How much money is spent on invoice matching?
Join Alan Brown, senior sales consultant @ ITESOFT as he talks through the top 5 things to understand about AP processing & matching.
Part 1, Alan will be delving into how much is spent on invoice matching, and why this is important to a successful AP automation project.
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 1 of 4.
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Welcome to the latest ITESOFT Insider View, my name is Alan Brown and I am going to be taking you through the 1st session:
The top 5 things to understand about processing and invoice matching.
I’ve been with the company for almost 6 years. Specifically within the sales team, working with lots of organisations on actually: What is it that they do?
We do a lot of this through things like white boarding sessions, to be able to understand:
What organisations do?
What do they have as workarounds?
And what impact does that have into the business from current processing into what they would like to do in the future?
The first part of the session that I’m going to be looking at here, in this ITESOFT Insider View is…
How much time and money is actually spent on the invoice matching part of this?
Most organisations that I’m speaking with have a little bit of automation in place.
But they generally don’t know how much they have.
For most, and were probably talking well over 60% if not closer to 80%, it is still manual.
This could be manual processing.
When it comes to the actual invoice side itself, its manually matching invoices against purchase orders and goods receipting.
For instance, what impact does that have for the AP team?
Well, for them, it’s just a case of business as usual. That’s what they’ve been employed to do so that’s what they do.
But, for a lot of organisations they have to keep on taking more and more staff to deal with the growth in their organisations.
And to deal with the increased volume of invoices coming into the company.
Cost & risk in manual matching & processing.
There’s also an increased level of risk that these organisations have. As part of that you’ve got different abilities about how you physically get the information from an invoice into the ERP.
Usually by manually keying the invoice data in.
That then opens up the organisation up to, well, what happens when you miss key things?
If you are anything like me with Microsoft Word then I need to have auto-correct on to help me get the data correct!
But on an invoice… It’s always going to be different. It’s always changing.
The impact from a time point of view and, more importantly, further down the line within the business is quite high. Especially when considering getting that information wrong and then where and how does it get corrected?
When we actually get into matching the invoices themselves to a combination of the goods receipt, if it has been done, (which is another matter!) as well as the purchase order…
That’s where it gets really complicated.
It’s also getting really time consuming at that stage. Anything that is time consuming also becomes really tedious.
Successful AP automation business cases.
So how do we then start to understand the costs and the risks that are built into manual processing? That are integral to the business?
In terms of being able to minimise the costs and risks when we are looking at building a successful business case for AP automation.
An approach that takes out some of these problems that are there.
That I regularly see not being included within the business case, both in terms of, a factor of, this is where our risk it right now today?
But also in terms of how do we get automation to deal with some of these aspects?
From a successful implementation perspective, where by putting capture & automation in place, you actually start to achieve the business case.
Because, let’s take a step back, how many times does a project happen in your organisation where you’ve deployed the project, but who goes back, and when do you go back to say:
“Have we achieved the business case, that was set out right at the very start of the process, about why we are applying change into our organisation, about why we’re applying automation?
Have we done that?
How often have we done that?
How closely did we achieve the business case against our starting point?”
Focus on data extraction & validation.
So, when you’re looking at, and researching, and considering products and tools for automation, where should the core focus be?
How wide should that core focus be?
Now, there’s the old database adage of “bad data into a database is still bad data, and therefore you’re going to get bad reporting out of the back end of that.”
It’s not quite as polite, in terms of phraseology, but that’s essentially what we’re talking about.
If there’s good data going in, it’s all nice a smooth, simple and easy, and you get good reporting coming out the far end.
So the key thing for us here, that you should be looking at, as the prime focus within this is not just the document capture.
And not just “how do you deal with the number and ever increasing levels of emails that are coming in with your attachments of the invoices on them in various different formats?”, but actually the data extraction.
How do you get the data off the page?
We’re not talking about OCR here, we all have a fairly good idea of what OCR is, and there are lots of engines out there that have that, we’ve got the same as well.
We’re talking about the actual data extraction and the validation of the data to be able to then say:
That’s the source that makes your automation really simple and gets you a high level of straight through processing.
Minimising the amount of work and effort, thereby reducing the amount of cost that’s involved and the risk that’s part of that.
Better capture, extraction & validation gives a better RoI.
The higher that you can get the data extraction and validation rates, the better return on your investment on each of the projects.
And subsequently each time you go back and optimise it.
Now there will be a point where you won’t need to maximise it anymore, because you can’t do it for the amount of time and effort that’s involved in it.
But the key aspect for this is the data and specifically, how do you extract the data in a really simple, seamless way, that you can validate data against:
Against your ERP.
Including against warehousing systems for your goods receipting.
And how do you then get the information out into the business so they can then deal with the discrepancies and the problems with your purchase orders. Because that’s when line item matching is a real, real pain.
So extraction is a massive focus for you.
Validation is the next massive focus, because that has an impact on where and what you’re going to have to do from a processing perspective.
Understanding your current processes.
In my experience this is something that, in the white-boarding sessions that I regularly run, extraction and validation is something that hasn’t been really thought about in any sort of level or depth.
It’s something operational that the staff do.
“I sort of know that they do it, but I haven’t really understood the level of complexity that’s around this.” is common.
The tedious level of work that is involved with what the AP team has to do means a have a high level of staff turnover within the organisation is also missed.
But this subsequently steps into “what’s the cost of processing my invoices” as part of this.
So, where are we looking for? How are we looking to be able to include the invoice matching, and any discrepancy approvals that come out of the back end of that, into our business case?
Is something that we need to look at in more detail?
It’s something that I need you guys to be looking at and thinking about in far more detail.
Think about your future processes!
There tends to be a lot of workarounds that organisation put in place round invoice matching, and why are they doing it the way that they currently are.
They’re then trying to apply that to how they want to work in the future.
Some of that makes sense, but, does the way you’re working now mean that you then want to carry on doing that into the future?
It may well mean that you don’t need to.
So, the higher the extraction rates that you have, the more successful the project is likely to be.
The more you’re going to get a return on investment.
The better you’re going to be able to have the project that you’re looking for, the automation that you’re looking for, in the final product.
I’m going to wrap up, thank you very much for your time. I look forward to meeting you on part 2 of the ITESOFT Insider View.
Enjoy the rest of your day.