Manually managing and processing vendor invoices is painful.
Why doesn’t the invoice match the purchase order? Did we get the goods we are being invoiced for? Who ordered these services on this non-PO Invoice? And why won’t this supplier stop calling me to ask about a payment I already sent?
“I consistently hear from finance and AP leaders that digitizing invoice capture and processing is one of the highest priorities this year,” said Joe Fox, CEO of Vroozi. “The current state of invoice management is very manual, not standardized and is ripe for costly mistakes. Digitizing the process is essential to maintain control and scale effectively, especially for growing businesses.
The 10 challenges below are commonplace across the board, especially for mid-market businesses. But they don’t have to be. Digital procure-to-pay platforms can automate and simplify the entire invoice management process – saving time and boosting productivity.
“Digitizing invoice management is challenging for buyers and suppliers. Implementing a software solution that removes paper, automates capture, handles exceptions, utilizes 3-Way Match and offers workflow for approval and coding eliminates the challenges. This type of digitization is a significant driver of financial control and operational efficiency, and is necessary for automation and scale,” said Fox.
10 Common Vendor Invoice Management Challenges
1. Invoices don’t match purchase orders
Invoices that don’t match orders can be caused by several factors. Price discrepancies are the most common. Other factors that influence mismatches include quantity, unit of measure, product description, and part numbers, among many others.
Digitization: Purchasing documents stay in sync with the changes as they occur from upstream procurement to downstream accounts payable. Workflow, exception handling and 3-Way match ensure you only pay for what you received and the negotiated prices on the PO.
2. Billing errors and mistakes
Mistakes happen. And when you don’t catch them, the results are costly. In all likelihood, your organization has accidentally paid an invoice twice, been charged the wrong amount or paid for something you didn’t order or receive.
Digitization: Automatically catches duplicates and inaccuracies and gives AP teams a fast way to resolve disputes or discrepancies through automated workflows.
3. Invoice approvals
Chasing down approvals wastes significant time and resources. Digitization reduces the amount of time AP spends getting approvals by storing approver information in the cloud and automating the approval process with workflows.
Digitization: Digital workflows route invoices to business owners for approval, eliminating emails, shipping costs and wasted time spent trying to schedule meetings with budget owners. Approvals can even be done on mobile devices, making it easy to get approval from anywhere and everywhere.
4. “No PO, No Pay” doesn’t always work in the real world
“No PO, No Pay” policies are designed to increase financial control. However, not all purchases can be put on POs, and today’s invoice management processes need to handle both PO and non-PO invoices, including recurring billing.
Digitization: Enables control and visibility with speed and agility. Post spend approvals often require approval to pay and invoice. Automated workflow of non-PO Invoices (directed to the people who ordered the goods or service) results in faster approvals through compliant channels.
According to the Association of Certified Fraud Examiners (ACFE), companies lose up to 5% of revenue to fraud. While fraud can never be entirely eliminated, manual processes are significantly more susceptible than their digital counterparts.
Digitization: Ensures suppliers are pre-established and within the company vendor master file. Purchases are placed to approved suppliers and non-PO based invoices are validated against the vendor master file and approved by the business budget owner. Digital systems catch fraud and non-compliance. Baked-in rules and validations, plus order-invoice matching ensures that companies can automate and weed out the fraud.
6. Closing the books
Invoices without the right accounting codes or financial errors slow end-of-month financial reporting. Invoices that haven’t been accounted for can also impact go-forward budgets and spend approvals.
Digitization: Data accuracy and automation ensure that documents have the correct information based on data and context. It eliminates guesswork from users.
7. Unidentifiable information
Is your AP team working with paper invoices or invoice images from PDF emails and scans? Not being able to identify the information in the image means you have to chase down people to get the right information. Manually managing multiple different file types drains efficiency.
Digitization: Keep the exchange between your company and suppliers digital so both companies are working with accurate and live data. Digital platforms can ingest bills and invoices, no matter the format, automatically.
8. Surprise costs
Unplanned costs associated with things like freight, tax, shipping charges, fuel, payment type and sur-charges affect budgets and cashflow. Automatic visibility into what has been added, removed, or altered between POs and invoices is essential for catching surprise fees.
Digitization: Rules, tolerances and validations can identify excessive costs that need to be checked, and allocate unplanned costs to the right accounting objects.
There are only two certainties in life. Taxes are one of them. But don’t let taxes be the death of your AP as well. Identifying and tracking the applicable taxes for each purchase is complex and time-consuming. The penalties associated with incorrect calculations are even more painful.
Digitization: Avoid penalties and over payments. Let the solution calculate the tax based on the transaction information.
10. Supplier collaboration
Your suppliers rely on you. In fact, 22% of AP’s time is spent on supporting suppliers by answering questions such as “Did you get my invoice?” or “When am I going to get paid?”
Digitization: Automated platforms free up AP’s time by providing suppliers with automatic visibility into where invoices sit and when they can expect a payment. Communicating digitally in one central platform also eliminates the inefficiencies associated with email and phone tag. Suppliers benefit from electronic invoices as well (payment accuracy, operational efficiency and visibility), and can gain more business from buyers that find it easy to do business with the supplier.
Digitize the Vendor Invoice Management Process
Digitizing the vendor invoice management function will save you money, boost efficiency and increase spend control. By automating the entire process, you can reduce your cost per invoice by 40 – 50% while simultaneously freeing up your AP team to focus on more valuable initiatives. Calculate your total cost per invoice and see how much you can save. (Access the formula here).
While implementing a full procure-to-pay solution typically provides the maximum benefit, many companies start their digitization journey with Invoice to Pay, and then expand with digital purchasing.
Make 2021 the year you leave invoice management pain in the past by digitizing your Invoice to Pay processes. Your team – and your bottom line – will thank you.