Using Invoice Data for Better Business Decisions

Did you know that a valuable source of business data is sitting right under your nose? That’s right, the key to making better business decisions is already within your grasp, and you may not be using it to full effect.

For many businesses, invoices are seen as a tedious necessity. But others recognize their importance as more than plain documents, and use deep invoice data analysis to inform a whole range of business decisions.

Invoice data could be the key to unlocking important financial insights that will give you an edge over your competition. And it’s easier than you might imagine, too.

So sit tight while we explain how to extract data from invoices and how to harness that data to make better business decisions that will affect your bottom line.

What is invoice data and why should you care?

Invoice data is the structured information recorded on an invoice (which details a business transaction between you and your loyal buyers).

That data includes:

• Invoice number: You’ll find this at the top of every invoice. It’s a unique reference used for tracking.
• Product details: A description of the product or service bought (including quantity, units, and total price).
• Payment terms: At the bottom, you’ll find payment information, like due date, accepted payment methods, and any applicable discounts.

All this information is obviously crucial for getting paid, but that’s not its only use. Invoice data is also a key tool for enhancing financial management more generally, as well as improving and managing cash flow, and ensuring legal compliance.

Invoice data analysis helps your business:

• Track revenue
• Identify spending patterns
• Optimize procurement
• Detect fraud
• Minimize errors
• Forecast

How invoice data analysis can improve financial management

So, how exactly can businesses use invoice data for smarter decision-making?

Let’s explore:

• Smarter budgeting: One of the most useful aspects of invoice data? It expresses trends in expenses and revenue. If you can track historical spending, you can allocate future resources much more effectively. You can even categorize expenses, fixed vs variable, for even more accuracy.
• Cash flow management: It’s not just profits that matter, but when to expect those profits, too. Timely invoices are crucial for this. You need to be able to track payment cycles and keep an eye on outstanding payments to better understand how your cash is flowing and plan accordingly.
• Cost optimization: Invoice data reveals inefficiencies in procurement and supplier contracts. By comparing pricing trends and supplier performance, businesses can negotiate better terms and keep expenses down.

Knowing how to use invoice data and how to extract data from invoices are two different things. Here are a few ways businesses can pull info from an invoice, including:

• Optical Character Recognition (OCR)
• Accounting software, like QuickBooks, and ERP systems
• Data visualization tools
• Even AI & machine learning

Key benefits of using invoice data for business decisions

Hopefully, it’s already becoming clear why your business should jump on the invoice data analysis train. If not, here’s why in plain terms:

• Better forecasting: Historical data doesn’t just tell you how much money you made yesterday. It can also tell you how much you might make,or, for that matter, spend, tomorrow. Better forecasting means better budgeting.
• Identifying savings: Invoice analysis highlights spending patterns. These can reveal cost-saving opportunities if you know where to look. Who doesn’t want to save cash on unnecessary expenses?
• Improving supplier relationships: You also want to make sure you’re getting the best deal from your suppliers. Timely payments, volume-based discounts, and transparent transaction records strengthen relationships, leading to better terms and service.
• Enhancing compliance and fraud detection: Lastly, invoice data analysis is one of the best ways to up your compliance with tax regulations. Plus, it could help you catch anomalies, which in turn creates better financial security.

How to extract data from invoices for analysis

To start reaping the rewards of those benefits, you’ll need to know how to extract data from invoices. When it comes down to it, you basically have two options depending on your needs, either manual entry or automation. Here’s a quick breakdown to help you out:

• Manual entry: ‘Essentially, employees input invoice details into spreadsheets or accounting systems. This is relatively straightforward, but it’s also time-consuming and prone to errors. So it’s not for everyone.
• Accounting software: Full accounting software that integrates with OCR (Optical Character Recognition) tools and then automatically imports details and manages them save you a lot of time.. QuickBooks is a prime example ideal for better bookkeeping. What’s more, QuickBooks leverages AI to enhance efficiency and compliance every step of the way.

When to leverage invoice data for maximum impact

Ideally, you’d continuously analyze invoice data for maximum impact. But not every business can employ full-time data analysts, so here are a few ideas:

1. Firstly, analyze invoice data during budgeting cycles. Review data before setting annual or quarterly budgets. This will help make realistic financial plans and avoid overspending.
2. Another great time to look at the numbers is during supplier negotiations. Here, you can analyze past trends to better negotiate rates, bulk discounts, and the like.
3. Oh, and don’t forget during financial reporting periods, too. Regular invoice analysis during monthly, quarterly, or annual financial reviews ensures accurate record-keeping and compliance—all of which contribute to clearer financial statements.

Where to store and access invoice data for easy analysis

If you’re going to implement invoice data analysis into your business operations, you need to be able to store it somewhere securely and access it easily. Here, you again have two basic options, cloud-based systems or centralized databases.

• Cloud-based storage solutions: These days, cloud storage is a popular, secure way to store data easily. Platforms like QuickBooks Online offer encrypted storage with automated backups.
• Centralized databases: Of course, you could also centralize your data. Using ERP systems or dedicated accounting software provides structured data organization that makes retrieval much more efficient.

As for security measures, here are some common solutions you should look out for:

• Encryption
• Access controls
• Two-factor authentication
• Regular backups

Overcoming common challenges in invoice data processing

Here are a few common hurdles you could face, and how to overcome them:

• Data entry errors: Manual input mistakes, even small ones, can have ripple effects. Automation. OCR and other such tools almost guarantee zero errors.
• Data security concerns: Data breaches and fraud can keep some businesses up at night. But using encrypted cloud storage and two-factor authentication (2FA), as well as regularly updating security protocols, can help manage that risk.
• Challenges with manual processing: Again, manual invoicing is slow and expensive. Digitalization is your way forward. Automated processing systems that streamline invoice handling, improving efficiency and reducing errors.

Why automating invoice data analysis is the future

The good news here is that invoice data analysis no longer has to mean expensive teams of analysts manually entering data for hours on end. Businesses can slash time and money spent on data analysis, and get more accurate results, with one simple trick, automation.

Automation tools like QuickBooks are the future. They can do in seconds what a whole team of data analysts would spend hours on, and at a fraction of the price.

Modern cloud-based invoicing tools are fast, accurate, and secure. But don’t take our word for it—try QuickBooks for yourself with a free 30-day trial and discover the difference automation can make to your business decision-making!