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Digital invoice verification

Artificial intelligence to support digital invoice verification is proving to be an indispensable tool that is revolutionizing the entire invoicing process.

In this article, we look at the different aspects of invoice verification and why integrating AI solutions is critical to developing a resilient business fit for the future.

Types of invoice verification

There are two types of invoice verification:

  • The formal verification
  • The factual verification

Formal invoice verification is used to check mandatory information, i.e. information that has to be included on every invoice. Factual (or content-related) invoice verification checks whether the services provided or goods delivered have been invoiced properly.

Formal invoice verification

Formal invoice verification is always the first step when checking incoming invoices. You ensure that the invoice contains all the information required in accordance with § 14 Para. 4 of the Value-Added Tax Act (UStG). This includes, for example, information about the invoice issuer and recipient, a unique invoice number, the date of issue, and the quantity and type of goods delivered or services provided.

Formal invoice verification: Checklist

  • Invoice issuer: Company and address
  • Invoice recipient: Company and address
  • Invoice date:
  • Invoice issuer: Tax ID or VAT number
  • Invoice number
  • Quantity and type of delivery or scope and type of other service
  • Time of delivery or service
  • Payment, broken down by tax rates and tax exemptions
  • Reductions in fees (e.g. cash discounts or rebates)

Factual verification

The factual invoice verification provides quality control. For example, does the invoice include only what was actually delivered (and on time)?

Factual invoice verification: Checklist

  • Comparison with the order confirmation: Was what you requested invoiced?
  • Comparison with order receipt: Was what was actually received invoiced?
  • Are all conditions met and were any discounts taken into account?
  • Does the sales tax reported meet the legal requirements?
  • Are there sufficient documents to support the transactions listed on the invoice?

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7 steps to digital invoice verification

Manually verifying incoming invoices is time-consuming and prone to errors. For this reason, a digital invoice workflow should be part of every company’s digitalization strategy. It begins with the digital inbound mail and ends in an audit-proof archive of a certified document management system (DMS). Let's take a closer look at the process:

  1. Invoice receipt and digitization: Incoming paper invoices are scanned and sent to the DMS as PDFs. The DMS collects invoices already received in digital format (e.g. via email) directly, independently, and fully automatically via interfaces. This could, for example, be an enterprise-wide invoice mailbox in Outlook. The DMS retrieves the documents via the Microsoft Office 365 interface and transfers them to the invoice workflow.
  2. Extracting invoice data: Using OCR text recognition, the DMS makes all the information on the scanned invoice usable. It then automatically captures all the relevant information, such as invoice number, amount, delivery date, and items, and stores it as structured metadata. If the invoice received digitally is in XRechnung or ZUGFeRD formats, the metadata provided is already in a structured format.
  3. Entering invoices in the digital invoice ledger: All incoming invoices are stored chronologically in the digital invoice ledger for further processing.
  4. Formal and factual verification: An employee in accounting checks the invoice for accuracy and for completeness of information. The invoice is also checked against the order confirmation and the order receipt.
  5. Approval by authorized employee: Before posting the invoice, it has to be approved by an employee. This is typically an employee in purchasing or an authorized employee in the department that placed the order. For automatic postings, usually invoices with a small invoice amount, invoice approval is not necessary and the invoice is posted immediately after invoice verification.
  6. Posting an invoice: The invoice is entered in the accounting system, officially released for payment, and posted by an employee.
  7. Audit-proof archiving: After posting, all the relevant documents (invoice, order confirmation, delivery note) are placed in inactive status and are then archived in the DMS in an unalterable and audit-proof manner. Authorized persons continue to have read-only access, and changes are no longer possible.

By digitizing the invoice verification process, you increase your efficiency and significantly reduce the rate of errors. This also helps you to ensure documentation is complete for future reference and any possible audits.

AI – the future of digital invoice verification

Let's go one step further: With an AI-supported enterprise content management (ECM) system such as Doxis, you can further streamline your digital invoice verification by entirely eliminating manual work steps:

  • AI-supported data collection and automatic invoice capture: AI automatically extracts and captures data, even for passages that are difficult to read.
  • AI-based comparison of invoice data with order data in the ERP system: The intelligent platform compares invoice data and order data, and minimizes the sources of error.
  • Fully automated invoice verification and error handling: AI takes over the check, highlights missing information, and allows you to make corrections directly.
  • Learning-capable AI for optimized verification processes: AI improves its checks with every new invoice.
  • Seamless transition to the approval process with intelligent task allocation: Doxis automatically forwards the invoice to the correct processor, also taking into account deputy rules.

AI-based invoice verification: Key benefits at a glance

  • Extremely fast process: ✓ Time savings of over 50%
  • Highly secure process: ✓ No media gaps ✓ No typos ✓ Cross-check with order confirmation in seconds
  • Cost-effective process: ✓ Only pay for what was delivered ✓ Compliance with discount periods ✓ No missed payment deadlines or reminder fees

The significance of OCR in digital invoice verification

OCR text recognition plays a crucial role in digital invoice verification:

  • Accurate digitization of invoice content: OCR makes it possible to accurately convert invoice content into digital data and precisely capture all the information.
  • Structured metadata: You store the invoice contents as structured metadata, which ensures that you can manage your digital invoices in an orderly manner.
  • Elimination of manual data entry: Thanks to OCR, your employees no longer have to rely on manual data entry from PDFs or original documents, which minimizes the sources of errors.
  • Reduction of media gaps: Digitization using OCR recognition entirely eliminates media gaps, increasing the accuracy and reliability of your entire invoice verification process.

Why AI is a must-have for the invoice verification process

Artificial intelligence is a necessary step in the today’s business world to remain competitive and raise the efficiency of your own work processes to a new level. Through targeted use of AI, you can revolutionize your invoice verification process and give a major boost to the overall success of your company.

Careful invoice verification is the basis for many other processes in the company. When you add artificial intelligence to the mix, you are basically redesigning processes from ground up, which opens a wide range of possibilities for using resources more efficiently.

Frequently asked questions about digital invoice verification

What benefits does digital invoice verification provide?
Digital invoice verification ensures efficient and accurate verification of incoming invoices, significantly reduces error rates, saves costs, and supports audit-proof archiving for later verification and possible audits.
What is involved in invoice verification?
Invoice verification includes two crucial steps: the formal and the factual verification. The formal verification checks the necessary information on the invoice. The factual verification evaluates the reason for the invoice and the proper provision of services.
How is the invoice verified?
Invoice verification includes two crucial steps: the formal and the factuInvoice verification includes the thorough review of all information on an incoming invoice, including company name, tax rates, and quantities. If everything is correct, the invoice is approved, and subsequent process steps are initiated (e.g. posting and audit-proof archiving).al verification. The formal verification checks the necessary information on the invoice. The factual verification evaluates the reason for the invoice and the proper provision of services.
How long does invoice verification take?
Invoice verification can be shortened significantly by using digital solutions. Ideally, the process speeds up by around 50 percent, depending on the complexity of the invoice and the efficiency of the software.
What is a formal invoice verification?
Formal invoice verification is the first step in checking incoming invoices. In this step, you ensure that the invoice contains all the information required in accordance with § 14 Para. 4 of the Value-Added Tax Act (UStG).
What is a factual invoice verification?
Factual invoice verification is the second step in checking incoming invoices. In this step, you check whether the services provided or goods delivered have been invoiced properly.
How does AI help with invoice verification?
AI makes invoice verification easier by systematically extracting important information from invoices, automatically comparing data, and correcting errors. It also triggers the next immediate steps, which significantly improves the efficiency and accuracy of the entire process.

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