Log in

Invoice Automation – It’s a Tool not an Answer….

Guest article by Marie Simpson, AP Project Manager, Dairy Crest

Let’s be honest about this and have a look at the bigger picture

Having implemented invoice automation systems, along with ERP systems, there is absolutely no doubt that there is time saving in Invoice Automation (IA) versus processing manually.invoice automation3 However – do not believe all the spiel that this is going to be the saviour of the business and that you can reduce your AP team drastically. At least not before you have processes and policies embedded!

Each ERP system works differently – set up for its own business needs. The same with the IA system. The software itself needs to capture data correctly and will need someone to manage this. The output files then need to be linked to your ERP/Finance system, and this has to be correctly set up to match to the PO/workflows/approval processes dependent on the type of supplier/invoice. Some ERP systems are complex, due to the nature of the business, but essentially so for accounting, stock and accrual purposes.

Every business has its own policies and procedures around P2P compliance, and non-P2P payments. However, I have yet to work anywhere where P2P compliance is at 100%. Impossible. For multiple reasons. This in itself has an impact on the “savings” predicted by automation.

Three-way matching fails due to price and quantity variances. This is not always the business, this could be the supplier. Often though it is internal - the item catalogues not being up to date, or the receipting not being completed. Also – where end users are used to seeing the invoice before receipting the PO, getting alternative streamlined processes in place often has its obstacles.

One off supplier payments – many systems can handle these but historically a lot of businesses just make a payment via their banking office, bypassing processes with a signed and coded document. These therefore usually bypass IA, creating a very manual process. All these issues do not disappear with Invoice Automation. In order to streamline your business to make it more effective, think about what the business should do behind the scenes.

Education and training is key – but hardline employees will often still not co-operate, and many businesses will not enforce policy or performance reviews in these instances.

Most ERP systems will provide compliance reporting (often written bespoke to the business needs).

How the business then uses these varies. However, in my experience – this is not consistent and dependant on the “user in the system responsible for the actions” as to whether there will be enforcement of policy.

Therefore, consider your primary areas to focus on:

Educating the end users of the wider implications of non-compliance –

  1.  Where they wait for the invoice they are not accruing the expenditure, so their accounting/budget control is affected.
  2.  Bypassing official processes where set up in systems for one off payments – there is no budget control through the system, no accrual, and most importantly – high risk of Fraud for bogus invoices via an approver. 
  3.  Where they do not raise a PO until after the invoice, and this crosses over in a financial year, they have understated their accounting and this can have a real impact.

In all of the above I have witnessed this happen and the real impact on the business.

Updating Policy

In order to enforce compliance, it is critical to have an up to date Finance and Procurement policy that clearly lays out the requirements of the business and its users.

  • Strict P2P compliance – stating clearly any agreed PO exceptions. (You will always have some)
  • Compliance monitoring – what is in place and how it works
  • Consequences – what are the agreed actions if anyone bypasses the process
  • User Exceptions – who what and why are clearly documented.

Audit

Ensure your internal auditors are kept up to date of issues. Audit can be a fabulous tool to ensure business compliance

Consistency

Agree the policy. What are the exceptions? What is the business requirements for enforcements? And no excuses, whatever the level of staff member – from Requester to CEO – we have one policy. If your policy has a requirement for certain types of invoices/POs to be treated differently – it is clearly documented what they are. The same with certain senior staff members – if there is to be a bypass of the system for their approvals– it is stated in the policy. 

This way AP will have consistency in their “invoice holds” and can ensure these are correctly monitored. (I have found that most CFO/CEOs are great and on-board – other senior managers and PAs however are often another story!)

Once you have all the key areas in place, IA can and will be a much more successful investment.

"It is not the answer, it is a tool - which alongside good processes and practices - can make a positive contribution to the business in a multitude of ways."