Administrative Cost Savings through Invoice Verification

The cost of doing business.

• The average company spends between three to 15 dollars processing a single invoice1.

• The paper invoice, which continues to account for 95 percent of all business-to-business invoicing practices in Europe and the United States1.

• Approximately 13 percent of all invoices encounter a processing road block2.

• Strategic invoice verification processes can reduce the cost to produce transactions.

1http://www.unece.org/press/pr2007/07trade_p02e.htm

2Gartner industry estimate. 2003. http://www.gartner.com/press_releases/pr24june2003e.html

Transaction data defined.

The data captured during a transaction is merchant-dependent.

• Level I data - basic transaction data received on a consolidated monthly credit card bill: purchase amount, date of purchase, merchant name, date charge/credit.

• Level II data - all of level I data plus: sales tax, additional merchant information, purchase order info and other basic data elements.

• Level III data - Levels I and II data plus line-item detail (i.e. itemized receipt-level detail).

However, the detail of transaction information required to facilitate payment is reliant upon corporate accounts payable procedures.

The tiered approach.

Three levels of invoice verification• Invoice compliance

• Bill duplicate filters

• Product-price verifications

Each tier represents an organization’s procurement process and the level of verification needed to ensure accuracy.

Invoice compliance.

This first level of invoice verification ensures that invoices submitted for payment are compliant with corporate policies.

• Complete

• Valid

• Accurate

Invoice compliance: complete.

The most basic form of invoice compliance is ensuring that the invoice submitted is complete.

• All data fields required to process transactions are provided.

• More detailed information itemized prior to releasing payment.

Invoices that do not meet the customer’s basic data requirements should be rejected prior to invoice submission. By automating this process, the administrative costs associated with manual

exception management is significantly decreased.

Invoice compliance: valid.

Once it is confirmed that all required data fields have been completed, the next level of invoice verification requires that information provided be valid.

• Purchase Order (P.O.) number should adhere to the buyer’s formatting standards.

• Transaction date should adhere to universal date formatting and represent an accurate historical date.

• Merchant or customer identifier must match an existing record within the accounting database.

Invoice compliance: accurate.

If valid data has been submitted for all of the required invoice fields, the system should then check for accuracy.

• Price x quantity = subtotal

• Percentage sales tax x subtotal = sales tax charged

• Subtotal + sales tax = total

Bill duplicate filters.

Filtering processes reduce the number of duplicate invoices submitted to an accounts payable department.

• Minimizes accounts payable workload.

• Increases efficiency and reconciliation processes in 87 percent of organizations studied3.

• Offers cost savings and staff reduction opportunities in 76 percent of organizations3.

3Association for Financial Professionals. Electronic Payments Survey. 2008. pg 3, 12.

Product-price verifications.

The processes to determine that the price charged is appropriate for the product purchased are numerous, and it is at this point in rule-development that verification procedures can become extremely complex.

• Contract price verification

• Product-price tolerances

• Merchant-product verification

Product-price verifications: contract price.

If an existing contract for the specified product exists between the customer and the merchant, the system identifies the transaction as a contracted purchase and ensures that only approved products are purchased against the existing contract. The billing and payment system then verifies that the price charged matches the fee specified in the contract.

Product-price verifications : product-price.

If your organization is likely to purchase a specific set of products regularly, your transaction database can be built to understand the typical price range for a specific product and flag purchases made outside of that product’s minimum and maximum price threshold.

The system should track both high and low tolerances to ensure that settlement is not conducted on an erroneous transaction that will later be corrected or reprocessed.

Product-price verifications: merchant-product.

Merchant-product verifications can be based upon merchant standard industrial classification (SIC) codes, geographic location, or other similarities between collections of suppliers.

For example, the transaction database for a billing and payment program can be built to understand that your employee did not purchase a new luxury sedan from the local stationary shop nor a ream of paper from the local car dealership.

Cost savings that cannot be taken for granted.

Rejected invoices or invoice disputes create unnecessary repetition within the payment process. An effective invoice processing solution can significantly reduce the cost to process transactions and eliminate man-hours currently dedicated to invoice dispute and resolution – a cost-savings that should not be undervalued.

Multi Service. Innovation Where it Matters.

Multi Service specializes in the design, implementation and management of custom billing and payment solutions. The company collaborates with clients to isolate specific commercial credit and payment issues and design tailored payment solutions to meet business objectives

Thank you for your interest in this free presentation. We welcome your comments, feedback and suggestions. Please consider sending us a note about how this presentation has helped you. Check out the Multi Service commercial payments blog at multiservice.com. If would like to contact a private label business development analyst directly, you can call +1-913-451-2400 or email contact-private-label@multiservice.com.