Here’s Our Step-By-Step Process to Cut That Time in Half.
This strategy is not for all companies.
It is designed for finance teams of growing companies between $1M to $20M in annual revenue who want to cut time spent processing invoices in half and reduce the invoice processing cost by up to 40%.
In fact, it is the same strategy used by our customers to cut their invoice processing time in more than half. And some of them are processing up to 1000 invoices every month:
If you want better cost control, get better spend visibility, and reduce the time spent on processing invoices, then THIS is the strategy for you.
Grab our procure to pay optimization checklist below that lists key invoice process optimization strategies
Then follow the step by step process below, to optimize your procure to pay process.
The biggest time-waster for many finance teams is that when the invoice shows up, they have no way to know whether the purchase is authorized or not.
So they implement a purchase approval process so that purchases can be authorized before the order is placed with the vendor.
The idea is to have a Purchase order # on the invoice so that it is easy to match an invoice with the respective purchase order.
That is a good start.
Most companies start with a similar manual process but that is frustrating for employees and eats into your employee’s productive time.
If you are currently using a manual process, the following would sound familiar to you.
Before our customers start using ProcureDesk, it is not uncommon to find a purchase authorization process which looks like this
- Submit a purchase requisition form.
- Send an approval email with the attached requisition form.
- Chase people for approvals because everyone is busy!
Though the process is straightforward, it doesn’t scale and it is frustrating for employees for many reasons.
Let’s look at forms first.
Here is what a typical requisition form looks like:
First of all, forms are overwhelming for employees when they don’t know what to fill in the blanks.
For example – if you don’t know the supplier name or the exact part number details then how are you supposed to fill that in!
Imagine the time wasted on following up with different team members to understand what to put in the form.
Moreover, other than finance teams, no one knows what accounting codes to use. So there is a lot of back and forth to fill the form.
Let’s say somehow you figured out how to fill the requisition form, the next step is approvals.
Now let’s talk about approvals
Most companies don’t have a defined purchasing policy.
In other words, they don’t have a written down purchase request and approval process. More specifically:
Employees don’t know who is authorized to approve purchases and up to what limit.
To keep it easy, finance teams decide to route all purchases for approval to a senior officer of the company. That could be the Chief Financial officer or Chief operating office or the owner of the company.
And that is your bottleneck.
Your senior management is already busy and now they are inundated with additional approval work.
Since they are busy, approvals take more time.
Employees then need to follow up with them to ask for approvals with an email like this:
And after the requisition is approved, work is not finished yet.
The purchase requisition then needs to be converted into a purchase order format.
If you are using a spreadsheet-based purchase order form, then you have another form to fill before the purchase order can be sent to the vendor. Here is what that looks like:
Now if you add the time spent on each transaction, it could easily add up to an hour for each purchase order (PO).
Now imagine, if you are creating even 100 purchase orders in a month, that is 100 hours spent on generating purchase orders.
Considering the cost of all people involved, the cost per PO can easily add up to $62.50/purchase order. That is $6,250 spent every month creating purchase orders.
Automate the Purchase Approval Process To Cut Purchase Order Approval Time By 30-50%
Now let’s look at how to scale your purchasing process without spending endless hours on manually approving and generating purchase orders.
By following this process, you would create purchase orders in less than a minute and without losing cost control
1. Catalogs for making the purchase easier
We all use Amazon.com or similar platforms to purchase products.
Do you remember filling in a lengthy form or typing in details on what you need to buy?
Of course not!
So why do you need to do that at your workplace?
The short answer is you don’t have to.
To make the purchasing process easier, implement “catalogs” so that repeat purchases can be ordered effortlessly.
Let’s look at some examples.
Let’s say you are a professional services company that certifies fire extinguishers for companies. Your technicians probably need to purchase certain items on a regular basis.
To make the purchasing process easier, you can create a catalog like this:
Users can then easily choose what they need to purchase and add to their purchase request cart.
You can also directly connect with marketplaces like Amazon.com to make the purchase requisition process easier. This can be done using a purchasing system like ProcureDesk.
Employees can then browse what they need to purchase and add items to the Amazon shopping cart.
Notice in the screenshot above that there is no checkout button. Instead, employees are prompted to submit the request for approval.
This triggers an approval process, and the employee is routed back to your purchasing system:
2. Reduce data entry effort
As we mentioned above, employees could spend up to an hour finding the information they need to create a purchase order request.
How can you avoid this using an automated process?
You could build in smart defaults so that the system can prefill a lot of information based on employee defaults.
Here is an example of that:
You can default departments, shipping addresses, contact details, and many more fields like that.
Now let’s talk about accounting information – finance teams need accounting information to book costs but the employee’s generally don’t know that information.
So you can automate the accounting by adding accounting defaults.
This can be done at the line item level by using defaults in the catalog or using category-based defaults.
The end result will look like this.
3. No more guesswork on who is going to approve the requisitions.
How do you take the guesswork out of the approval process? Automate it so that employees don’t have to think about it.
Here is what an automated approval workflow looks like:
This is supported by a workflow engine that can define approval amount levels and exceptions to the standard workflow. For example:
The idea is to configure the approval workflow and let the system dynamically generate the workflow based on the variables in the purchase requisition.
In the example above, the budget owner’s approval is triggered only when the amount of purchase is more than $100,000.
With automated workflows, you can set it and forget it.
4. On the go approvals using a mobile app
What if the approvers are not approving the requisitions on time?
This is usually the case.
Approvers generally are busy people and approvals are the last thing on their mind.
But everyone has a smartphone now, so use a smartphone app to ensure that the purchase order requests are approved on time.
Above is a screenshot of a mobile app that can allow approvers to approve purchase requests on the go.
With built-in notifications, it is difficult to miss approvals!
5. Automated purchase approval generation and submission
Once the purchase requisition is approved, the next step is to generate a purchase order and send it to the vendor.
Companies spend a lot of manual effort generating the purchase orders and then manually emailing them to the vendor.
All that can be easily automated.
Below is an example of an auto-generated purchase order (based on the purchase requisition):
Once the purchase order is generated, you can automatically email the purchase order to the vendor. All you have to do is to maintain a valid email for the vendor and let the system do the rest for you.
Also, some vendors have EDI (Electronic Data Interchange) capabilities. This allows you to send the purchase order document electronically from the purchasing system to the vendor’s ERP system (without email).
The process is highly reliable and effective because it is fast and reduces the data entry on the vendor side. Less data entry, less chance of errors.
Now your turn!
Download the Procure to Pay Process Checklist
Then follow the steps mentioned in the section “Automate Purchasing Process” and see what you can implement this week to reduce the time spent on purchase orders.
One of our clients is in IT services, where they have to regularly purchase hardware and software to fulfill the requirements for customers they are helping.
The demand can vary, so the purchasing team can end up creating 3 orders to 30 orders per day.
It is not very helpful when the purchasing team is one person!
To make matters complicated, the purchase orders have huge numbers of lines. Think of a Bill of material for a server – you could easily have 20-35 lines per order.
A small server bill of material looked like this:
The purchase order and approval process was very manual. The typical purchase process was like this:
- Receive a request from a field engineer to purchase hardware for the customer.
- Reach out to the vendor to get a quote for the requested hardware.
- Copy the quote from a PDF to a spreadsheet.
- Ensure that all the part descriptions and pricing are correct.
- Send the purchase order request for approval. The buyer emails the stakeholders with the quote attachment, to get approval. This often takes many follow-ups to ensure that the orders go out on time.
- Once the purchase request is created, generate the purchase order in PDF format.
- Email the order to the vendor.
As you can see above the process is not only laborious but it is also not scalable.
When the team has to generate 20 purchase orders in one day, it can easily take 10 hours to create a purchase request, send for approval, generate a purchase order, and send it to the vendor.
The current process with ProcureDesk looks like the following:
- Employees create requests for purchases within the ProcureDesk system.
- The request is sent to vendors to get a quote. The quote process is also integrated with the request.
- The vendors respond to the quote request and the team picks the best vendor.
- The buyer creates the purchase order by flipping a quote into a purchase order. No manual effort, just the click of a button.
- The purchase order is sent for approval based on predefined approval conditions.
- Once approved, the PO is automatically sent to the vendor.
The biggest benefit for them was over a 50% reduction in time to generate a purchase order.
The operations manager said –
“We haven’t done a time study yet but I can confidently say that our (purchase) cycle time is cut by more than half”.
However, the biggest benefit our client achieved was peace of mind!
The buyers always had anxiety whenever they had a large number of orders to process. This was for two reasons:
- The process was highly manual, so it took a long period of time.
- Since the purchase order was a spreadsheet template, the buyers needed to be highly proficient and careful with spreadsheets. You mess up a formula and the whole purchase order is wrong.
With the automated purchase order creation process, there is no need to remember anything, and anybody in the team can follow simple instructions to create a purchase order.
If you are currently not using the purchase order process above, then your invoices need to be approved before an invoice can be paid.
Your current process might look something like this:
- Receive the invoice.
- Scan the invoice
- Figure out where it needs to go for approval. Assuming there is a contact name on the invoice, you can figure that out.
- If there is no contact name, then you start calling people.
This process is painful, no wonder it is costing you up to $21 to process an invoice when it should take only $2.45 on the lower end.
So how do you improve this process?
Here is how you can improve the invoicing process:
- Implement a purchase order process, as we described above.
- Then ask your vendors to refer purchase order numbers on their invoices.
- When you have a purchase order # on the invoice, you can match the invoice with the purchase order.
Whether you have a purchase order process or not, if you are using a manual process for invoices, it is of-course costing you time, but it also costs you around $21/invoice.
The cost can be broken down as follows (approx. breakdown)
- Cost to scan & index the invoice in your system – $10
- Find the right approvers and the cost of approval. – $8
- Cost to create the invoice in your accounting system – $3
That is the price benchmark for cost per invoice for companies who don’t have invoice automation.
In the automated invoice process, we will show you how to reduce the cost down to $3/invoice or under.
Let’s look at some of the cost drivers that are contributing to a $21/invoice cost.
The biggest time-waster for companies is that they don’t have an established process to receive invoices from vendors.
The invoices are coming to buyers, via mail or directly to the accounts payable team.
The result, the invoices are either lost or you have to maintain different invoice channels to receive the invoices from vendors.
It feels like you’re in an invoice maze!
You might be thinking, “but not all our suppliers are using the same invoicing channel.”
That is correct, but you can automate the invoice capture process so that the invoices can be consolidated for you, no matter how your vendors are submitting the invoices.
Do you still receive paper invoices?
If you receive paper invoices, then you can relate to the pain of scanning the invoices, indexing them, and routing for approval.
Not only do you need to purchase and maintain specialized software for scanning invoices, but you always need someone in the office to complete this process.
If your team is remote, then this is a big issue.
Later in this section, we will show how to get rid of 99% of paper invoices.
You still might have some bills like taxes coming through but you can get rid of most paper invoices.
One of the key issues the AP (Accounts Payable) team faces is that the information on the invoices is either incorrect or missing.
A common challenge is a missing purchase order # or wrong purchase order #.
If you have a wrong purchase order #, of course, you can’t match the invoice and that leads us to the next issue.
Every time you receive an invoice that doesn’t have a purchase order # on it, you have to send it for internal review.
Since the team processing the invoices doesn’t know whether a purchase has been authorized or not, they need the business user to confirm if the invoice is ok to pay.
Though this process is ok when you have a few invoices, as your organization grows, this can become a real pain.
The process looks like this:
- Receive the invoice and check if there is a contact name on the invoice.
- Scan the invoice and send an email to the internal buyer.
- Follow up multiple times before they approve the invoice.
- While that is happening, the supplier is chasing you to know when they will be paid.
In this section, we will cover the steps you can take to reduce the time spent on processing invoices by at least 50%-60% and reduce cost by 80-90%. Here is how ProcureDesk automates the process for you.
Not all suppliers are equal, so we need to first figure out the suppliers you need to focus on.
The easiest way to do this is to pull the annual invoice volume of your suppliers and focus on the top suppliers that are contributing to the 80% of the invoices.
You can do that in a spreadsheet as follows:
Once you have the top suppliers, you need to figure out the right invoice channel for those suppliers.
An invoice channel is a way the suppliers are going to submit the invoice to you. This depends on the capability of the vendor.
We recommend the following priority when it comes to invoicing channels
- Electronic data interchange – This simply means that invoices are submitted electronically without any manual intervention. There are primarily two protocols for that: EDI and cXML.
- Supplier portal – we cover this in detail in the next few sections.
- Email – if the suppliers can’t use the supplier portal for any reason, only then you should allow them to submit invoices via email.
You should consult your suppliers to understand the supplier-channel fit. Based on your conversations with suppliers, the results should look something like this:
Once you have prioritized the top vendors and the support channel, it is time to kick off the invoice automation process.
Your first priority should be electronic invoices. Electronic invoices are efficient for the following reasons:
- There is no manual intervention, the data is transferred from machine to machine.
- The data is transferred based on a pre-defined standard, so there is less chance of any mistakes in the submitted invoice.
- It is highly efficient for a large volume of suppliers because it reduces the cost for both buyer and their suppliers.
To implement the EDI process, you can work with a third-party EDI provider or someone like ProcureDesk, who already have this process baked in the invoice process.
There are primarily two standards used in the industry today:
The technical implementation of these standards is outside the scope of this article, but if you are interested in reading more, the following resources are helpful
If electronic invoicing is not viable then the next best thing is to implement a supplier portal. Below is a process of how the supplier portal invoicing process would work for the suppliers.
Each supplier would get their individual credentials for the supplier portal.
They can see all their available purchase orders, invoices, and the status of each of the orders and invoices.
The supplier portal not only helps with electronic invoices but it reduces overall supplier inquiries about payment status.
A supplier can view all the open purchase orders as seen below.
The suppliers can then create invoices against the submitted order. This reduces data entry issues because vendors know the exact order against which they are submitting the invoices.
Apart from submitting invoices, the vendors can also acknowledge the order or create an advanced shipping notice (ASN).
The data is copied from the purchase order. All the vendor has to do is to add any applicable taxes and shipping charges and attach the invoice document.
The supplier portal should allow suppliers to submit a partial or full invoice. Since the line data is copied from the purchase order, the data entry related errors are greatly minimized.
All the vendor has to do is validate the information, hit the “Submit Invoice” button, and the system does the rest.
If the vendor is unable to support the EDI or the Supplier portal, then the third option is to have the invoices submitted through an email process.
Here are the steps to centralize your invoice capture process through email.
First, you need an email so that vendors can send invoices to that email. This email should be different from your standard AP mailbox and should be exclusively used for receiving invoices from vendors.
For example – firstname.lastname@example.org
Once you have the email set up, send an email to your vendors. Something along the lines below. Feel free to use this template.
Please note that you are only sending this email to your top 80% list which you created in step
If you are using a system like ProcureDesk, the system will also pick up the supplier invoices from the email and create the invoice for you. The following is how a draft invoice would look in the system.
You can also automate the process to extract the information from the supplier.
For example in the screenshot below, the system extracts the data from the invoice and adds to the respective fields.
You can then validate the information and submit the invoice for processing.
The above three steps should drastically reduce your time spent on processing invoices.
Does that mean you don’t have any paper invoices?
Unfortunately not, you still have utility invoices, etc, where you probably don’t have leverage with those suppliers.
But for all your material purchases, this process will completely make the invoicing process 100% paperless.
Now your turn!
Download the Procure to Pay Process Checklist
Then follow the steps mentioned in section “Automate Invoicing Process” and see what you can implement this week to reduce the time spent on capturing invoices from vendors.
We recently worked with a training company to automate their invoice capture process.
Before ProcureDesk, their process looked like the following:
- Go to different vendor sites and place the order.
- Since the orders were placed online, there was no purchase order # to match when the invoices showed up.
More so, there was no single place to store the invoices.
Once the invoice was received, there was a set of manual steps before the invoice could be paid.
So the invoice processing looked like this:
- The invoices are first scanned or downloaded from the websites and stored at a central location.
- The AP team then goes in and reviews each and every invoice to identify the internal stakeholder.
- The invoices are emailed to the respective stakeholder.
- After approval, the invoice is keyed in the accounting system for payment.
Before we started implementing the process, we worked with the client to understand the invoice volume.
More specifically, we did the following:
- Created a vendor matrix to identify key vendors that need to be moved to a purchase order based purchasing process. Since they had limited purchase orders, we wanted to solve that problem first.
- They were purchasing from Amazon.com a lot, so we set them up on our integrated punch-out catalog with Amazon.
- Identify key vendors volume and channel for receiving invoices from the vendor.
Today, this is how the process is working:
- Users go in to create purchase orders from different catalogs.
- We implemented a website plugin, that allows them to go to any site and copy the cart data for approval.
- All invoices are routed to a central email.
- The emails are then scanned and picked up by ProcureDesk.
- Each email is converted into an invoice in ProcureDesk. This is done automatically without any human intervention.
- Since the PO # is available on all invoices, the system does the match automatically.
- After matching, the invoice is sent to QuickBooks online (Accounting system) for processing.
The obvious result was productivity improvement because the invoices were not keyed in manually.
With the PO process, the compliance was made much easier and no double approvals were required to send the invoice for payment.
The biggest advantage though was that the team now had an integrated purchasing and invoicing process in one system.
Since the process is standardized, the team is able to onboard new employees with ease without spending hours on training employees on individual processes.
In this final step, we will talk about how to further reduce the time spent on processing invoices so that you can cut the cycle time by half or more.
Just a recap, so far we covered how to set up an automated purchasing process, and how to automate the invoice capture process.
When it comes to matching the invoices with purchase orders, it is not always the case that the invoice matches perfectly with the purchase order.
The three main issues we see while matching purchase orders and invoices are as follows:
- There are additional taxes and shipping that are not on the purchase order.
- There is no receipt to confirm that the product has been received or not.
- The unit price on the invoice is different from what is on the purchase order.
Here are the typical steps in a manual invoice matching process. You might be following all or some of them.
When an invoice shows up, the AP team doesn’t know if the invoice is ready to pay or not.
By matching it with the PO, they know that the purchase was authorized but if you ordered a widget, how does the team know if the buyer has received the product.
So you have what we call a missing receipt exception. For example, we generate a missing receipt exception as following:
The next step is of course to get a receipt confirmation from the buyer.
The truth is that employees don’t like to create receipts, so you have to chase people to confirm if they have received the product or not.
So even though you have automated the invoice capture process, you need to have a way to confirm the receipt of the product.
When you create a purchase order, you might or might not have the information about shipping charges or taxes.
When the invoice shows up the invoice has the shipping and taxes on it.
If you are comparing the purchase order and invoice, the amount is not going to match and that raises another exception.
To make matters complicated, if you have a direct pay permit or you are tax exempt, then the applicability of taxes varies based on the items you purchase. For example, some states tax products but not services.
If you don’t have an automated process to resolve these exceptions, you probably have to resort to a manual approval process.
More manual processes, more time spent on processing invoices.
What if the price on the invoice is not the same as the purchase order?
The price could be different because of the following reasons:
1. The Buyer doesn’t have the latest pricing. Let’s say you purchased a widget 3 months back and now you need to buy it again. You probably would just copy the price from the old order and send it to the vendor.
However, if you don’t have negotiated pricing, the price might have changed.
2. For service invoices, it is common that the vendors submit an incorrect unit price. For example, you hired a developer for 50 hours at a $100 unit price for a total of $5000.
When the vendor submits the invoice, they submit a total of $5,000. However, they add the unit price as $5,000 and quantity as 1.
When you try to use automated matching, the process identifies that as an exception that needs to be resolved manually.
Now let’s see how an automated matching process helps you resolve these issues and cut down the time spent on chasing people to get invoice approvals.
There are two ways you can automate the receipt process so that you don’t have to chase people to know if they have received the product or not.
- Automated receipts based on tracking information
The first approach is the automation of the receipt creation based on the delivery information.
Let’s say a supplier provided you with the tracking information.
Since you have tracking information, you can create an auto receipt as soon as the status changes to delivered.
This process works great for common office supplies, for example, orders from Staples or Amazon.com.
Since the orders generally ship in full, this is not an issue.
In cases where there could be a partial delivery scenario, you can ask the user to confirm if they have received the order in full and then auto approve the receipt.
2. Automated email reminders
If you don’t have the tracking information or you don’t want to auto-create the receipt, an alternate option would be to send a reminder to the user so that they can confirm the receipt.
For example, we generate an auto-reminder as soon as we receive an invoice. The reminder email looks like the following:
If the user has not received the product yet, then the system can be set up to send another reminder after a few days.
If you have the shipping information available, you can use that information to trigger the email to the user.
As we mentioned above, additional shipping and taxes cause issues with matching. If the invoice amount is more than the purchase order amount than the invoice needs to be approved/reviewed.
When it comes to taxes, you can default the amount of tax you are liable to pay.
For example, if your standard tax is 6%, then you can configure the value such that the only value a user can select is 6% or no tax in cases where tax is not applicable.
Once the taxes are configured in this way, you can set the system to ignore any tax matching issues and auto-approve exceptions related to tax.
For shipping, there are two ways this can be handled:
1. Proactively ask the vendor to provide the shipping amount
The easiest way to handle the shipping exception is to have the vendor add the shipping amount on the purchase order.
It is not possible in all cases, but in most cases, the vendors should be able to provide the shipping charges in advance.
All you have to do is to add those charges to the purchase order. For example, you could add shipping and taxes as follows:
2. Set Up a tolerance for the shipping amount
Alternatively, you can set up a tolerance so that the system can auto-accept the shipping charges if the amount is within a certain range.
For example, you can set up a rule that if the shipping amount is within 2% of the order value or $100, auto-accept the shipping charges and don’t raise the exception.
The above is just an example, you should review your past shipping charges to come up with the right tolerance amount.
3. Use your own shipping account
If you don’t want to rely on the vendor’s shipping carrier, you could sign up with your own carrier and have the vendor use that while shipping the products to you.
This might not be a viable solution for all vendors. For example – Amazon.com would use its own shipping method. But for your key vendors, you can leverage this strategy.
When you are creating the purchase order, select shipping options to let the vendor know that you want them to use your carrier account. This can be configured on the purchase order.
If you are dealing with price exceptions – (Unit price difference between purchase order and invoice), you could set up automated rules to route the exception for review.
You can set up an automated rule, so every time an exception occurs, it is sent to the person responsible for resolving such exceptions.
The assigned individual then needs to work with the vendor to resolve the pricing discrepancies.
The vendor can then resubmit the invoice or accept the invoice as is.
Once the exception is resolved, you need to take proactive measures to avoid these exceptions in the future.
Here are a couple of recommendations
- If the pricing difference is because of the vendor price change, you might want to look at negotiating a contract and lock in the price. You should be able to lock in the price for 6-12 months unless it is a highly volatile commodity.
- If you had the wrong price, make sure you are using catalogs for repeat purchases. By using catalogs, you can not only make the purchasing easier, but you also avoid pricing errors.
For example, you set up a catalog like this:
You do need a cadence to review the catalogs on a regular basis to ensure that the price is current.
With all that said, you still might have issues with pricing or other quantity issues.
For example, a vendor always sends more than what is ordered because the order is adjusted for the minimum viable order quantity or truckload.
So how do you handle scenarios like that?
You can set up tolerances and let the system know to auto accept the invoice if the difference is within the exception range.
Here are some examples of tolerances:
With quantity tolerance, you are telling the system to automatically accept the invoice if the price difference between PO and Invoice quantities is within this range.
You can set a % or an absolute number and the system picks the least value from % or the absolute number.
You can set up a quantity exception as follows:
The system picks the least value from % or the absolute number.
You can set up a unit price exception as follows:
Total amount exception
The system picks the least value from % or the absolute number.
Here is an example of the total amount based tolerance:
Now your turn!
Download the Procure to Pay Process Checklist
Then follow the steps mentioned in the section “Automate Matching Process” and see what you can implement this week to cut the time spent on matching invoices with purchase orders.
We recently worked with a client in the manufacturing space to help then reduce the time spent on processing invoices.
Their invoice process before using ProcureDesk was completely manual.
They manually created purchase orders in their accounting system (QuickBooks Online).
If the invoice didn’t match the purchase order, they would route that for approvals via emails.
The invoice was not entered in the accounting system until it was approved and that caused delays in the accrual process and delay in month-end close.
With the automated matching process, our client was able to significantly reduce the time they were spending on processing invoices.
The time to manage exceptions was cut in half because of two reasons:
- The system triggered automated emails for exception approval, this took the manual effort out.
- They used tolerances to auto accept the invoices wherever possible.
We set up an automated workflow so that any exception could be routed to the appropriate person. Here is what the exception workflow looks like:
For example, the invoice exception was routed to the order contact so that they could resolve the issues.
Prior to ProcureDesk, this was a completely manual process.
- The AP team would identify the right contact first and then send an email. With the PO process, the system already knew the order contact.
- The emails generated via the system have the complete details of why the exception was raised and what the user needs to do to resolve it.
We also set up tolerances for unit price. You can set up a tolerance like the following:
As you can see above, the tolerance for the invoice unit process is set to 1% of $10. If the unit price difference is within this range, the system automatically accepts the invoice.
We noticed that some of their suppliers always had some unit price differences between the purchase order and invoices.
The products they were purchasing were highly-price sensitive. If the commodity pricing changed, the price of the product also changed.
Since the volume was not high enough to negotiate a stable, long term rate, we advised the client to set up a tolerance to auto accept the invoice.
The biggest benefit for the client was instant visibility into the cash flow requirements.
Before ProcureDesk, they would wait for the invoices to be approved before they were entered into the accounting system. As a result of that, they had to rush in the month-end to receive all approvals and then key in the invoices.
As a result of that, they always have to guess the month-end cash flow requirements.
With ProcureDesk, invoices are processed 42.5% faster and with QuickBooks integration, the invoices are instantly created in the accounting system.
Moreover, we created a report for them to see what invoices are pending review so if need be, they can manually accrue for expenses.
With the combination of automated matching, exception routing, and tolerance rules – our customer was able to reduce the time spent on processing invoices by at least 40%.
The time reduction was driven by the following:
- Overall less number of exceptions generated because of better catalog data and tolerance rules.
- No manual review and sending approval emails to the end-users, all that was managed by the system automatically.
- The person approving the exception had all the information in the email so that they can see the root cause of the exception. Before the automation, they have to go check the purchase order, then compare it with the invoice to find the discrepancy.
A reliable and scalable purchase to pay process is not only good corporate hygiene, but it is also a requirement if you are a public company or you are looking to raise funding to support growth.
With this 3-step strategy, you can improve your purchasing compliance and cut invoice processing time by up to 60%. One of our recent clients reduced processing time by 61.5% in the first 45 days of implementing ProcureDesk.
With ProcureDesk’s purchase to pay automation, we have incorporated 1000+ hours of practitioners’ experience and feedback.
Finance teams in XX countries are using ProcureDesk to reduce invoice processing time as well as improve the time they spend on approving employee’s purchase requisitions.
What you need to be successful:
1. Volume. Our process only makes sense if you are processing 100+ invoices every month. Why this number?
ProcureDesk would help you cut the invoice processing time in half even if you process 10 invoices a month. However, to see the Return on Investment (ROI) you need volume so that you can see quantity time savings in real cost savings.
2. A process mindset. Everything can be optimized if you look at it as a process. There is an input and there is an output. Purchase to pay process is as simple as that.
A purchase requisition is an input and supplier payment is the output. We will help you design the optimum purchase to pay process and provide technology to automate that.
3. Ownership. Like everything else, successful execution of the purchase of the pay automation is the key for you to get the results you desire.
For that, you need to assign ownership of the process. You would need someone who is responsible so that you can not only automate the process, you also improve it over time by working with different stakeholders.
If this is you, sign up for a ProcureDesk Demo, and let’s find out how we can help you.