PDF data extraction has become a major part of invoicing in the construction industry. However, it has some significant disadvantages and there should be a push to adopt true e-invoicing solutions.
While there is a place for PDF data extraction tools in invoicing, over-reliance on these is creating issues for both buyers and suppliers. The construction industry also risks being left behind in an era when true digital transformation is essential. There is a genuine concern that, as an industry, we will delay the adoption of true digital approaches due to the assumption that we have already achieved this transformation this using PDF processing.
While the tools and services that can be used to extract information from PDF can save a lot of time compared with manual entry of data, several manual steps are required to check and correct any errors in the information, such as removing spaces in number fields. It also needs to be manually validated before it can be processed further.
It is important to understand that a PDF is designed for visual presentation of its content rather than for automatic reading of its data. For fully automated exchange and processing of e-invoices, the data needs to be ‘structured’, meaning that it has both a semantic and syntax framework. The semantic element describes the meaning of each data element while the syntax describes where each piece of data is placed within the data file or application database. Without this combination, there is an increased risk of errors, which can result in more queries, payment time disputes and the need to raise and process credit notes.
Another issue for construction, especially for contractors and subcontractors is the pressure for prompt payment. The Construction Act (2009), the Late Payment Directive, the Construction Supply Chain Payment Charter and the Prompt Payment Code all require invoices to be processed and paid efficiently. Invoicing systems that rely on PDF data extraction can present a real barrier to this and can negatively impact the company’s reported performance, which can in turn affect its ability to win major projects. Any issues with the PDF data extraction may not be identified immediately, resulting in a delay in rectifying the problem or requesting resubmission from the supplier. This in turn means that invoices can quickly become overdue and when this occurs frequently across all invoices the proportion that are late can rise sharply.
In addition to these issues, there is also the implications around the ‘legal invoice’. There can only be one legal invoice so if the same information is sent in two formats, such as electronic and paper, it must be clear to both parties which is the legal invoice. The other version is considered to be ‘metadata’. Similarly, data extracted from a PDF is not the legal invoice and must be treated as metadata. Therefore, the buyer will need to retain access to two formats to comply with tax rules, increasing complexity and the potential for issues to arise.
The solution to these issues is to invest in a true e-invoicing solution, such as Causeway Tradex. With this approach, all suppliers submit their invoices through a dedicated portal. All invoices then undergo an automated validation process to ensure each is an HMRC-compliant invoice, check it is not a duplicate and confirm it contains a valid PO number and that the details match the PO information. Importantly, the invoice receipt date is recorded automatically to make internal and external auditing and reporting of payment performance simple and accurate.
Where an invoice is not compliant, the supplier is automatically notified and given the reason for the return. At this point they are given the option to edit and resubmit, removing the need to credit and re-issue.
The fully automated validation, which is only possible with a true e-invoicing solution, has been shown to immediately deliver up to an 80% time saving for the accounts payable team, significantly improving productivity.
While PDF invoices have provided significant advances over previous approaches, businesses need to appreciate the possible issues and understand that PDF data extraction is not a truly digital solution.
Find out more about how a solution like Causeway Tradex can improve efficiencies and relationships across your supply chain.
