by Steve Carter
My journey in Accounts Payable started back in 1998, when I worked on my first Accounts Payable automation solution combining scanning, OCR and workflow. It was a fun project and it felt like the first step towards something more powerful. After this came the next AP Automation project, and ever so slowly, innovation just became the norm, now it’s legacy Invoice Processing.
Over time the focus has shifted from the real challenge of Invoice matching to creating the perfect supplier invoice relying on OCR. Finally, the all powerful e-Invoice network emerged to magically automate all before it. The perfect vision was that by merging e-Invoicing with a hammer called ‘No-PO No Pay’ the earth would move under Accounts Payable. So for the last decade the Procurement teams have been pushing the ‘No-PO, No Pay’ mantra, it’s now even ‘Government Policy’.
However, ask any AP team member, in any company and they’ll tell you it’s impossible, ‘our business just doesn’t work like that!’ There are exceptions to every rule, and that rule just doesn’t work. It breaks the bond between Buyer and Supplier, resulting in fragile supply chains and lots of mistrust.
As a result, Invoice Processing has become overly complex, and still far too labor intensive, and full of exceptions. When this started for me, I’d hoped that after twenty years of evolution, AP would be touchless, compliant and low cost. But AP has become stuck in a rut created by system providers, and has been taken down a dead end alleyway called the e-Invoicing Network. The Purchase Order has been touted as the only way to manage ‘maverick’ spend (stopping off budget expenditure), but it’s also a way to automate invoice processing.
By matching an Invoice against a PO, the theory goes that as long as you can find the PO number on an Invoice, then the items on the order can be matched with each invoiced item, and high-levels of invoice automation follow. No PO, no Pay was born to force suppliers to add PO’s to Invoices by forcing Buyers to create PO’s. However, although in some cases life can be that simple, it is never reality. What about tolerances, variances, delivery fees, exchange rates, mixed volumes, multiple shipments, emergency orders, the exception list goes on.
Then we come to the Order-Flip or PO-Flip, where a Supplier goes on to a Portal and simply flips the order from the Buyer into an Invoice, sounds so simple, until you understand digital Tax and Accounts Receivable in a Supplier. So the network providers just haven’t delivered, and only further fractured the link between buyer and supplier.
Meanwhile, Governments (large & small) have seen the opportunity digital technology offers in the automation and policing of tax collection. As resolution to tax fraud, legislation is being introduced across the globe that forces every business to use ERPs (Oracle, SAP, MS Dynamics etc.) or Accounting systems (e.g. Xero, Sage, Quickbook etc.) to manage Invoicing, Collections and VAT/Sales Tax.
These packages will connect to the Government tax systems, removing typing and calculation errors and all generate the ubiquitous PDF*. Many countries have supported digitalization of Tax with the introduction of Invoice Clearance systems that centrally log and stamp every invoice issued by a supplier (with or without a PO) to every customer.
Suddenly, every supplier from the ‘Poolman’ to the global manufacturer is truly digital, and with this the PO-flip becomes a dead-duck in most countries. Why force a supplier to rekey, when you can have pure electronic invoice data linked to real-time delivery data, capture receipt information all integrated into RFID tracking of inventory, all supported by a Government stamp saying its a real invoice, from a real supplier?
After ten or more years trying to make the impossible work, it’s time to rethink the problem. We need to take the good parts of the networks (data quality) and go back to look at AP Automation and invoice matching. This was the challenge made to the Ivalua R&D team a year ago.
We needed an Invoice Hub, not a fancy network, something embedded within the AP process. We needed to help clients support good procurement practices, and not build new barriers to partnerships. Surely with the convergence of the procurement silo’s into the one Source-to-Pay journey, Ivalua could make the impossible come true for Accounts Payable – and we have!
It was time to rethink, step back and ask – what are we trying to achieve? At the end of the day, the clue to Accounts Payable is in the name, making Payments. More importantly, the correct payment, to the correct supplier, for real goods or services. Does PO-flip or No PO-No Pay help this? Well it does, but only all little, as it creates just another exception to manage. By going back to basics the age old AP questions are:
What’s changed, nothing other than data! In a modern Source-to-Pay solution every one of these questions has one or more digital reference points to help automate the answer. With the introduction of digital accounting, the suppliers, the Government and 3rd Party data providers become external reference points.
In some countries even the transmission of the invoice has been addressed by the Government who now act like an e-invoice network but with real teeth, sending pure, certified invoice data into the Accounts Payable team. Although in most countries the standard transmission method is now a PDF Invoice sent in an email. No one needs a 3rd Party Network that just adds complexity, cost, and is a barrier to supply chain collaboration.
Like digital streaming embedded within modern HD TV’s, invoices in any format can now flow into the AP automation journey without the need for a Network. Within the Invoice Hub is all the technology needed to handle PDF, EDI, XML and Portal data.
Alongside this are all the compliance checks to ensure only high-quality invoices can flow into AP for smart matching, viewing and consumption. The beauty of the Invoice Hub being part of Accounts Payable, rather an isolated network, is that the validation and matching can be moved into the Supplier Portal. For the first time, the supplier’s Credit Controllers can upload, validate and even match their invoices to the Source-to-Pay data.
From here, only compliance, valid and perfect invoices flow into the payables journey. The receipt, contract, even a verbal order, join the PO, as items that enable the Supplier to self-match an invoice. Finally, AP doesn’t need to rely on a PO to match an invoice and automate the process, self-matching creates a truly touchless AP journey.
So what’s the next horizon for AP automation? Firstly, by realizing the need to think Source-to-Pay; ‘No-PO to No Pay’ can join the Betamax video tapes and the Network added to the growing piles of VCR’s for recycling.
With an Invoice Hub and self-matching embedded with AP automation it’s time to harness the power of the supplier self-service to correct data and start thinking about the saving possibilities of just-in-time Payments. Until now Invoice-to-Pay has been pushed to the back end of the Procure-to-Pay cycle, the hype has been on using Purchase Orders to drive Spend compliance.
The opportunity tomorrow is to use every ounce of data to deliver true spend management and harness the power of the payment to maximize saving from Sourcing to Payables. An Invoice Hub and self-matching is undoubtedly the next horizon for AP Automation.
* a technology also from the 1990’s and one I first used for Supplier Invoicing back in 1996.
Spanning a 30-year career, Stephen has led successful global product marketing launches alongside procurement experts and finance professionals in both the public and private sector. As a longstanding contributor in the ever-evolving sourcing industry—from early OCR—to the establishment of eInvoicing Networks, Stephen now applies his extensive tech experience to Ivalua’s unified Procurement platform. A problem solver and industry thought leader, his product positioning is central to generating long-term customer value while streamlining user experience. In software development, adaptability is the key and Steve’s commitment to the future of procurement is propelling Ivalua toward the next generation of strategic payment solutions. Outside of his professional life, Steve is a published author and 17th Century historian.