Invoice Reconciliation – pay for what you get!

An order is placed, invoice comes in and payment is made – as simple as that! However, this simple looking transaction isn’t always so easy. One of the main stresses a financial team faces comes from reconciling supplier invoices with purchase orders, SOWs, timesheet reports, etc. There are several reasons why this process can become one hell of a responsibility filled with potential for leakage.

• Information which is critical to business is not collected
• Data is not organized properly
• Systems are not properly integrated across the processes
• Information is not collected at a central repository for reporting, spend analysis, and business intelligence

A huge number of invoices are showered every month and everybody wants to be paid immediately. If one tries to reconcile these statements as and when they come in, they may run into trouble since amount may not match until the month end and they may end up overpaying.

Invoice reconciliation is a process which makes sure your organization gets what it has ordered and pays for what it gets. In today’s volatile business environment, organizations have a belief that by automating their processes they can eliminate errors increase profitability and a more satisfied customer base. However, most of the time managers end up spending more time on routing the invoice or clearing their worklists as they get the invoices which are not meant to be sent to them. This leads to wrongly placed invoices, missing invoices, junk in mail boxes.

Invoices tend to arrive in whichever format vendor likes to use, rather than the one format which is convenient for you to track down and then process. Then you have to sit down and translate the invoice into a format which is acceptable and easy for you, investigate the item label and amount. Without translating the invoice, finding just the information you need from the invoice can be a hard task. An easy method to overcome this formatting issue is to reformat the data into your own accounting/ERP system as the invoices come in.

Often it is seen that vendor’s invoice figures don’t match the value of deliveries, or purchase orders for the month. This may be because the vendor has over-charged/under-charged or they have rolled over a previous balance. It becomes a hard task to investigate where this amount has come from. You can either spend your valuable time in tracking the amount or you can set your processes in place for the quick identification of brought forward amounts and speed up your reconciliation process.

Solution for all the above mentioned problems is having a back office management support. It helps reduce time consumption – managers save their time which was spent looking and pondering over invoices which were meaningless to them. It also increases operational efficiency – invoices are routed to the intended managers helping them take quick action on the invoices thereby making their vendor happy by making payments in time, improving/maintaining relationships and benefiting the business.

About Author:

Tina Nebhnani is consultant and part of Systems Plus Pvt. Ltd. She is a part of consulting team that delivers Sourcing and Vendor Management Office projects. She can be contacted at: tina.n@spluspl.com