How Do You Store Supplier Invoices? What Are The Associated Costs?
In the final episode of the series, Alan Brown is asking you how you store suppler invoices, and what are the associated costs?
Join Alan Brown, senior sales consultant @ ITESOFT as he talks through the third 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 5 of 5.
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How Do You Store Supplier Invoices? What Are The Associated Costs? The Transcript.
My name is Alan Brown from ITESOFT, and I will be taking you through this last episode, asking you how you store supplier invoices, and asking what the associated costs are.
These sessions have been about the 5 things that you need to remember when you are detailing your AP processes.
The first session was about defining ownership of the process steps and making this clear.
In session two we looked at how you handle invoice discrepancies and why that is important.
The third session was about multiple purchase orders on one invoice, and why that happens.
Last weeks session was about the exact % split is on your invoice formats and why that is important to be able to detail.
This week’s session is all about how do you store invoices, what is the cost associated to that?
Manually storing supplier invoices for audit.
The whole reason of why we are going through the 5 things to remember when you are detailing your AP / P2P process is this is about your business case, your RoI and where the problem areas are.
As part of that, how much of a problem it is.
So, let us get into how you store your supplier invoices, and what’s the cost associated to that.
A lot of organisations that we speak with are, and still have, a reasonable level if not a high level of manual processing of invoices.
Part of that manual process is that they are storing their invoices manually.
Some call it archiving, it makes no difference, it is what do you do with your paper invoices that you are going to store some where for HMRC, internal auditors, and for your external auditors to review.
The cost of time when storing invoices manually
One of the things that we need to consider as part of this is that, when I speak with organisations, it does not get considered as part of the business case for automation.
What is the cost of your AP staff doing the manual archiving, the manual storage?
You will have a process in place, how often is it done?
Is it done daily? Weekly?
Is it one person’s job?
Perhaps it is something that is done ad hoc?
Maybe you have delegated this to someone outside of the department to deal with.
On site? Off site? How you store your supplier invoices comes at a cost
Then you have the physical storage space. Essentially, we are talking about filing cabinets, or something similar.
This includes its own costs, including space for storage that will be used.
For a lot of organisations, they will only keep this year (financial years) invoices on site.
We then send the rest of them off somewhere else for storage, off site, because it is physically cheaper to do.
You are still taking up space to be able to have that, whether on site or off site.
Even if this is partially digitalised…
Then you might have taken a bit of a step forward, from a technology point of view, by having an internal document management system that you use.
Again, what is the cost of that for use?
It may well be an internal cost, but there is still a cost to the business. It may be within IT because they must look after it, maintain it etc.
Ensuring enough storage within the system when they may not have a good clean idea of what is going on.
That is just storing the document in its own right.
Let us come back to what is one of the impacts of this?
How do you find an invoice?
What happens if you have got one of your suppliers, and this probably happened yesterday for you…
They call up and say: “Hi, I’ve got a query on one of the invoices we sent into you…”
And you then must go and find out? You have to go and find that invoice, and deal with the enquiry.
When we then take that and extrapolate that cross say 10% of these queries specifically focusing on you needing to find that invoice….
How easy is it to find the invoices?
How easy is that?
It comes back to my first point around the cost to your AP team for archiving.
We are just flipping that the other way around.
They know roughly where to go, they have a system or process in place, but they still have to do this manually.
Then you take time and motion studies on these processes the costs add up.
The extra burden of auditing manual invoice storage
Let us look at this from a slightly left of field view.
You have your internal or external auditors come in to review your process, systems, costs etc.
Are there delays in the process?
How much time do they spend in the business?
When I speak with most organisations it is usually somewhere between 4 and 6 weeks that they have the auditors in.
Especially when they are end of year results to work through.
Part of that is about, audit have requested a specific invoice and you have to go off and find it.
This has a huge cost to it, because someone who is in the business doing their day to day job no needs to stop and do something else to find the invoice.
Visibility, traceability, audit
Of course, this comes back to a previous session which was about handling discrepancies.
Well, if you’ve got an invoice that is in storage or in a filing cabinet, how do you know it is there?
There is no reporting capability around that. It is just data within your ERP that says you are going to pay the invoice.
There is no visibility around the process.
There is limited reporting around it.
It all adds up
So, when you start looking at these half a dozen different points, well, individually they may not add up to much.
But taking them as a whole there is a huge amount of time, effort and cost involved in storing supplier invoices.
Costs to your finance team to put processes in place and create the manual flow.
These all have costs associated to them.
What we are looking about here, is the benefits of going digital.
And how that then, retrospectively, impacts into your finance team.
This is where you will get your business case from.
Digital technology supporting growth
If you are a growing organisation, and most are looking to grow, you want to be able to take on more work and business.
But you do not want to be adding to the team sizes in AP or Finance.
You want to be able to allow that to happen. This is one of the benefits of going digital.
One of the key things, coming back to storing invoices, is that if its digital to start with you have 0 physical storage costs.
Because it is already digital and is going to be stored in a document management system, or SharePoint system etc. and there are lots of them available.
It could even be an internal drive that you have that has some security around it.
The cost of storage this way is incredibly cheap these days.
More importantly, coming back to visibility and reporting.
Time is money
And this impacts both internal and external audit.
You have a full audit trail from the time that you received that invoice, to the time at which it was paid.
Including breakdowns on payments, invoice numbers etc.
Your auditors can then see what’s happened, when it happened how it happened, who was involved in that etc.
There may still be problems, auditors will always come back with issues and improvements, but that is normal.
But it reduces the amount of time that the auditors need to be involved, especially hen external audit.
There is a huge reduction, potentially completely eliminating, the amount of time your AP team use on storing and retrieving invoices.
They may still have to do a quick digital search, but then the invoice is available.
As opposed to finding the right filing cabinet, or do I need to request this from off site.
Full audit, full visibility
When we then talk about clear visibility from the full process. We now know from an AP point of view, never mind the audit team, where the invoices are, what they are for, whats happened…
Who’s got this?
Where do they need to send the access rights for someone in the business to be able to see?
Complete reporting across the life cycle of an invoice is incredibly important these days.
This is how you are looking to police, monitor, report abnormalities etc. into the business to drive business change.
You then have fact-based evidence to be able to push the digitalisation.
This is how we can run more efficiently and effectively through having a digital process.
Thank you very much guys for your time on today’s session looking at how you store supplier invoices, and the associated costs.
Hopefully, this has helped you in detailing your AP process properly. And why digital automation is really important for all organisation.
Its all about making faster, making it smarter and doing it far more safely than you are at this moment in time.
Thank you very much, look forward to speaking with you soon.