With supply-chain processes becoming more automated, many organizations have a vision of digitizing the order-to-cash cycle. The process is often broken into three steps of digitization: procurement, receipt of goods, and inbound invoice and payment.
Many companies have started the journey, but stall in their efforts to complete it. Competing constituents make it difficult to bring about organizational change. It’s not uncommon to have three or four senior vice presidents or C-level executives involved in the initiative.
Stalled efforts at digitization are often rooted in conflicting priorities. A company might place greater emphasis on revenue growth than optimizing cash flow or reducing overall expense. But for those pursuing the last two goals, e-invoicing can deliver powerful benefits.
The receipt of a paper invoice is problematic. It often arrives in a variety of formats, such as e-mailed PDF files, faxes, or mailed sheets of paper. The act of entering the information into an enterprise resource planning (ERP) system can be expensive, time consuming and error prone. By contrast, transferring data from a digital invoice via EDI or XML into the ERP eliminates the need for human interaction, avoids entry errors, and accelerates invoice approval and payment.
There are three other important benefits to be obtained once an inbound invoice has been digitized:
Ability to take advantage of supplier discounts. Companies that avail themselves of supplier discounts can accelerate cash flow and reduce operating expenses. But many can’t do this because the process of getting the invoice into the ERP, and subsequently approved, takes up so much time. Digitizing inbound invoices speeds up the entry process and cleans up bad data. The effort eliminates the prospect of an ERP rejecting an invoice because it lacks a unique identifying number, and can’t be processed within certain time boundaries.
Automation of invoice matching. Most ERP systems have the ability to automate two- or three-way matching once the data is digitized. But those with multiple systems often are unable to automate the exchange of data across internal systems. Companies that haven’t invested in an ERP, and are still using accounting software, will struggle to digitize the matching process.
The good news is that a digitized order-to-cash process, using a cloud integration company, can provide automated two- or three-way matching in the cloud, without the need for relying on an ERP for that function. A two-way match can compare the invoice to the purchase order, while a three-way match adds the receipt of goods. Any discrepancy in quantity or product can be quickly identified and highlighted prior to payment. As a result, companies aren’t paying for “invalid” invoices.
Reduction in labor expenses. In addition to the expense of entering an invoice into an ERP or accounting system, there are hidden costs associated with vendors seeking the status of invoice approval and payment. It’s not uncommon to receive multiple phone calls from a vendor over the payment of just one invoice. If the process is digitized, it’s easier to produce vendor-specific dashboards that show the status of the invoice and payment date. Such digital dashboards eliminate the hidden cost of communicating with vendors over a process that is typically hidden from them.
Digitizing the inbound invoice process offers a host of potential benefits, some obvious and others not fully appreciated. If reducing expenses, optimizing cash flow and improving the order-to-cash process is important to your business, investigate digitizing your inbound invoices.
Steve Scala is executive vice president of corporate development at DiCentral, a global provider of business-to-business integration (B2Bi) managed services.
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