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What’s In Your Network?

Business networks have come a long way since the first EDI messages were sent via telex before being converted into computer data.

Today, electronic documents are exchanged securely over the Internet, and many networks have built-in business rules that bring intelligence to the network. This is the advantage of the next generation business network, and driver of the networked economy.

Consider the transformational impact of these networks on invoice processing. With an EDI network, you could exchange electronic invoices, but there was no way to validate that the data on the invoice was complete and accurate. The invoice got to accounts payable quicker, but often would not get through AP quicker.

Today, the best e-invoice networks employ business rules that automatically check for errors and exceptions before an invoice posts to your ERP or financial system. This presents a huge advantage for organizations burdened with manually resolving these problem invoices.

Invoice error and match failure rates vary. I recall one research report showing that 15% of invoices on average contain some kind of error or exception. Then, there are the anecdotes, such as a recent conversation with a large Fortune 500 company. During that discussion, I was told that the order-invoice match fail rate was close to 60%.

Regardless of where you fall in this area, one thing is clear. The costs to resolve invoice errors and exceptions aren’t cheap, ranging from $20 to $200 or more per invoice. That’s where the invoice validation via business rules can make a huge difference.

What’s more, the network that expands its scope to include the exchange of electronic purchase orders and related documents (order confirmations and advance ship notices) simplify invoice validation and create a more compelling business case. As invoice management is part of a larger procure-to-pay process, the ability to handle these related documents in the same network adds to the business process improvements and cost savings while improving compliance.

So as you look to tap the empowering capabilities of today’s business networks, know that all networks are not created equal. Carefully assessing the network validation rules is an important step in the evaluation process.

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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