Why an Outsourced “Imaging” Solution is Superior to “E-Invoicing” via a Supplier Network

A recent article from the Accounts Payable Network, titled “E-Invoicing and Scanning: The Right Mix,” brought up the age-old debate about whether “imaging” (via optical character recognition [OCR] software) or “electronic invoicing” (e-invoicing) is the most advantageous strategy toward achieving a paperless accounts payable process.

We offered our thoughts on this topic earlier this year in an article DataServ Founder/CEO Jeff Haller penned for Financial Ops magazine, but it is worth reiterating here: Outsourcing your “imaging” by using a third party to handle the cumbersome task of scanning all your invoices through a full-service digital mailroom combined with OCR is preferable to using a supplier network (aka, e-invoicing). The biggest reason is that supplier networks require suppliers to change their billing practices, something that has proven to be unrealistic to achieve across 100 percent of vendors, even for some of the largest companies in the world.

We don’t recommend trying to implement OCR internally, as the article implies. In our experience talking with clients, many have tried to implement OCR internally and failed because of a lack of internal expertise and resources to maintain the hardware and software required to make it run efficiently. In fact, the article cites the Department of Veterans Affairs, which implemented OCR internally and achieved a success rate of only 60-70 percent accuracy without human interaction. That is well below acceptable standards, and managing the “human interaction” it takes to get 100 percent accuracy yourself isn’t your best option. OCR is essential, but it’s best to outsource it to a third party that can achieve that 100 percent accuracy rate for you.

In fact, the AP Network article examines the pros and cons of the “imaging” and “e-invoicing” approaches from the standpoint of implementing them yourself, but we feel the “imaging” solution holds significant advantages if, as we mentioned, you outsource this task as opposed to attempting to manage it internally. In addition, David Hay, former director of shared services for Hewlett-Packard, states at the end of the piece that your goal should be to get 80 to 90 percent of all invoices electronically. While Mr. Hay is on the right track, your goal can actually be much higher. A full-service digital mailroom solution makes receiving 100 percent of your invoice data electronically entirely possible and, in fact, easily attainable.

We give Mr. Hay much credit, however, for providing one of the best statistics we have ever seen to quantify why ridding yourself of paper in your AP process is so valuable. During his tenure at General Electric (GE), Hay achieved $200 million in cost savings via early payment discounts by paying 50 percent of the company’s invoices according to terms, a feat that is only possible when your AP department is dealing with electronic invoice data and not mounds of paper. However, if GE was getting only 80 to 90 percent of invoices electronically, they were still leaving significant potential savings on the table. Retaining 10 to 20 percent of your paper invoices still requires you to use valuable staff time and maintain dedicated resources to process that remaining paper invoice volume, reduced though it may be. If you get 100 percent of your invoice data electronically, you can shift the entirety of your AP staff to higher-value tasks, which should be the goal of any ap automation project.  

To learn more about using a digital mailroom solution to streamline your AP process, contact us at info@DataServ.com.