Many would agree that the accounts payable process is paper intensive and laborious. In most companies, particularly SMBs, supplier invoices are forwarded to the accounting staff from all over the company for payment. They key the invoice data into their accounting software and then it’s up to them to figure out if the goods or services have been received and the payment is authorized. Depending on how long it takes to verify the invoice, the company could end up paying the vendor late and missing a possible discount for early payment.

For many services, verifying the invoice may be just a matter of having the requesting manager OK it for payment either by email or preferably, by returning the paper invoice with their written authorization. Then the accountant can release it for payment. Some invoices require more careful verification which often includes matching. Matching is the process of comparing a supplier invoice to the original PO to make sure the price being charged is correct and ensuring the quantity of physical goods being billed reconcile to what was actually ordered and received by the company. This can be very time consuming because a multitude of line items must be checked and errors reconciled before you can pay the supplier. As above, the risk is alienating a vendor and missing an early payment discount, however if you don’t conduct matching, you either risk paying too much or paying for something that has not been fully delivered.

There are several ways to streamline supplier invoicing. One is not matching at all. This may be perfectly fine for non-material items such as office supplies where the effort to verify the quantity is probably not worth the accountant’s time. Another way is to allow variances of a small amount, say 5%, before making an adjustment to the supplier’s invoice. This is also fine when the amount of purchased goods is low and the total potential for variances is low as well.

Another way of streamlining accounts payable is to automate the process through integrated software systems that manage the entire procure-to-pay process. Through these systems, purchasers create a PO (or an employee can initiate the process via self-service procurement), and send it to the supplier. When the goods or services are received, employees can verify receipt through the system’s workflow. When more precise matching is required, employees in the receiving department can pull up the PO in the system, verify the quantity received and create a goods receipt to notify the accounting department that the invoice is OK to pay. This is an ideal method because it shifts the quantity matching task to the people who are in the best position to do it and significantly decreases the workload on the accounting staff. Discrepancies in the invoice amount can be easily handled by either creating variance thresholds (i.e. if the difference between the PO and the invoice amount is under 2%, the accountant can simply accept the variance and process the payment.).

However, in the case of more significant variances, the accountant can use the system’s workflow to request clarification from the purchaser. Once the accountant receives the authorizations she needs, she simply approves the invoice and schedules it for the next payment run. Another benefit of an integrated financial management system is that all of the verification steps are recorded in the system and provide a full audit trail to comply with internal controls and keep the auditors happy. Companies using accounting point solutions should consider the benefits of an integrated system to help streamline core business processes, minimize errors and reduce the burden on their accounting staff.