Problem-Analysis-Solution for Defect Rate Reduction: When defects in your payables process rob your productivity and threaten the efficiency of your accounts payable department, then it is time to consider how to reduce your company’s defect rate on invoice processing.
AP Problem # 1: Get Your Payables Process Right, the First Time, Lower Defect Rate
Benefits of Implementing a Digital Procurement to Pay Platform: This is the first in a series of several SnapAP Blog Posts on what frequently goes wrong in accounts payable processing of invoices and why a focus on digital-based Procurement to Pay is the key to enhancing business process efficiency. AP Problem #2: A Solution to Poor Supplier Relationships
The first sign you have trouble in your payables department is a consistent double-digit defect rate on invoice payables processing.
What you see is that your payables staff are spending more time and effort at the payment approval stage for signing cheque acceptance because everything went wrong somewhere in the supplier ordering and delivery confirmation process.
The Crux of the Problem with Accounts Payable Defect Rates
- Businesses using a manual invoice processing approach are incurring too much cost in being forced to correct too many manual processing errors.
- Often these errors are created by poor initial invoice documentation or misfiled change order communications, which are paper-based mistakes and are pushed to the end of the payables process.
- Mistakes that have to be unravelled when it is time to issue a cheque to the supplier.
- To find the error requires going back and confirming the order details, delivery acceptance and recreate what was agreed to by the purchaser and the supplier during the final authorization for purchase.
- Time sink heaven.
The result of this bad start to completing supplier orders is a higher and continuing defect rate. High supplier invoice defect rates in the procurement process will waste valuable time and human energy in the accounts payable department.
The cost and loss from invoice defects will decrease the productivity of your payables staff and slow down the payment process to suppliers.
Slow payment to suppliers results in missed opportunities for discounts.
Delayed payment can cause strained relationships with suppliers, not to mention frustrated employees who report that they just can’t get ahead of the time lag problem.
- A random survey of AP department managers reports that over 30% of invoices contain defects.
These are defect mistakes made in preparing the original invoices or result from changes that are not captured accurately in delivery acceptance. Whatever the cause, it all leads to an endless process of uncovering and fixing errors.
This is where costs become hidden and more costly as more staff time and effort is made to correct the myriad of mistakes and missing paperwork trail.
- Ironically, OCR scanning of invoices only accelerates the defect creation problem and promotes the mistakes and errors into even a digital process, which in effect automates the defect rates instead of solving the accuracy problem of garbage in-garbage out.
SnapAP thought thru this flawed invoice acceptance process before programming the SnapAP solution.
- Our developers decided if they could get the process started right at the first step in ordering( procurement) they could win the battle to reduce errors.
- As a result, SnapAP’s solution encourages purchasers to put more energy into getting the first steps of procurement correct.
By starting right, then less time and cost is required at the back end of the process in completing payments to suppliers.
Here’s how SnapAP does things differently in software automation.
First, the SnapAP procurement to pay process starts with the end result in mind.
- A SnapAP solution implementation means that all of your suppliers will receive approved purchase orders.
- These purchase orders are sent electronically to the supplier directly, which provides them with the opportunity for up-front review of what they are agreeing to and including in their invoice.
- The beauty of this arrangement is that the supplier takes the opportunity and the responsibility, as well as the pre-emptive effort to ensure that the purchase order received and agreed to, exactly matches the invoice they will also return electronically.
- This early purchase process step creates its own efficiency and solution to high defect losses.
It is in the supplier’s personal best interests and cash flow management to compare their purchase orders to their invoice description and costing figures before sending them back. This one simple step in an often complex process ensures the accuracy of the invoices sent to the purchaser.
Here’s the double payoff for both purchaser and supplier.
For the Supplier: By using SnapAP’s focus on creating accurate PO-in and accurate invoice-out process, defect rates are immediately lowered to below 2% from often double-digit defect rates.
- Customers using SnapAP report that their AP department immediately increases their processing efficiency and productivity with fewer costly labour hours.
- By design, the SnapAP procure to pay solution gains consensus from all involved on the front end, leading to enhanced relationships between you and your suppliers. The big bonus we often hear about is that our customers spend much less time dealing with time-consuming supplier inquiries. Suppliers can securely log in to their portal page and view the progress of their payment in a transparent, and supportive manner.
- The SnapAP Savings Calculator app will help you analyze the cost of manual invoice processing that you are incurring now, and once submitted will project back the cost savings calculation specific to your invoice volume.
- SnapAP’s solution advisors are happy to customize a software demo based on your description of your company’s procurement and payables volume. During the live site demo, you will view the payables cost control dashboard, which will lead your payables team to a more streamlined process for your business.
- An additional benefit to invoice automation is an enhanced relationship with all your suppliers, as well as securing more cost savings from meeting discount performance payment schedules.
- Reducing the stress of invoice matching and going paperless also improves the overall morale for your AP department. Particularly, as they evolve from a cost centre to an enhanced business performance contributor.