AP or accounts payable is the expense side of the finance aspect of a business. It is the process by which companies pay for the supplies, materials, and services they have purchased. While accounts payable deals with the outflow of funds, it has a lot of strategic value. With the optimization of the AP process, you can reap many benefits, including a better overview of your spend.
However, the AP process is complex and detail-oriented which makes it expensive and labor-intensive unless you automate the process. One of the main aspects of processing the accounts payable process is that of invoice processing. It involves several steps, including the receipt of invoice, capture of data, verification with purchase order, matching the parameters, and resolution based on various parameters. Today, technology has come to the rescue, which means that you can enable touchless invoice processing. The key is to find the right AP automation solution to achieve this.
Here are some interesting facts on what a truly touchless invoice processing solution can help your company achieve:
|Criteria for improvement||
With the right touchless invoice processing solution
With an average touchless invoice processing solution
|Touchless processing||Up to 95%||69%|
|Manual connection to purchase order||7%||25%|
|Manual approval for deviations||5%||22%|
|Average lead time||1 day||
|Manual approval lead time||1 day||
Now that we have looked at the improvements that the right AP solution can help you achieve, let us take a look at the list of tactics that can help accomplish this:
Making sure that the quality of data is right: You must have an optimum method to capture information to match with the purchase order at line level. Also, talk to suppliers to ask them to provide you with e-invoices that have the same kind of elements, including purchase order numbers, product description, and alignment of currency and unit measurements.
Matching of invoices: Intelligent invoice matching is an invoice matching process driven by a flexible and specialized high-quality matching engine. If your solution can match invoices at a line level, head level, purchase order, goods receipt, and other factors, then the steps can be fully automated, with waterfall matching.
In situations where there are no exceptions, then the invoice can be ready to be paid with coding and purchase order matching. Your solution can also factor in exceptions like freight, packaging fees, pallets, other taxes, coding tolerances, etc. In such situations the solution needs to match with unit price, quantity, due date, and tolerance factors.
Depending on the number of supporting documents that an invoice needs to be matched against, there are three different levels of automated invoice matching, as shown below:
- 2-Way Invoice Matching
It involves verification of an invoice match with the corresponding purchase order.
- 3-Way Invoice Matching
It involves verification of an invoice match with both the purchase order and the goods receipt.
- 4-Way Invoice Matching
It involves verification of an invoice match with the purchase order, the goods receipt as well as the acceptance or inspection documents, if applicable.
Resolution of exceptions: While the resolution of anomalies cannot become touchless, you can still automate it to a great extent. The AP solution can isolate unit price, quantity, and due date exceptions so that these can be approved or rejected. The solution can set these exceptions to be routed to the purchaser, inventory or goods manager, category manager to accept or decline with automatic coding.
ERP integration not a limiting factor: If you want to leverage all the benefits of true matching then the data from your AP solution should match the ERP-specific criteria. This can include PO and GR status, rules to handle freight and other charges, item costs, etc.
From your end, you will need to ensure that your company has a philosophy of continuous improvements in processes, technology, quality practices, etc to keep getting the benefits of touchless invoice processing. These include shortened lead time, lesser manual efforts, better cash flow forecast, better pricing and costing practices, reduction in manual errors, and discounts from suppliers.
To-Increase MediusFlow is one such solution that can enable you to reap all the benefits of touchless invoice processing.