Invoice validation and coding
This step can be very time and resource-consuming when processing invoices manually. It can also be prone to frequent errors that distort financial and procurement information over time. In an automated process, the system should be able to use invoice information such as the supplier ID, PO#, contract ID, item codes, etc. to automatically determine purchase categories and GL accounts. More sophisticated systems can even “learn” how to code invoices over time to continuously reduce the amount of human interaction that’s needed. For instance, it can “learn” what departments to be charged based on phone numbers in a complex telecom bill. In an automated system, this step should also highlight obvious and not-so-obvious duplicate invoices. Invoice matching and automatic approval.
Again, this can be a big job when processing invoices manually. And it’s a step that may be skipped when Accounts Payable (AP) staff
are particularly pressed for time or don’t have ready access to the right information. In an automated process, PO-based invoices can be electronically compared to PO and receipt records from your purchasing system. Non-PO invoices can often be compared to contracts. Invoices that match can be automatically approved for payment.
Of course invoice details like freight charges and taxes can make this more difficult than it sounds on the surface, but a good system will provide sophisticated logic and user-set tolerance ranges that enable a very high percentage of valid invoices to be automatically approved.
Discrepancy resolution and approval
There will always be some invoices that are questionable or need a particular manager’s approval. Even with automated matching, there will still be the need to route a certain number of invoices for review, possible supplier dispute, and eventual adjustment or approval.
The key technology here is electronic workflow. An automated process will enable AP personnel to quickly route invoices to appropriate people via email. In many cases, the system will even automate that. Unlike sending paper, the invoice and all associated information will be instantly available to the reviewer. Simple approvals can usually be done with a single click. The whole cycle may only take a few minutes or hours, rather than days or weeks.