Are E Invoices Always Correct?

Over the past year, I have noticed a rebirth of the concept that if the information came from a computer it must be correct. One example is an e invoice. The electronic exchange of meta data between trading partners has been around for a long time but most of these routines such as edi also include varying levels of error detection and collaboration. What I have observed is that some embrace e invoicing as a way to eliminate invoice errors. The reality is that merely changing the output format does nothing to change the source of the invoice meta data. There are several business solutions that include routines to "clean up" the meta data before transferring it to an ERP such as SAP but many of the decisions as to how to resolve the incorrect meta data still must come from the receiver of the invoice. Just detecting the problem and sending the invoice back to the vendor often does not eliminate the problem. For SAP clients, SAP Invoice Management by Open Text, allows the corporation to still receive the e invoice seamlessly but then analyzes the meta data for problems and if detected, a notification is immediately routed to the person with both the knowledge and responsibility to correct the meta data. It also provides a critical component where incorrect electronic meta data is analyzed for trends thereby allowing the corporation to address the root cause. Of no surprise...the root cause is often an issue with the origin of the meta data.

One of the first computer terms I learned was GIGO...garbage in garbage out. Changing only the method of invoice delivery often cause more problems than it solves...but...if done in concert with a solution such as SAP Invoice Management...the rewards can be significant!

See SAP EcoHub for more on SAP Invoice Management

Problem Invoice: Post or Return to Supplier

I was recent ask by a client when they should send a problem invoice back to the supplier or should they continue to process the invoice.

Variables to Consider

There are several variables that should be considered when making the decision. For this discussion the first variable assumption will be that the corporation has implement SAP as their core system of record. You must also consider if the invoice input channel is paper or electronic. If you are digitizing the paper invoice, you should consider if you want to scan and create an image before returning or return before imaging.

Manual Process

If you process invoices manually, returning the invoice may seem like the simple approach but keep in mind you must keep some record (typically a spreadsheet) that the invoice was received and returned. If you have already received the goods and / or services, you must still ensure proper accounting for the liability regardless of the invoice.

Automated Process

If you have optimized your Accounts Payable processing utilizing a solution such as SAP Invoice Management, the decision shifts to a best practice of processing the invoice to the point of problem detection and review of problem. This optimization allows for fast analysis. Often the invoice is correct and the resolution requires changing the transactional data such as goods receipt. In other situations, it is more relevant to possibly short pay the invoice and if required to issue a debit memorandum.

Audit Consideration

Even if the resolution is to return the invoice to the sender, processing to the failure point and then sending the invoice back creates a strong audit trail related to the original source document. This audit is often needed for disputed payments.

Returning the Invoice

One major consideration with most vendor master files is the correspondence information includes only the contact information required to purchase from the vendor. If you are returning the invoice, it is the vendor Accounts Receivable department that requires notification. The usually prompts the question …“do I have to update thousands of vendor masters”? The answer is typically no. You would only update the vendors that you do the majority of business with and / or those you know have historically sent problem invoices. After that, you utilize reporting metrics to observe when a trend evolves and update the vendor master at that time.

One last decision is whether to include the original paper invoice or an imaging of the original invoice when communication with the supplier that you will not be processing the invoice. If electronic or if OCR is used for paper invoices, sufficient invoice meta data can be included in the notification email. If the meta data has not been captured, then it typically would improve the process by attaching a copy of the invoice. Being able to return an image not only reduces cost but also provides effective control for the Accounts Payable processing.

So…to return or not to return…that is the question…and as with most complicated business processes the answer is “it depends on the circumstance”.

See SAP EcoHub for more information on SAP Invoice Management

Paper Invoices Can Be Best Practice

I am often ask by corporations “what is best practice for invoice receipt…paper, vendor networks, EDI, direct uploads, vendor portal ?”…and the answer is YES. Most corporations rely on multiple invoice input channels. That often prompts the reply…”you included paper as best practice…are you sure?”
While electronic communication has long been best practice for almost every aspect of our businesses, invoices continue to be generated primarily as paper. The obvious negatives related to filing and retrieval of paper is compounded by the variability of the paper. This variability includes where the data is located on the invoice such as purchase order number, the quality of the paper, the quality of the printer, handling during transmittal (folding, staples, getting wet), handling after transmittal (tears, coffee cup rings, more staples) and the addition of meta data such as a time stamp showing date received or hand written notes. But on a good note I am sure that ALL your invoices are in one language and one currency? Add to this the simple task of routing the paper with in a business process (isn’t land mail great!) and you have all the necessary ingredients for making a bad process.
It might be ask that how can this be considered a bad process since paper invoices are currently used by most successful corporations.
It is not how you receive invoices but how you work with them. How you capture and use this business content is what takes you down the path of best practice or bad practice. It is the header and line item meta data that is important in the Accounts Payable processing and not the document itself. The paper is obviously just a mechanism to convey the meta data. Best practice requires that you immediately scan and store the image while linking to the accounts payable posting within the accounting system. The content will be electronically extracted from image, tested and corrected to ensure accuracy and completeness and then automatically posted. The invoice is the result of procurement, which is the component of a larger business transaction that required the purchase. It is necessary to also link the structured AP document to additional structured documents such a purchase order and unstructured information such as contained in emails related to the purchase. It is also a requirement that the AP information be addressed by corporate record retention.
Since best practice in Accounts Payable is more about the content and use of the content than the paper itself; receiving paper invoices can still be a best practice! Many corporations have already taken the best practice initiative of moving to an ERP such as SAP. When the invoice receipt is paper based, SAP provides the best practice solution by offering all the necessary components including Document Archive for scan and storage, Invoice Management for OCR and exception processing and ECM to manage invoices as one component of the enterprise picture.
If you handle the content properly most certainly, those paper invoices can become a best practice.

How To Communicate Without Saying a Word

How to Communicate Without Saying a Word
This can be a difficult challenge in the world of Accounts Payable when working to post invoices accurately and quickly. Just accurately and quickly alone is a major task but when you add “quietly”…is it really possible?
Think of all the people involved…Accounts Payable Professionals, Approvers, Corporate Procurement, Field Procurement, Receiving, Contract Management, Master Data Management, Tax Professionals…just to name a few. There are a number of Vendors offering solutions to address the accurate and quick...although in many cases you have to decide…do you want it accurate or quick…one or the other but not both. Yet very few address the quietly issue. Why is this important? For invoices that are received and immediately posted without any human intervention due to issues such as problem resolution or approval, communication is not a critical factor. Yet when that 80/20 rule kicks in where 20% of your invoices result in 80% of the problems, the Accounts Payable Professional must reach out and communicate. They need to communicate with the individuals that have both the knowledge and security authorization to resolve / approve invoices as required by best practice separation of duties. As an example, in an ERP such as SAP this communication is often started by running a report such as MRBR to find invoices blocked for payment. Without a solution that includes “quietly” as a building block, the first communication triggers a barrage of activity including but not limited to emails, phone calls, entries into spreadsheets for follow up, follow up calls, making copies of invoices and pulling contracts.
So how do you add “quietly” to the process flow? You must examine the entire process flow from how you receive the invoice, how you capture the meta data at the header and line item level, how you determine if there is a problem and then who must be involved to resolve / approve. Equally important is anticipate what that person requires to complete the task…such as…access to invoice and related document images, history of others that have worked on the process including their comments, transactional data such as purchase order, goods receipt, prior postings to purchase order and options to resolution / approval.
One excellent example of a “quite” solution is provided by SAP with their SAP Invoice Management and optional OCR.
One last thought…quiet extends to reporting also…you need to anticipate the need for information related to the invoice. While invoice payment status is certainly important you must also anticipate others will want to know trends such as invoices paid without problem and if a problem…what type of problem is most common. Yet a truly quiet process goes beyond the expected reporting…the invoice occurred because of a purchase…the purchase occurred due to a larger business process such as a building project and so on. You must anticipate that others must be able to see the invoice as part of the bigger picture. This bigger picture is ECM. You would expect that a large ERP would anticipate this more holistic requirement and SAP has also done that by providing an ECM solution through it partnership with Open Text that takes the invoice and quietly makes it available as part of the ECM big picture. This allows you to see for example all the invoices from one vendor on one project in one virtual view or to see all the invoices related to the project regardless of vendor. No longer is it required to communicate and ask the Accounts Payable Professional to accumulate all the related information and wait for a response…it is already waiting for you to access immediate and quietly.
So…Accurate…Quick…Quiet…yes it is possible!
See SAP EcoHub for More on AP Optimization

Standard Invoices

Why not require all vendors to submit standard invoices? If you are like me, you can immediately start thinking of reasons this will never work but it has already worked for some. For years trading partners using SAP have utilized edi to send invoices in a predetermined format.
With the continual pressure to reduce cost, many corporations are moving to electronic invoicing but paper still constitutes the majority of invoices. To reduce the cost of processing paper invoices many corporations are implementing OCR solutions such as the optional OCR included with SAP Invoice Management by Open Text. Having a standard format for invoices would significantly enhance the OCR process. Even for those entering invoice meta data manually, standard invoice format would significantly reduce the time per invoice.
With a standard format, it would be expected that the vendor logo be located in one section and header information would always be found in the same place. Typical line item details would also always be consistent in format. The standard may need to be of several variations such as one for services and another for goods. The format should also be international so as to include relevant tax information.
Changing is never easy but a onetime investment in the effort could reap continual rewards in efficiency. While it would not be realistic to expect 100% participation, even if a corporation achieved 50% standard format invoices, major improvement would result.
The continuing pressure on profitability may be just the impetus to facilitate moving an old idea into the mainstream.

See SAP EcoHub for More on AP Optimization

AP Fraud Follow Up

n a prior blog I made a few comments about the growing problem of fraud. I took part in a webinar sponsored by SAP through IAPP a couple of weeks back and I learned a lot from my co presenters. The focus was on AP Fraud and how SAP Invoice Management by Open Text helps eliminate fraud before it happens. I encourage you to check out the webinar on IAPP and download the associated white paper.

One interesting question during the Q&A session was “has the control mandated by SOX reduced the occurrence of fraud”. The answer was … no! A case can be made that economic pressures may be driving individuals to seek ways to cope with personal financial problems. My observation is that many companies have focused on the control of the individual transaction as opposed the process. SOX section 404 talks about “process control” and not transactional control. I feel it is essential to remove as many non valuing adding human touch points as possible not only to streamline the process but to also remove temptation. For those touch points that remain, utilizing a rule based solution such as SAP Invoice Management by Open Text to involve the right person at the right time with the right information provides the opportunity to tighten controls and ensure compliance.

Another importance aspect of the overall process control is to immediately secure the original invoice source document and access the image during controlled processing. It is not only costly to route around the original or copies of the invoice, it also opens the door for manipulation of the document. Paper invoices should be digitized immediately upon controlled receipt. Immediate scanning secures the source document while reducing the cost to copy and distribute the invoice.

See SAP EcoHub for More on AP Optimization