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The Bill Stops Where?

Bill Stops Where?

Last month, I endured a billing nightmare that took weeks to resolve. I had consolidated onto one invoice a cell phone bill from one carrier with an Internet service bill from another carrier.  I subsequently decided to switch back to separate billing due to some unexpected issues with the new arrangement.

A prolonged invoice resolution process followed when one carrier claimed to have made a payment to the other carrier on the consolidated bill, but the other carrier did not show receiving the payment.

I can only imagine the fun in accounts payable when this kind of scenario plays out on a regular basis. How much time does your AP staff spend dealing with these kinds of issues? If you don’t know the percentage of invoices that require extra effort resolving errors and exceptions, you can’t calculate the true cost of processing an invoice.

Resolving invoice errors and exceptions is arguably the biggest challenge facing AP, and a major contributor to rising invoice processing costs. The larger your invoice volume and percentage of paper invoices coming into AP, the more time and effort you must expend here—time and effort that could be put to better use.

How can you help minimize the number of problem invoices that come into accounts payable? By collaborating with trading partners over a business network, where both parties can follow the status of a transaction at any point in time.

The value of shared visibility goes beyond the invoice.  Equally important is the ability to leverage a business network to collaborate over related business documents such as the purchase orders, order confirmation, and advance ship notice.

This distinction was enthusiastically shared during a conversation with a chemical company executive charged with transforming his procure-to-pay process.  He mentioned a recurring problem with a legacy system that complicated the accurate matching of purchase orders to invoices. The error rates were excessive, but neither his company nor his suppliers could identify their cause.

Each blamed the other as the responsible party. Once the company and these suppliers were connected across a business network, the bottlenecks became clear (they were supplier issues), and the result was touchless invoice processing.  The suppliers have embraced the new, collaborative process. It saves them time and has lowered their billing costs, so much so that one supplier now offers lower prices for orders that flow through this e-commerce channel.

Back on the buyer side, the benefits go beyond the lower operational costs and improved efficiency. The collaborative process frees up two hours per day of each buyer’s time, allowing these buyers to focus on more value-added tasks. When you take into account this positive impact on business performance across 15 plant locations, you get substantial benefits that don’t always appear on the business case.  For this chemical company, these unexpected benefits meant that a three-year operational improvement goal was achieved in less than five months.

If streamlining your procure-to-pay operations is not yet top of mind for your procurement and finance leaders, it’s likely that they don’t understand the true cost of a business transaction. They may not know the percentage of invoices that have problems. And they may not understand the opportunity cost of assigning staff to solve invoice problems rather than proactively manage supplier performance and early payment discounts, or enforce compliance to preferred suppliers and negotiated prices.

In a networked economy, attention to these details can make a big difference.

 

About the author
Chris Rauen
Chris Rauen

Chris is responsible for marketing programs at Ariba that educate finance, procurement, supply chain, and other business professionals on the transformational potential of the Ariba Network and Ariba Financial solutions. Before joining Ariba, Chri... Read More >>>

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