ITESOFT Insider View – How Do You Handle Invoice Discrepancies?

How Do You Handle Invoice Discrepancies?

Part 2/5, Alan is asking you; how do you handle invoice discrepancies?

Join Alan Brown, senior sales consultant @ ITESOFT as he talks through the second part of our 5 part series: 5 things to remember when detailing your AP processes.

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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How Do You Handle Invoice Discrepancies? The transcript.

Hi and welcome back to ITESOFT Insider View, part 2 is all about handling invoice discrepancies.

My name is Alan Brown, I am a sales consultant here at ITESOFT and I will be taking you through this week’s session.

We have started this off with 5 things to remember when you are detailing your AP processes.

Last week, the first week of this series, we were talking about whether you have defined the ownership of the process steps in a really detailed way.

This week what we are going to be going into more detail on is:

How do you handle invoice discrepancies? And why this is important when you are detailing your AP process?

Every business has a process for handling invoice discrepancies.

All organisations that I have gone into have a process or processes in place to handle invoice discrepancies, and they just vary massively.

Irrespective of industry or sector, or anything else.

But they all boil down into essentially 3 specific areas.

  1. They do it manually, and I mean completely manually, and we will come back to that.
  2. They do it in some sort of digital way.
  3. Doing it within their ERP system.

So, when you are looking at detailing how you handle invoice discrepancies, we are looking at why its important to understand what happens within the AP / P2P process specifically.

The cost, the time is part of that, and what risks are associated to it.

Way 1, manual processing and handling.

So, lets go back to; you are detailing your AP process for invoice discrepancy and it’s a manual process.

For most organisations, when we talk manually, what we are really talking about is they have paper invoices usually.

Now, in some cases it may be that they have an invoice that has come in by email, but they have printed it off.

A lot of organisations are like that.

I know some are pushing back on it, and they just want to have it come in via paper because, with the way they are currently working, this is part of the business case.

But, how do you deal with invoice discrepancies?

You’ve matched elements to it and gone, so this is obviously going to be on your purchase order invoices, you’ve said; there is some sort of discrepancy which is:

I either don’t have a good receipt, or perhaps I’ve got a partial goods receipt.

Or there is a price quantity discrepancy, who deals with that? How do we deal with that?

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Walking the invoice around the business.

When we are talking about dealing with this manually, what usually happens in this case is someone can walk it around the building, someone can walk it round the organisation.

Or in some cases, especially if they are multi based and have multiple locations, they will actually have it either posted out or they will send it out in one of the company vehicles that’s going to go to that particular site and have it dealt with.

That will be, essentially, an internal post situation. It lands on that person’s desk and at some point, it will come back to them.

Way 2, handling invoice discrepancies digitally.

Digitally, that is the second one we were talking about.

I have specifically chosen the word digitally here rather than workflows.

Because for 95% of the organisations that I speak with, what they actually mean is that they have emailed it to someone.

They may have scanned that paper invoice. Or even an invoice that they have printed out and scanned back in, so that they can email it to someone in the business that is in a different location, on a different floor etc.

So, I specifically put digitally there, because at least it is in some sort of electronic format.

Digitally doesn’t mean a proper workflow.

But it is not a workflow, it is not joined into the process and it doesn’t really give you any sort of audit, real complete audit information.

Yes, you can go and search for it if you remember, but this comes back to manually.

If you post it out to someone, where are you recording this information? I will come back to that in a second.

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3, in an ERP or finance system.

The last one was, we are doing it within our ERP.

So that assumes your organisation has bought all the licenses it requires for people within the business to be able to have access.

And that permissions have been set for people to have access and see what they need to be able to see, and then complete the tasks that they have.

Great, fantastic!

But, in a lot of cases it doesn’t actually say to them, or to AP and Finance, more importantly:

When did you send it?

What have they done about it?

When are they going to deal with it?

Limitations in an ERP, or any of these 3.

Most ERP’s don’t have reminders, escalation capabilities in place to be able to help automate some of that chasing that needs to go on within the process.

This is when it becomes really important, as part of the processing, to be able to understand what happens.

Irrespective of whether it is manual, digital, or within your ERP. What happens?

What’s the impact that goes on?

How much time is associated to this?

How many people are associated to it?

These are all parts of the costs that are associated to this, and potentially the risks.

Visibility, audit-ability, accountability.

When we are detailing this as part of your AP process, this is also working towards a potential future state, and your business case.

It is equally important for your AP team to be able to have visibility of invoice discrepancies in a relatively simple, easy way.

For them to be able to track and audit as they are being handled and managed through the process.

Why is that?

If we go back to manual processing of invoice discrepancies, well, where do you keep a record of it?

Even if you send it out digitally, where do you keep a record of that?

How often is that updated?

How accurate is that?

If you have a team in your AP department then is it one person that updates that, and has responsibility for it? Or is it everyone?

How often are they doing it?

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Recording discrepancies on invoices.

If you say the 80 / 20 rule, 80% of the invoices that you have coming in will go straight through the system.

You are only dealing, in this case, with invoice discrepancies which are going to be your goods receipting, or lack of. Or your price and quantity discrepancies.

That can be handled in a variety of different ways, from a recording perspective.

But without digitalisation in place this is invariably managed by Excel spreadsheets and paper.

Or other types of similar spreadsheets.

Who updates them?

When do they get updated?

When do you go back, and how often, to check that it happens?

Understanding your own issues and risks.

This is where you are then looking at understanding what happens and having that detailed within your overall process of AP and P2P.

You can then ask; do we have a business case in here?

Do we have a problem here?

Do we understand the extent of the problem?

To then say, this needs to be dealt with from an automation point of view.

When you use this to automate your AP function, the visibility, tracking, traceability, and an audit trail (preferably a full audit trail) in place and included saves a huge amount of time and effort, and therefore cost.

It significantly reduces the amount of fraud, and it enables some policies to be put in place that AP and Finance are going to be the police officers for.

What we are trying to do here with the automation side of things is detail and understand what your problem is. How much of a problem it is? How many of these problems do you have?

Data, data, data!

This is specifically in your workarounds when dealing with invoice discrepancies.

You may have 3, or perhaps subsets with these 3 of invoice discrepancies.

Again, the quality of your data capture at this point, and we have talked about this before, is really critical.

The data capture, the extraction and validation aspects of this are being driven around, or rather are driving, your invoice discrepancies from an automation perspective.

You get that wrong you have more work to go back down that process to be able to sort it out.

You want to be able to realise the benefits that you are trying to achieve by putting automation in place and you need to focus on these areas.

Guys, thank you for joining us for this session.

We hope you have enjoyed it.

Hopefully, some of the questions that I have asked have pushed back on you and you can go and start looking at this within your team.

I look forward to seeing you for the next session.

Thank you and have a great day.

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Post by John Stovold,
Marketing Manager ITESOFT

John Stovold has worked at ITESOFT since 2012. Driven by a desire to learn and educate John has used this to set himself up as a true thought leader in digital transformation of Accounts Payable and Finance. John really isn't that keen on writing in the 3rd person... But will when he has to.

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