I was forwarded an article the other week that highlighted an important area of the order-to-pay process: data accuracy. It turns out that when certain photocopiers were compressing images of scanned documents the compression algorithm was changing the value of numbers, effectively re-writing the documents. The user in question was an architect and his documents that were re-written? Building plans.
On examining his copies the fastidious architect noticed that one room he had designed had been shrunk by 25%! Can you imagine the architect’s surprise if he had not noticed and came to examine the finally constructed building. It is important, as they say, to get the facts straight.
Data accuracy is a major source of exceptions within Accounts Payable and the leading reason for late or non-payment. Industry averages tell us that between 50-60% of invoices have a related purchase order and of the invoices returned against these POs, around 30% result in exceptions – and of course let’s not forget the invoices that do not have an associated PO, which are all exceptions.
But we are not constructing a building here so what is the big deal? Every invoice that is an exception costs your company money. Each requires a data validation and matching process to occur, the clerk capturing the data must ensure the math on the invoice is correct and check for duplicate or fraudulent invoices. The invoice is then compared to the PO for quantity of price changes and to see if the goods have been received, for PO related invoices this is where most exceptions are found.
In the retail industry there are strict compliance policies for the shipping/receiving of goods and if the supplier does not comply they can be charged a deduction. The compliance rules of each retailer vary and can be complex for suppliers to manage. These rules are designed to optimize the retailer’s business operations and it is the supplier’s responsibility to understand them to minimize their number of deductions.
Any exception invoice must then be routed within the business for subsequent review and approval. A PO related invoice should contain the purchaser’s name, but an invoice without a reference makes routing more difficult. However invoices may not be clearly marked and it is for the clerk to track down the recipient by goods or services type, supplier name or perhaps ultimately by experience.
Let’s not forget that all this is typically occurring with the supplier having zero visibility. This leads to many phone calls and can result in tension between Finance and Procurement, who work closely with their suppliers and may even have negotiated early payment discount terms.
In this case the technology isn’t the problem as in the photocopier – it’s the lack of it.
(Happily the photocopier problem has been solved with a simple bug-fix…)
