How are you currently matching supplier invoices?
Join Alan Brown, senior sales consultant @ ITESOFT as he talks through the top 5 things to understand about AP processing & matching… Matching supplier invoices.
Part 2, Alan will be delving into why understanding your current invoice matching process is so important.
For anyone involved in an Accounts Payable automation project, or is thinking about getting started these sessions will give you some actionable insights to help.
Watch the video, listen to the podcast or read the transcript below.
Part 2 of 5.
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Welcome back to ITESOFT Insider View, thank you for joining us, appreciate the time that you’re giving us.
This is the second part of ITESOFT Insider View that we’re going to take you through, my name’s Alan Brown.
I’ve been with the company for 6 years now specifically focusing in the finance /AP space automation aspects.
We’re talking here about the top 5 things to understand about AP processing and matching.
Last week we were talking specifically about how much time and money is spent on invoice matching.
That was last week, you’ll be able to find the recording for that via this link.
This week part 2 we’re talking about how you are currently matching your supplier invoices, and going into that in a little bit more detail.
How are you matching supplier invoices?
This is something that comes out in every single organisation that I go and speak to on a regular basis.
When we start touching into:
What are the problem areas that they’re looking at?
What are they currently doing from a working perspective in their AP team?
Where are some of the real problems that they are semi aware of, but haven’t really dug into enough, to understand how much of an impact that has on the business case.
And how are you currently matching supplier invoices against PO’s, GRN’s etc.
Matching supplier invoices against other systems.
So, what we’re really talking about here is starting off with the matching of a supplier invoice against the information that’s held in some of your other systems.
Now, I say some of your other systems, that’s going to be usually your ERP system and in a lot of other cases, probably about 50/50 split, a warehousing system, or another system, that you have for goods receipting.
Now, why do I bring this up? Because actually for most organisations it’s a really costly part of the AP process.
Why is it costly?
Well in some cases they don’t actually have that information joined up in an easy way for the AP team to get to so they’re actually having to deal with that from a manual processing perspective.
Another way of dealing with that is, it is joined up so you may have your goods receipting for instance being done within your same ERP system, but is that actually being done?
How often is it being done?
Is it being done as consistently and as regularly as it should be done and who’s in charge of being able to do that?
Invoice matching impacts further downstream in the process.
The impact that that has within the organisation is that the manual processing is causing issues further down stream when it comes to things like error reporting, or discrepancy management.
Or when we want to be able to have meaningful conversations with the suppliers about what’s happening with deliveries, or what’s happening from a payment perspective.
Perhaps because there’s only been a partial goods receipt made against what they’re invoicing for a full invoice.
So, these are aspects that come out and get dealt with within AP specifically, but actually the business and other parts of the organisation have no real understanding of.
Because it’s not part of their job it’s not something that they have to deal with.
But is this something that you’re looking to have dealt with through automation, or at least elements of that. When you’re putting your system in place you need to look at the big picture as well as some of the macro elements within that.
Detail your processes clearly.
So, when we’re dealing with the whiteboarding session, part of this is about making your process really explicit, detailing it down in a way where it’s clear, it’s reasonably simple.
I appreciate there’s complexity within each part of your process.
But being able to have it done in a way that means that you could explain it easier to someone on a diagram than off the top of your head.
And then you can get intro some of the detail around what is happening within each of the processes that you have, for instance:
How do you capture an invoice to start with? Once you get your invoice, how are you then going to match that?
Understanding how invoice matching impacts your bottom line.
Understanding how you’re doing something and how that then impacts into not just your bottom line and as part of that the business case. But also what you’re expecting your employees to do.
Because in a lot of cases you bring someone into your AP function that’s going to be working on putting invoices into your ERP system for instance, so that suppliers are going to be paid on time.
That’s a very high level general requirement that you put in the job description, but I bet it won’t have the workarounds in there about; well I need you to phone Billy in stores or, I need you to phone XYZ in the business to say what’s happening with or what have they done?
Oh, and I also need you to log something in an excel spreadsheet, potentially, or in a paper document about when did you do this, how did you do this, when did you follow up on it, when’s the next action required, all this side of things.
Understanding how manual processing impacts your business case.
There’s an element of understanding how it impacts into your business case.
Understanding how it impacts into the automation case that you’re putting forward, but that’s also understanding where are you going to be asking your staff to do.
Why are you going to be asking your staff to do the same things in the future that they may not need to do if there’s automation in place?
And as part of that for your AP team there always tends to be a case of fear around automation, well their jobs are on the line.
I would say in probably 50% of the cases when it comes to the AP team and automation well actually they’re going to keep the same people in place, they just want to grow the business and have these same people do the job really well.
So expectation internally from that perspective is really important.
Automating the matching process & the benefits this brings.
Understanding how you’re matching that invoice internally against a goods receipt.
Understanding how and where did they get that information, how easy is it to find a goods receipt for a specific order?
Especially when we’re talking about line items, and line items may cover anywhere from 1 invoice, 1 page of an invoice across to multiple pages of invoices, means it becomes more and more time consuming to be able to then find the very specific information that you need to tick in your ERP system to say: “Yes I’ve now got the invoice for all these goods.”
It’s often not clear for an audit team, or an accountancy team, and whoever else needs to approve invoices before they get paid, yet it is really important.
Being able to automatically match information and the line item information for your POs against your goods receipts, against your supplier information and against it all coming back to the invoice, is really important.
Fundamentally the business case for putting automation in place is about a number of aspects.
It’s about time saving, if you take the 80/20 rule, if you can take 80% of the line items that are going to be probably absolutely fine coming into your organisation, and just take that away from your AP team so that they’re dealing with exceptions, you will save a huge amount of time for them.
It changes the value that they then bring to the organisation at that stage.
The cost savings are huge against doing it manually because it doesn’t just save a huge amount of time, which it does don’t get me wrong, but it also means that you’ve got:
Staff costs in there.
You’ve got potentially hardware costs in there, and some of these hardware costs could be around just a scanner if nothing else rather than taking an easy way of looking at that.
What about how you store things and where you store them?
Because for most organisations when they are manually matching lines they may well need to add here’s also the paper goods receipt associated against it, so we’ve got the physical evidence and proof of that.
That suddenly starts bulking out the amount of storage capability that you have for this, and where do you store that and how do you find things easily to be able to put that back in against it?
Increased security & reduced risk of fraud.
You’ve then got the added and increased security that you have with electronic invoices and matching because there’s just no humans involved in it.
As long as the business rules all match up then why wouldn’t you pay a supplier on time?
But the converse of that is also true:
That by putting this in place so that it’s automatically done and automatically or roboticised matching going on, you’re reducing the potential fraud that can go on around invoice processing.
Now most of that will be external possibilities but that fact that you have policy in place and you’re able to minimise that helps towards the business case for automating the matching of supplier invoice.
Better payment terms & discounts.
And of course, how many times do you get hit by the accounts receivable teams from your suppliers asking:
“We’ve got a query for you, have you got my invoice?”
“Where is my invoice?”
“Is that on a payment run?”
“What payment run is that on?”
All this subtle information that they’re after for their internal teams, their internal accountants to say when are we going to have cash coming in to deal with cash flow aspects.
This then means you’ve got better payment terms, this then means that you are potentially able to take advantage of early payment discounts.
I know that’s not so much of an issue here in the UK at this moment in time, but you do want to have good terms with your suppliers for when you are going to have real invoice issues that you need to deal with them.
Or, you’re going to have real conversations with them about the quality of service that they’re providing.
Straight through processing goals.
So, you then have the second stage of invoice processing.
Where your ability to obtain straight through processing is directly impacted by the quality of the data extraction and the validation on receipt of these invoices coming in.
That’s also massively impacted by; do you have the goods receipting done? Has that information been properly input into your system?
So, this is where when you’re manually matching supplier invoices most organisations aren’t putting into the business case, they haven’t really done a good enough in-depth view of how much time is involved, what are the workarounds in place, and how does that get added into the business case?
So, this is the end of part 2, of the ITESOFT Insider View, look forward to seeing you next week for part 3. Thank you very much.