Back in the old days, you placed orders with your supplier by phone, fax, mail, and by walking into their store. They entered your order into their system, picked and delivered your products, and mailed you an invoice. Your AP clerk took the invoice, did the 3 way match, put it in the stack to be paid, and you mailed a check at the end of the month. Have times changed or what?Nowadays, you can place orders as you did in the past, but you can also order from a website, purchase through a marketplace connection your company has established, or send your orders by EDI. You expect to receive an EDI invoice, which automatically flows into your ERP after translation. Your system validates a bunch of data at both the header and detail levels against the original PO data and, if everything matches up from a delivery perspective, it’s approved and set up for automated payment via EFT.
The modern process sounds wonderful, but does it really work? The answer, as usual, is ‘sometimes’. The fact that you, as a customer, have myriad options available to shop and place orders is a truly wonderful advancement in the customer experience. Receiving an invoice electronically that processes automatically in your system is likewise a fine development. Problems can arise, though, when the customer makes use of those multiple ordering methods and invoice data doesn’t validate.
Because most of the ways of ordering described above are manual in nature (even ‘electronic’ ordering with a website usually requires manual entry and re-keying of order information into your system), errors can crop up in information that ends up on the invoice. And guess what? The accounts payable clerk who used to process invoices and knew enough to stick a dash in the right spot in a PO number and manage differences in units of measure isn’t there any longer. Your coldly efficient ERP is, and it’s very unforgiving.
There’s been considerable buzz over the past few years about invoice automation, with several companies specializing in selling services around the magic they can work with improving your processes and providing value added information. No matter how they propose to do that, EDI invoicing or some other method, the key to success is data integrity. What you have in your system to create PO’s must be accurate, and any orders placed via manual methods must have processes in place to ensure the right information is communicated to the supplier and updated in your ERP. The supplier, likewise, needs to have integrity in pricing and capturing order information. How to handle anticipated issues, such as UOM discrepancies, must be negotiated in advance.
Before you sign on the dotted line for an e-invoicing initiative, take a good look at whether you have the data integrity to really pull it off. Our experience has been that your chances are best when you’re ordering machine-to-machine (EDI or eProcurement system) and when you and your supplier have agreed on processes to keep pricing updated in both systems.