help picking up the phone and questioning one of their buyers. Instead, spend time reading their online reviews to understand what other buyers think of the products.

Step 4: Pick a small pilot project

Never try to automate an entire process using a software solution. In the case of invoice data extraction as well, start small and then gradually scale transformation evenly across the length and breadth of your organization. So, start by determining the number of invoices leaving or entering the enterprise’s system, where they are coming from or heading to, and where the bottlenecks lie in the process earlier. This helps identify which steps in the invoice data extraction consume the most time, increase costs and errors, and create unnecessary delays. Therefore, implement the tool only for small suppliers, see the difference, and scale the change across all other suppliers and partners, big or small.

Step 5: Prepare your datasets

Now, AI and automation systems will only work with concrete datasets. So, identify what kind of data the platform needs to perform a task like extracting invoice data. Then, create rules and feed appropriate data into the system to enable seamless, hassle-free performance.

Step 6: Strengthen your IT infrastructure

Now, many intelligent software solutions fail post-implementation for multiple reasons. Two reasons would be – more software understanding among employees and poor IT infrastructure for maintenance and repair. For example, sourcing an invoice data extraction solution from a third-party vendor guarantees ongoing customer support, but if resources involved with the system have no basic understanding of how the software works, the latter will fail to perform. Therefore, work on these areas before you seriously change your operations.

Step 7: Evaluate and scale

Every software solution requires continuous evaluation, monitoring, and timely maintenance to perform as expected. And the tools are good enough to be implemented in more critical business areas. So, an IT team should be there as backup, monitoring the software solution, testing for bugs, and remediating issues before the tech support from the vendor reaches your door.

The future of invoice data extraction

Data and analytics are the future — considered the key to unlocking competitive advantage for businesses in the market. And invoices are taken as one of the primary sources for business data, but sadly, unstructured data in invoices and other documents continue to grow at 62% per year. This poses a significant challenge for decision-makers without adequate tools and technologies. Therefore, the future of data extraction, not just for invoices but for various other sources, would be significantly impacted by Big Data and advanced technologies supporting the extraction, storage, and accessibility of such data volumes. Big Data is nothing more than datasets comprising a greater variety of information, arriving in increasing volumes and with more velocity, promising game-changing benefits for businesses. But, they need the support of adequate technologies to help extract detailed insights from unstructured datasets and store them in a centralized place.

Therefore, advanced predictive analytics, Artificial Intelligence, and its extended capabilities like ML, Deep Learning, and others, as well as more intelligent documents and invoice data extraction tools, are likely to dominate the mainstream, enabling businesses to leverage data and unleash endless possibilities for their organizations.

The final takeaway

Invoice data extraction software solution powered by AI capabilities has become the need of the hour. Since they contain crucial information, timely extraction has become imperative for data-driven decision-making – a key to staying ahead of the competition curve. Therefore, a comprehensive guide on invoice data extraction tools could provide a good head start in the same direction.