Fifth of 8 blogs in the series. Read previous post.
Imagine tackling a home improvement project without fixing a faulty heating, ventilating, and air conditioning (HVAC) system. The design and structure may look great, but the home would barely be habitable.
Fixing a broken invoice process without considering how to link invoices to related transaction documents such as purchase orders and contracts will have a similar effect. It will limit your ability to drive business process transformation and enforce compliance. For more on this you can watch one of our most recent webinars (as a replay).
In our last post, we discussed how the rules in a business network can get AP and procurement teams out of the business of managing invoice errors and exceptions. Now if you take the next step and consolidate the management of purchase orders as part of an invoice automation project, you can expect dramatically better results. It just doesn’t make sense to have separate networks for exchanging orders and invoices or to ignore the purchase order altogether.
The obvious advantage of having one network for PO and invoice automation is the ability to run simple. With this approach, you can send a PO to a supplier over the network, and that supplier can simply “flip” that PO into an invoice. Add to that the ability to integrate e-catalogs on the same platform, and you extend the benefit on the front end, ensuring that orders come from preferred suppliers at negotiated prices. All this contributes to a comfort level that promotes touchless, straight-through processing.
No PO? No problem!
But what about invoices that don’t have POs? These are often the most difficult invoices to manage, with many errors and exceptions that require extra time and effort to resolve.
That’s where you can add another capability to your AP makeover: the ability to invoice against contract. This is especially useful for recurring and unplanned services such as landscaping or for equipment installation and maintenance.
Contract invoicing extends straight-through processing of these non-PO invoices with no compromise in compliance. While there are solutions that claim contract invoicing proficiency for services with fixed contract rates, many organizations need much more than this basic feature.
The flexible approach
In many cases, you’ll need a more sophisticated contract invoicing approach for services with tiered or discount pricing, and for services with rates that vary by type of service, where the service was delivered, when it was performed, or some other variable. So make sure your AP automation contractor is qualified to handle these transactions.
Then there are complex project-based services such as those for construction, engineering, and facilities management. Here, the ability to collaborate on the creation and approval of service entry sheets, and automatically convert them to e-invoices, is extremely valuable. Because the details on the service entry sheets are agreed upon in advance, you can process these invoices without manual intervention, saving time and resources. You can also capture and analyze detailed, line-level data to improve management of your services spend.
Having your suppliers create an invoice from a contract or service entry sheet removes AP staff from the review and approval of these invoices. You just confirm that the work was completed and the invoice is ready to pay. By replacing a manual process, you reduce the errors, speed processing time, and lower your costs.
Improving compliance to manage cash better
As you get more control over spend with these AP renovation approaches, your procurement organization will begin to take notice.
So will your treasury department. It turns out that a byproduct of fixing a broken invoice process is the opportunity to better manage your cash and working capital. That’s what we’ll examine in our next post.
Learn more about how to take your payables to the next level of performance in Ardent Partners’ research report E-Payables 2015: Higher Ground.
Chris Rauen is a solution marketer for Ariba, an SAP company. He regularly contributes to topics including e-invoicing and dynamic discounting as well as the value of collaborating in a digital economy.