Insights from DCS
Knowledge for the information generation

Digitisation for Invoice Processing Accuracy - Scenarios to Synchronise Invoice Data

By Nicolas Zeguido - 26 Mar 2020
  • Intelligent Document Capture

If you receive invoices regularly, you know the headache that poor data quality causes. Tax legislation in your country can have very differently formatted mandatory data fields than what you have in your master data. When your data is inaccurate, at the best of times you will deal with increased exceptions handling and payment delays. But at the worst of times, you can be placed under the spotlight with investigations in tax evasion or money laundering.

Businesses that don’t have AR and AP modules in their accounting is one group where end-to-end invoice automation isn’t feasible. Their e-invoice procedures rely on office programs to generate the invoice. Up to 50% of all businesses fall into this category1. Sometimes, third-party outsourced staff are even used to handle the processing. This makes it difficult to move ahead into automated e-invoicing aka. “touchless e-invoicing" .

Sometimes it’s just not appropriate to move beyond this into full automation. And that’s ok. But it doesn’t mean it’s not worth it to move to digitisation. Fully automating your invoice-based processes typically result in 60-80% in cost savings.

This will be a brief introduction into the scenarios and uses of different sources of data matching for invoices:

  • Official public registries
  • Direct data synchronization
  • Catalogue data matching
  • Structured invoices

Why Adopt Automated Data Matching for your Invoices

If you don't have the right data in the beginning. Trying to correct it increases your costs substantially. Typically, 20-30% of invoices must be treated as exceptions. This can still be a problem if you are still on the first step of digitising your paper invoices. But even after digitisation, you still run into the risk of redundancies in your master data. Left unchecked, these redundancies can further alter your invoice processing and budget balancing, thereafter.

The push for data matching and accurate accounts payable is as a spill-over of government initiatives to reduce the VAT Gap, which can be up to 20-30% of public revenue2. Invoices are the cornerstone document. They contain the most complete information for tax authorities. Easily verifiable e-invoices and other electronic delivery methods make rectifying the VAT Gap easier and pinpoints tax evasion.

But the business-side cost of inaccurate data? A b2b payments survey by Atradius found that incorrect invoice data was the cause of 14.7% of payment delays in Western Europe 3. For the smoothest invoicing process, the responsibility is on both the issuers and recipients to have as accurate data as possible in the supply of goods and services (while also doing their part in helping tax authorities close the VAT Gap). You can arouse suspicions of AP fraud if the following are expected:

  • Phantom trading partners
  • Supplies that are never delivered
  • fraudulant invoices

Trading Partners and Methods of Invoice Data Synchronisation

In tax compliance legislation, it should be proven that the supplier and recipient listed on the invoices both exist. Digital certificates are one way of proving this, but this usually only goes so far as technical authentication.

It would still be difficult to show that the suppliers and recipients are genuine entities. One way you can more accurately match an entity's existence is to prioritise data synchronisation. Governments usually have pre-requisites that need to be fulfilled when publicly listing business entities. Business pre-requisites include maintaining overviews of corporate hierarchies, i.e. headquarters, branches and subsidiaries.

If you look over your own organisation’s entry and feel that this data is accurate enough, you can then use lookup routines to synchronise parts of your master data into ERP solutions. Or you can use data synchronisation can happen in user directories of e-invoicing network operators.

Direct data synchronisation is still in play at many industries (especially those with a high volume of invoices). But as advised by the Billentis report on e-invoicing, the use of official registries can become a norm. You can replace direct data synchronisation with lookups in national registries, or you can use national registries as a compliment to your own internal audits.

Keeping Accurate Product and Service Information

After proving that both your organisation and your supplier are not fictitious, you would then need to prove that goods and services were exchanged. The two dangers of inaccurate invoice data are over-invoicing and under-invoicing.

Over-invoicing: Fraudulently increasing the price of goods and services

Under-invoicing: Artificially decreasing prices.

Maintaining accurate information on goods and service received can be made easier with data synchronisation in a central database. These databases are available in heavily regulated sectors, like Healthcare. In those cases, supplies of the invoices are matched with these databases. That’s easy enough for organisations that operate in standardised sectors.

What about those that aren’t in regulated sectors? How do they QA accurate supply? The good news is that data matching doesn’t need to rely on national databases to ensure accuracy. Integrated purchase to pay solutions are being developed to work with catalogue data matching. So, your cashflows, item counts, or anything else numerical, can be balanced after tracking.

E-invoicing vs. Invoice Automation: The Structured E-Invoice Bridge

If you remember, 50% of organisations still rely on office programs to generate and send invoices. This is a far cry from having accounts payable and accounts receivables modules going into your ERP. Purchase-to-pay data integration isn’t widespread. It’s true that organisations still issue orders electronically with e-invoices and do the legwork themselves. But even if you are not automated to the full extent of touch-less invoicing; you can still adopt techniques to maximise data cleanliness in your finance function.

Switching from paper to e-invoicing relies on wanting to improve the supplier and buyer relationship. An e-invoice is any invoice that comes in an electronic format. It can be either a structured invoice, or an image-based PDF. Structured invoice data is useful once direct two-way communication is established between the supplier and the buyer. Alternatively, they use a service provider for this exchange.

By starting with structured e-invoices, an organisation puts in the building blocks for easier implementation of financing services.

Structured invoices allow the easier matching of the contents between two documents. How? E-invoicing is handled centrally, on both inbound and outbound invoices. This increases transparency in the supplier-buyer relationship. But before this transparent document flow can be realised, there still needs to be a unique identification of trading partners with compliant master data.

Even if you aren’t ready to adopt full e-invoicing, electronicising incoming invoices still makes them more easily accessible for your workers. In-house finance staff can access, feedback, and reject invoice filings to keep your quality up. Keep in mind that any Master Data still must be updated semi-regularly and manually. But data redundancies can still happen even with your most diligent worker. Fatigue, office distractions, balancing other tasks. All things that make your worker human become a cruel liability.

Resources

Billentis. (2019). The e-invoicing journey 2019-2025, Pg. 65, 67
2 Sovos Trust Weaver. (2018). Trends E-Invoicing Compliance.
3 Atradius. (2018). Payment Practices Barometer 

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