When implementing invoice automation processes at many mid-sized businesses, you can often witness a 'pantomime' effect taking place! Invoicing is in a rather muddled state. "Oh no it's not!" you might shout. "Oh yes it is! is my response.
1# Invisible commitment: A purchase has occurred that the company did not know about until after it had been raised.
2# Unknown owner: A purchase has occurred but (very often) no-one knows the owner who set up the invoice in the first place.
3# Unallocated spend: The budget/coding of the purchase is (very often) unknown.
4# Non-authorised: Authorisation of the purchase is yet to be complete and the supplier's process is a long way down the line.
The invoice must now, rather late in the day, begin a journey around the business to resolve these questions and so the pantomime scenario begins. Don't get me wrong, finance staff are characteristically process oriented and accurate with data, but that is part of the problem. These attributes are exploited by businesses to mop up and cope, slowly and expensively, with the pantomime behaviours of the business.
So what is the plot of this invoice pantomime? It is an everyday story happening all the time in nearly every business:
Behind you! - "Find the owner" game - Finance staff cannot identify the right owner. The invoice then gets passed around, often as paper and often with no sense of urgency. Time passes, staff are distracted by irrelevant material and time is wasted meanwhile the funds are being taken off you by the supplier.
The "I'll have to query this..." farce - A purchase may have been made a long time ago which makes it harder for the finance worker to understand the spend. Email exchanges and calls will often take place between other employees and suppliers. We all know how much longer it takes to deal with an email a week after it first arrived. Hours and even days are lost on just a few invoices dealing with exceptions and questions.
'Loose Coding, Wrong Coding' trick - Without invoice automation, departments often code their own invoices, leaving finance workers to guess. A good finance team will have one (or more) step(s) in place to catch many of these loose invoices, but at the expense of expert time again. For some this goes deeper as budgets are designed simply to facilitate this broken process, but that stops proper analysis and control of spend becomes impossible to manage.
'Everyone needs to authorise this conga' - Many of our customers don't simply hand the invoice to the right sign off level, but pass the invoice along a chain of authorisers sometimes four or five steps long. The rest is about authority and review. Few businesses, even when automating the invoice process, bring themselves to simplify the pathway. However, this is an extraordinarily long process simply because the invoice arrived as a surprise.
So how do we keep the pantomime out of our businesses and leave it on the stage where it belongs?
Well the real answer is to implement a Purchasing Process software system that covers both Requisition to Order and Receipting to Invoice matching - this mechanism addresses nearly all of the above challenges. The authorisation and commitment are made (and visible) before the order is placed, the owner and budget code are known and accurate; and the control has been enforced. A surprise will only then occur when the invoice does not match the order. In the case of an exact match, no-one needs to see the invoice as it is entirely expected and can be paid. When there is a variation – only one person needs to deal with that variation, not four or five.
The main reason businesses are holding back is fear of change. The paper request slip is simply ingrained into the memory and for the financial director or head of purchasing it is the dread of trying to roll out the process to a busy business and what happens from there if it fails as a project.
Today, purchasing systems really can enable staff and motivate them to buy what is needed for the business efficiently and within control of the finance team. Companies should be letting their staff shop like they would do at home on Amazon. It is necessary to make more efficient, control and visibility.