I feel confident saying that nobody really likes to pay invoices but imagine how it feels when you pay the same invoice twice or pay the vendor for a service or goods that your company never received? Tracking these is one of the foundations of accounts payable and unfortunately, the type and quantity of these errors frequently happen at companies that still rely on outdated manual invoice processing.
With a manually based operation the AP accounting staff must comb through hundreds of invoices, locate corresponding purchase orders and receipts; all to get and try to match details that document when and to whom an order was delivered (assuming that it was delivered). The problem only gets worse as the companies get larger. The best - and most likely only - way to avoid these types of costly and time-consuming errors is to implement automated invoice processing.
If the core function of finance is helping people to save, manage, and acquire money then automated invoice processing is the means to accomplish it. This intelligent software platform makes sure that the invoices are processed, assigned the correct GL codes, and paid on time. It confirms that all the invoice details match including amount due, bank accounts, tax information, and vendor address. Best of all it ensures a smooth workflow process that keeps everyone happy, from purchase to pay and from suppliers to departments to customers.
Paper-based Processes Are No Match for Errors and Fraud Attacks
The more you rely on paper-based processes, the higher the likelihood of delays and snafus along the path of an invoice through your organization. While accounts payable staff commonly compare invoice data with multiple sources, they often do it by hand and as a cursory spot check rather than consistently audit every invoice. This is especially true when a business keeps track of the accounts payable process by using a spreadsheet.
As a result, errors such as incorrect amounts, mistyped vendor data, and erroneous banking information on different documents can and will slip through. This only got worse due to the pandemic with outright scams consistently on the rise. Work-from-home mandates, thinned-out employee ranks, and dispersed staff just make it increasingly easy for bad players to target companies. Clearly paper-based processes are no match for reducing or eliminating errors and fraud attacks but what about automated invoice processing?
There are plenty of steps in the purchase-to-pay workflow where automated invoice processing saves time and money, boosts productivity, and often generates a new revenue stream. However, one of the best ways that it does this is by eliminating avoidable mistakes. The best intelligent automation uses three-way invoice matching as a crucial component to remove the possibility of fraud and errors throughout the entire accounts payable process.
Three-Way Matching Is a Key Tool to Thwart Payment Fraud
As market researcher Ardent Partners points out in its latest “State of ePayables 2021” report, 4 out of 10 companies reported being targeted by a payment fraud attack in 2020. This is a new record. Furthermore, Ardent concludes that “the risk of payment fraud attacks will be part of AP’s ‘new normal’, and that strategies and tools designed to thwart it will become more important.”
Enter automated three-way matching. This process raises the bar by adding the highest level of security and confidence to the purchase-to-pay order process. With three-way matching a platform will automatically compare details from three different sources: the actual invoice, the purchase order, and the recipient for the goods or services billed. The system does all this in the background, so there's little to no human intervention necessary unless an item is flagged as an exception. When this happens the system will automatically inform you or whomever you designate as well as route the document.
From a numbers perspective the rate of exceptions drops from 1 in 4 to just 1 in 10, with significantly less human labor needed to find and resolve the issue. Additionally, the ratio of invoices being processed “straight-through” without any human touch triples from 21% to 67%.
Apart from quickly catching duplicate invoice and fraudulent submissions, the overall workflow also improves. For example, because vendors no longer need call or e-mail regarding outstanding invoices, staff time is freed up and relationships improve. Imagine how much real value-added activities can now be implemented.
Winning the Matching Game with the 5+3 Formula
The time and cost savings quickly accumulate (and keep growing). Apart from quickly catching duplicate invoice and fraudulent submissions, the overall workflow improves. With your team freed from sorting through invoices and tracking details they can now focus on tasks that contribute real value to the purchase-to-pay workflow. For example, they can make smart decisions on scheduling payments to optimize cash flow and keep vendors happy. Not only is the business-to-business relationship improved, but you also have an uninterrupted supply chain.
Management can also extract key, live invoice and payment data and turn it into actionable financial intelligence for all departments in your organization. From procurement to the executive suite, this type of data has something to offer.
While it is easier to simply say all of this, let's follow a typical invoice submitted by a vendor to see just how intelligent automation plus three-way invoice matching offers unparalleled speed, security, and savings. This is the "5 + 3" formula" for success: mastering 5 steps and clearing 3 matches.
If that sounds too abstract, let’s follow a typical invoice submitted by a vendor to see how intelligent automation plus three-way invoice matching offers unmatched speed, security, and savings. There are two numbers to remember here that we’ll call the “5+3 formula” for success: mastering 5 steps and clearing 3 matches.
1. Capture: intelligent invoice matching
The first step in processing is having something to process. Regardless of what format or channel an invoice arrives – on paper, via fax or email, or through electronic data interchange (EDI) – the platform can capture the document, extract all the relevant information and hold or store it.
Platforms like Yooz utilize robotic process automation (RPA), true optical character recognition (OCR), and machine-learning algorithms that become smarter the more invoices that they encounter. To date, Yooz has indexed more than 100 million invoices from over a million different vendors. As a result, the platform can understand over 80% of invoices right out of the box and without any customization.
2. Review: matching and flagging discrepancies
In the second step each invoice is reviewed, correctly GL-coded, and undergoes a three-way match with purchase orders and receipts. This matching process weeds out duplicates, erroneous entries, and fraudulent submissions. It will catch all types of slip-ups including a digit missing from an account number or an invoice that was submitted twice with slightly different invoice numbers.
It is worth noting that not every error stems from human mistakes or a malicious fraud attempt. For example, imagine that someone in your business ordered a dozen laptops but due to supply chain constraints or delivery problems only 8 computers arrived. Manually reviewing relevant paper documents to determine who ordered how many devices could take weeks. Automated three-way matching will ferret out the discrepancy almost instantly, adding up to significant time and cost savings.
3. Routing: speeding through invoice matching and approval
The third step consists of approving or rejecting an invoice that passed the initial stages. This is done based on customizable workflows set up by each company to meet its specific needs.
Once identified and flagged both the exceptions and the greenlighted invoices will be automatically routed to the designated team member. Especially with a cloud-based system that individual can review the records, pull up related documents, or approve invoices from any location (even mobile devices) at any time.
Anywhere, anytime ability is especially important in a remote work environment and has proven its value during the disruptions brought on by the pandemic. It will continue to pay off as return-to-office plans keep being pushed back.
4. Payment: matching key invoice details all the way through the process
Fourth, the invoice needs to be readied for payment. Using a virtual credit card as the payment method of choice provides an additional level of visibility and contributes to a well-documented audit trail. These virtual cards allow vendors to be paid instantly and creates a new income stream through cash back benefits that accrue with each paid invoice. For the average business that processes a few hundred invoices a month, that cash back can become up to several thousand dollars per year.
Yooz offers an additional secure module called YoozPay which runs inside the Yooz automated platform. Powered by Checkbook, the module helps both sides of a transaction minimize risks and maximize convenience. YoozPay also performs three more checks: looking into limits, velocity, and additional patterns.
Vendors are rapidly onboarded with a single e-mail address and a one-click selection of the payment method of their choice. The AP staff then picks the amounts and schedules the payment dates.
5. Reconciliation: automated matching boosts competitiveness and resilience
Reconciliation, the checks and balance system of a company’s finances, is typically a time-consuming and highly repetitive activity. In other words, it is perfect for an automated AP process.
Automation stores and secures approved files and documents in a central, accessible location. This, combined with full visibility into financial information at any point in the procure-to-pay process, makes a previously time-consuming and highly repetitive process quickly known, understood, and easily reported. The perfect trail for auditing, tax preparation, and closings.
Unmatched speed, savings, and security plus increased compliance, better visibility, and improved control. That’s how the 5+3 formula adds up to much more value than the sum of its parts.
Automated Matching Boosts Competitiveness and Resilience
An intelligent workflow with automated, three-way matching is quickly becoming a vital part of the modern finance function. Having the right data triple checked and available at any time in the process provides a smart safety net that prevents things from going wrong and lets the entire company gain a better view over the entire purchase-to-pay process all the way down the line.
Verified data, invoices paid on time, late fees avoided, and better relationships with buyers and vendors established. The end result of automated invoice processing is an organization in a stronger competitive position, improved resilience to withstand external shocks and lastly, a tangible boost for productivity and job satisfaction among team members.
Intelligent Invoice Matching by Yooz
Yooz is a powerful, intuitive platform delivering the highest Accounts Payable Automation rates by industry standards. The YoozPay add-on module works seamlessly with the Yooz solution to allow scheduling and executing payments in the same interface. Together they offer accounting and finance leaders the ideal solution to streamline their productivity and ensure security from purchase to payment.