By incorporating strategic invoice verifications into the accounting process, an organization can significantly reduce the cost to process transactions and eliminate man-hours dedicated to invoice dispute and resolution. This paper discusses various types of automated invoice verification process, their purpose and the advantages stemming from a strategically implemented electronic payment program.
- 1. Administrative Cost Savings through Invoice
Verification
2. The cost of doing business.
- The average company spends between three to 15 dollars
processing a single invoice 1 .
- The paper invoice, which continues to account for 95 percent of
all business-to-business invoicing practices in Europe and the
United States 1 .
- Approximately 13 percent of all invoices encounter a processing
road block 2 .
- Strategic invoice verification processes can reduce the cost to
produce transactions.
1 http://www.unece.org/press/pr2007/07trade_p02e.htm 2 Gartner
industry estimate. 2003.
http://www.gartner.com/press_releases/pr24june2003e.html 3.
Transaction data defined.
- The data captured during a transaction is
merchant-dependent.
- Level I data - basic transaction data received on a
consolidated monthly credit card bill: purchase amount, date of
purchase, merchant name, date charge/credit.
- Level II data - all of level I data plus: sales tax, additional
merchant information, purchase order info and other basic data
elements.
- Level III data - Levels I and II data plus line-item detail
(i.e. itemized receipt-level detail).
- However, the detail of transaction information required to
facilitate payment is reliant upon corporate accounts payable
procedures.
4. The tiered approach.
- Three levels of invoice verification
- Product-price verifications
- Each tier represents an organizations procurement process and
the level of verification needed to ensure accuracy.
5. Invoice compliance.
- This first level of invoice verification ensures that invoices
submitted for payment are compliant with corporate policies.
6. Invoice compliance: complete.
- The most basic form of invoice compliance is ensuring that the
invoice submitted is complete.
- All data fields required to process transactions are
provided.
- More detailed information itemized prior to releasing
payment.
- Invoices that do not meet the customers basic data requirements
should be rejected prior to invoice submission.By automating this
process, the administrative costs associated with manual exception
management is significantly decreased.
7. Invoice compliance: valid.
- Once it is confirmed that all required data fields have been
completed, the next level of invoice verification requires that
information provided be valid.
- Purchase Order (P.O.) number should adhere to the buyers
formatting standards.
- Transaction date should adhere to universal date formatting and
represent an accurate historical date.
- Merchant or customer identifier must match an existing record
within the accounting database.
8. Invoice compliance: accurate.
- If valid data has been submitted for all of the required
invoice fields, the system should then check for accuracy.
- Pricexquantity = subtotal
- Percentage sales taxx subtotal = sales tax charged
- Subtotal + sales tax = total
9. Bill duplicate filters.
- Filtering processes reduce the number of duplicate invoices
submitted to an accounts payable department.
- Minimizes accounts payable workload.
- Increases efficiency and reconciliation processes in 87 percent
of organizations studied 3 .
- Offers cost savings and staff reduction opportunities in 76
percent of organizations 3 .
3 Association for Financial Professionals. Electronic Payments
Survey. 2008. pg 3, 12. 10. Product-price verifications.
- The processes to determine that the price charged is
appropriate for the product purchased are numerous, and it is at
this point in rule-development that verification procedures can
become extremely complex.
- Contract price verification
- Merchant-product verification
11. Product-price verifications: contract price.
- If an existing contract for the specified product exists
between the customer and the merchant, the system identifies the
transaction as a contracted purchase and ensures that only approved
products are purchased against the existing contract. The billing
and payment system then verifies that the price charged matches the
fee specified in the contract.
12. Product-price verifications : product-price.
- If your organization is likely to purchase a specific set of
products regularly, your transaction database can be built to
understand the typical price range for a specific product and flag
purchases made outside of that products minimum and maximum price
threshold.
- The system should track both high and low tolerances to ensure
that settlement is not conducted on an erroneous transaction that
will later be corrected or reprocessed.
13. Product-price verifications: merchant-product.
- Merchant-product verifications can be based upon merchant
standard industrial classification (SIC) codes, geographic
location, or other similarities between collections of
suppliers.
- For example, the transaction database for a billing and payment
program can be built to understand that your employee did not
purchase a new luxury sedan from the local stationary shop nor a
ream of paper from the local car dealership.
14. Cost savings that cannot be taken for granted.
- Rejected invoices or invoice disputes create unnecessary
repetition within the payment process. An effective invoice
processing solution can significantly reduce the cost to process
transactions and eliminate man-hours currently dedicated to invoice
dispute and resolution a cost-savings that should not be
undervalued.
15. Multi Service. Innovation Where it Matters.
- Multi Service specializes in the design, implementation and
management of custom billing and payment solutions. The company
collaborates with clients to isolate specific commercial credit and
payment issues and design tailored payment solutions to meet
business objectives
- Thank you for your interest in this free presentation. We
welcome your comments, feedback and suggestions. Please consider
sending us a note about how this presentation has helped you. Check
out the Multi Service commercial payments blog at multiservice.com.
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