The Accounts Payable department receives invoices in all forms and formats imaginable. In this entry we will analyse the multi-page invoices which require an individualized and detailed treatment of the information contained.
Long invoices with many lines, require and individualized treatment and can imply a high cost for both the issuer – as they are liable to be paid late – and the receiver – as they present some difficulties in their treatment. Normally these invoices are from the invoice with purchase order circuit for the purchase of material goods (inventory).This causes most of invoice problems in companies.
Invoice problems
Invoices with purchase order
The order invoice circuit is one in which there is an element against which the invoice data is compared. After this matching process, we see invoices that do not present any differences and others with discrepancies between the order and the invoice or receipt of goods. Invoices that show no differences in this reconciliation (either two-way: invoice vs. order or delivery note, or three-way: invoice vs. order vs. delivery note) will be recorded directly in the accounting and/or operating system. Invoices with differences will require exception handling, the complexity of which will increase exponentially depending on the number of lines.
In each one of the invoice lines there is information related to the order, delivery note, product reference, units, amounts, delivery date...This information is relevant and necessary when making comparisons. It is a lot of detail and requires a capacity for analysis and comparison.
Invoice problems: Electronic invoices, figitalization and OCR
The use of electronic invoicing or the digitization and OCR (Optical Character Recognition) of paper invoices reduces errors in invoices arising from the processing of lines, since in the first case, manual entry errors are eliminated, and in the second, they are minimized. However, extracting invoice data does not solve the problem unless there is an automatic reconciliation mechanism in place to simplify these comparison tasks. Without this technological capability for automatic reconciliation on the part of the recipient, the evolution of the process is hampered.
Automatic “matching” tools and “workflows”
For the recipient of the invoice, the more lines an invoice has, the more work it involves for the accounts payable department, as there are more checks to be made and the greater the likelihood of there being some kind of discrepancy and therefore an error in the invoice that requires additional processing. Thus, the cost of processing these invoices is higher the greater the number of lines. The use of automatic matching engines and workflows for exception resolution are indispensable tools for moving toward efficient processes in the processing of purchase order invoices.
For the invoice issuer, practice shows that invoices are processed completely, that is to say, the invoice must be 100% correct for it to be registered and paid. Which of the two parties (buyer and seller) profits from an invoice of 400 lines being stalled because there is a mistake in one of the lines? That an invoice is 99% correct is not enough for it to be registered and paid.
The balance: two orders or less per invoice
There is, however, a number of elements to take into consideration in the two actors in the process, invoice system restrictions, cost savings in invoice issuing, invoice reception and processing costs, delays in in receiving payment and payment of invoices due to error...But from our experience in projects in all types of sectors, with companies of all sizes and cooperating with our clients both in the issuing and reception of invoices, we can state that the balance is normally obtained in the relationship: 2 orders or less per invoice, making the number of lines and delivery notes of said order less relevant.
This relationship implies limiting the operation to a specific commercial transaction, with a reduced number of participants (more orders, more buyers) and with a potential limited number of problems derived from a single or reduced number of orders. In the case of an exception, the process is more simple and in invoicing systems, it is usually a valid variable for the issuing of an invoice. Therefore, it is the best solution for both parties and that which normally presents less problems an invoice problems.
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