As your company grows, so too does your responsibility to ensure the integrity of your business practices. When it comes to paying accounts, sloppy processes can impact on your bottom line – increasing your risk of errors and exposure to invoice fraud, eroding the trust of reliable suppliers and costing your business time and money.
Employing an invoice verification process is the most reliable way to guarantee the robustness of your accounts payable (AP) procedures. Widely accepted in the finance industry as best practice, businesses are encouraged to use a method of either two-, three- or four-way matching, where, depending on needs, scale and risk profile, businesses can cross-reference a variety of details to ensure accuracy. If any issues are detected during the matching process, payment of the invoice will be withheld pending validation, ensuring that everyone gets what they should in terms of product and payment, and, equally as important, providing a safeguard against someone receiving something they shouldn’t!
Three-way matching involves cross referencing the details on purchase orders, receiving notes and invoices - comparing company name, type and quantity of goods or services requested and supplied, agreed price, payment terms, and purchase order number.
On top of this, it is good practice to extend checks on invoices to include:
- cross checking payment account details against vendor records;
- maintaining a database of invoices received in order to detect duplicate submissions; and
- validating invoice calculations including totals and tax amounts, ensuring that the invoice meets the minimum content requirements as outlined by the Australian Tax Office.
Many businesses persist with managing this process manually. While this is acceptable, there are some obvious issues with continuing to handle the AP aspects of business this way. First and foremost, human error is real. People make mistakes – staff take leave, have lapses in concentration, some struggle with following detailed procedures. As a business continues to grow, manual handling increases along with workloads and invoice payment times, impacting on staff satisfaction and relationships with suppliers.
One way to overcome the issues associated with a manual validation system is to transition toward a digital AP process, making use of some of the many automated solutions available to the industry. Options vary depending on the needs of each business. Small businesses should consider adopting modern accounting software, for example Intuit QuickBooks Online, e-invoicing and related automation tools to streamline their AP process.
Medium to large businesses may benefit from utilising:
- e-invoicing to improve data quality;
- robotic process automation (RPA) to increase efficiency of tedious and repetitive tasks; and
- artificial intelligence (AI) to identify risk patterns and opportunities to maximise supply chain benefits.
Despite the rapid rate of technology development today, some businesses are still resistant to adopting digital processes. Considering the many benefits that come with automating AP processes like three-way matching - saving money, improving efficiency, minimising risks, and strengthening relationships - there has never been a better time to make the transition!
This article is: Part 1 in a 1-Part Series.