Lately, I’ve been having a lot of “outsourcing the invoice scanning operation” discussions with clients and other stakeholders. To my reflections, outsourcing the invoice scanning operation appears as a key enabler for both increasing efficiency and saving costs in the Accounts Payable (AP) process – something I would like to debate to help you understand whether it actually is beneficial.
Making the AP process more efficient
Before we begin, it might be a good idea to look at a typical manual supplier invoice process and segregate the time spent on each action.
For a non-PO invoice (i.e., ‘wild invoices’ or ‘general expense invoices’), the following are typical manual actions and the amount of time spent on each step.
As you can see from the above graph, the scanning step represents approximately 6% of the total process.
For purchase order (PO)-based invoices, as more manual steps typically are required, the scanning operation of the invoice represents about 5% of the total handling time.
A time-saver or suboptimization?
As the graphs above reveal, significant automation and time-saving opportunities reside not within the scanning operation but with the rest of the manual processes.
An outsourced scanning operation doesn’t necessarily mean bad data quality. However, saying that outsourcing will be better than the in-house alternative is wrong, in my opinion (although I’m a bit binary). Furthermore, it doesn’t necessarily mean that outsourcing scanning operation will imply a less automated process in the other steps.
If we neglect the potential language barriers that can occur during outsourcing, the critical factor we are missing out on is the ‘business know-how.’ In some cases, the ‘know-how’ isn’t relevant, but let’s give some examples as to when working knowledge is appropriate and how it affects the rest of the operations.
For PO invoice matching, article/ line detail information is critical. An in-house accountant could easily identify and handle deviations early in the process—in a way that it won’t drag the rest of the process down. Examples of such cases are unexpected charges (freight, environmental and invoices fees, packaging, etc.), information on the invoice should be neglected (mismatching PO and invoice article numbers and quantity units, errors in PO-number translation), internal references for workflow purposes and so on. When these factors can’t be handled early in the process due to a lack of ‘business know-how,’ it can drag the automation rate down in the subsequent process steps.
Meanwhile, the above examples are mostly relevant for retail and manufacturing companies. The service sector is an example in which you typically won’t deal with the inventory challenges.
To conclude, the answer to ‘when’ to outsource is when the ‘business know-how’ is not that relevant for the overall process. The more detailed and informative a line item on an invoice is, the more critical it is to have personnel with sound business knowledge to carry out the task.
However, outsourcing invoice scanning is not the same as automating the accounts payable process. It is the other way around; outsourcing invoice scanning could bring the automation rate in the process down.
Hence, there is a third alternative: e-invoices, but that is a topic for another day.
What are the benefits of AP automation? Read our infographic and see what the benefits are for different stakeholders in your organization: