Many Businesses STILL Aren’t Doing This . . . Here’s Why They Should!
However, most of these invoices are either in paper or e-mail format, which creates inefficiencies for the buyer’s Accounts Payable (AP) organization, and can thus increase the Days Sales Outstanding (DSO) for the supplier. The increased DSO results from “mail float”, which is simply the days that invoice takes to transit from the supplier, through the mail or email system, until it received and input by the buyer AP team.
In such a model, invoices are submitted in electronic form via EDI, or submitted to the buyer through a vendor portal either by using a web form on the portal, or via a file from the supplier’s billing system. Using a company like invoicespro.com can make a huge difference.
More and more businesses are going the electronic invoicing (or “e-invoicing”) route, and here are six key benefits to doing so:
#1: Capturing Digital Invoices
Invoices received in e-mail or paper format introduce unnecessary costs and complexities into the AP process. For invoices received via mail, the documents must be sorted, routed, opened, sometimes scanned, and keyed into an AP system. For invoices received via e-mail, the documents must be saved, stored and depending on the process in place, potentially printed and keyed if no front-end imaging or automatic data extraction technology is in place.
#2: Validating Automated Invoices
Many AP organizations perform validations on the invoice before processing for payment and approval. These validations generally consist of making sure the supplier is an existing supplier in good standing, the vendor name and number match. The terms match the vendor master, if it’s a PO based invoice that the appropriate PO information is on the invoice, etc.
When processing electronic invoices, AP departments can use readily available business process management (BPM), as well as data capture technologies, to perform these validations automatically that would otherwise require data entry and some manual validation.
#3: Automated Matching
One of the more complex validations performed is the matching process. There are generally three matching processes:
- 2 way match – Invoice > PO
- 3 way match – invoice > PO > receiver
- 4 way match – invoice > PO > receiver > inspection or some other verifying document
Most matching processes involved tolerances where organizational policy dictates an invoice shall match, even if it doesn’t exactly match individual line items, or the total at the header level. Tolerances can be expressed as a percentage or as a dollar amount. For instance, an organization may consider a match anything under a $20 discrepancy, or anything less than 3% of the invoice total, whichever is less.
These calculations can be complex, but with electronic invoices the technology exists to capture all of the data necessary to perform the calculations and validations necessary to either send the invoice through for payment without any human intervention or approval, or if it falls outside the tolerance or fails any required validations, automatically route the work item to a knowledge worker for corrective action.