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Expense management

The master data of goods and services combined with data from other dimensions will contain information about accounts, cost centers, cost bearers and perhaps more that’s used to code transactions. If you combine this with automatic approval of invoices that match purchase orders and deliveries, then invoices can be both coded and approved without any manual work apart from occasional maintenance of master data. Other daily processes like writing and sending purchase orders and registering deliveries will take care of other inputs needed. If, in addition to this, the invoices and purchase orders are sent and received electronically (EDI not PDF:s or similar) then you have a fully automated process.

The opposite to an automated process is when you receive invoices on paper or pdf and manually code and approve. Usually, this is done with a workflow tool (invoice is scanned and then circulated electronically) which to a certain extent makes the task smoother but still you are far from an automated, error-free and fully efficient process. It is recommended to keep manual coding and approval to a minimum. The risk of fraud is also higher with a manual approval process due to the fact that an employee with sufficient authority more easily can ‘push through’ invoices.

The coding and approval of certain expenses like entertainment and business travel can be particularly challenging and difficult. Restaurant and conference costs, for example, are often partially non-tax-deductible and there may be different VAT-rates on the same invoice. It’s difficult to avoid a manual process for codng such expenses. Usually it’s best to process them withing the expense management process rather than within procurement and accounts payable.

The coding and approval of certain expenses like entertainment and business travel can be particularly challenging and difficult. Restaurant and conference costs, for example, are often partially non-tax-deductible and there may be different VAT-rates on the same invoice. It’s difficult to avoid a manual process for coding such expenses. Usually it’s best to process them within the expense management process rather than within procurement and accounts payable

Registration and approval of vendors

Many organizations strive to reduce the number of vendors and even more so the number of new vendors registered. Registration of new vendors is a time-consuming and costly process. Organizations usually want to control and approve the introduction of new vendors to assure they comply with requirements concerning such things as payment terms and general legitimacy.

In some organizations vendors are registered as they appear – when an invoice is received from a previously unregistered vendor. This process is very common but far from optimal as you risk accepting unfavourable terms and even fake or incorrect invoices. You may also run into trouble with VAT if the new vendor is not properly registered . The vendor could also be on some kind of black list if you are unlucky. Such black lists usually contain vendors that act unethically in different ways, for example through fraudulent business practices, non-payment of taxes and exploitation of child labour.

It’s absolutely doable to have a both a structured process for registering new vendors and simultaneously a spontaneous ad-hoc process. The structured process would apply to regular vendors with significant volumes expected. The unstructured process would apply to minor purchases and best taken care of in the expense management process so as not to reduce the efficiency of procurement and accounts payable.

A structured process for introducing new vendors would involve steps to assure that the vendors accepted adhere to the organizations policies concerning trading terms and general suitability. If an organization uses a procurement platform like BasWare or Ariba the process for introducing new vendors is integrated in the platform. Such a process normally involves steps to negotiate terms with the vendor, to check credit rating and black lists and establish price lists and forecasts.

For purchases outside the main procurement process an unstructured process may be acceptable. This usually concerns smaller and ‘ad-hoc’ purchases. Examples are trainings, conferences, office supplies and presents. Such purchases are preferrably done within the expense management process with credit card payment. Payment terms are usually more favourable (=longer) for credit card payments than for payment against invoice. By using the expense management process these purchases don’t disturb the main procurement and accounts payable processes. For these smaller purchases there could still be limited checks on the vendors to assure that they, for example, are propoerly VAT registered. In many countries monthly VAT reporting requires organizations to send transaction level data and therefore it may be necessary to register complete vendor data also for credit card purchases and one-time vendors.

A good control of new vendor registrations and the trading terms applied is a key factor in optimizing an organization’s cash-flow and profitability.

Payments / Payment files

An often overseen step of the purchase-to -pay process is the actual paying. It’s a good idea to consider all payments and not just those related to traditional purchasing of goods and services. Other payments include taxes, salaries, fees and utilities.

Payments can be a rather messy process with many payments done manually outside the main optimized process. There are also inherent security risks within the payments process. How do you, for example, assure that an approved payment really goes to the right receiver.

Most organizations of a certain size work with so called payment files which are created in the accounting system. Ideally all payments would be done with payment files and there would be as few files and payment runs as possible, one per week or even less. A payment file is created by the accounting system by collecting all approved and due invoices on a certain date. Usually organizations do not make all payments with payment files, however. Manual payments are made for advances, urgent payments and payments which banks cannot process in a file. The latter can, for example be domestic payments in a foreign currency.

Another inefficiency with payment files is that you may need to create many of them. Files for domestic payments, for foreign payments in various currencies and more. There are banks that claim to be able to process different types of payments in just one file so instead of sending ten files for payments in ten different countries you would send one file and the bank would forward all of these to the right place. In reality this never seems to work though.

To make payments as efficient as possible an organization should strive to reduce the number of payment files, payment runs and manual payments. This goes for supplier payments as well as for salary payments and other payments.

An important aspect of payments is security. A payment file is traditionally a text file produced by the accounting system and then uploaded to the bank. The text file can be manipulated if you know what to do. An account number can be changed, for example. To avoid this you can use various approaches: if technically possible send the payment file directly from the accounting system to the bank, use another format than text (depends on technical possibilities), periodically audit payments. If nothing is checked you will eventually find out when suppliers get in touch for not having been paid.

Security for manual payments is also difficult to ensure. Important is to divide duties, to never have the same person registering vendors, invoices and making payments. All three tasks should ideally be done by different persons. It is advisable to use a workflow tool for controlling requests and approvals for payments. E-mail communication is best avoided. One of the most well known frauds is sending fake e-mails which look like they are sent by senior management asking accountants to execute payments (CEO- fraud). With a workflow tool such frauds are much more difficult to carry out.

A convenient way to make payments is through direct debits. A direct debit is a payment which is automatically debited to an account by a vendor when it is due. The payer must in advance give the vendor permission to charge the account. There are many methods for direct debits and we will not go into the details of how these work here. Many are local like Italy’s RIBA or the Nordic Autogiro. The most important direct debit method on a European scale is SEPA direct debit which is a low-cost alternative for both domestic and international direct debits.

If you want to use direct debits is often a question of policy. Allowing vendors to charge your accounts obviously requires trust and it also limits your possibilities to control outgoing payments. There may be situations when you want to delay payments for cash- flow reasons or due to disagreement and other reasons. Some vendors require customers to accept direct debits. Such vendors usually have a strong or even monopoly-like position. Examples are utilities, insurance companies and government organizations.

Expense management

There are many choices to consider such as whether an invoice should be processed and paid within the accounts payable process or in expense management and to what extent purchase orders should be written. Another common issue is whether to pay travel related compensations within the payroll process or as a separate process. Equally important are organization’s policies for things like accepting new vendors, writing purchase orders and expense management.

Receiving invoice and receipts

Consolidating and automating the way incoming invoices and receipts are received and registered is the first step to improving the whole spend management process. Typically invoices and receipts are received in a number of different ways: paper, pdf, electronically directly from supplier and electronically via an operator or portal.

The least efficient and least reliable way of receiving and registering incoming invoices is to receive them on paper. 10-15 years ago, many people expected paper invoices to soon cease to exist, but this has not happened, and they are almost as common today as they were then. The main reason for this is that, despite many good intentions, no general ecosystem for electronic invoices has evolved. Between two independent companies the easiest way to send invoices is still simply to send a paper invoice. Perhaps even easier is to e-mail a pdf invoice and this is therefore also very common practice and slightly more efficient than paper invoices. A pdf is not equivalent to an electronic invoice though. An electronic invoice adheres to a certain format and can be read with precision by software. A pdf- invoice can be interpreted and also read by computer software but with significantly less precision and reliability than a true electronic invoice. The problem with electronic invoicing is, as mentioned above, that the sender and receiver must agree on a format and a communication channel and usually this also involves a technical set-up and a cost.

What can you do to make receiving invoices and receipts as efficient as possible? If you are a large powerful buyer, you can perhaps force all suppliers to join an electronic invoicing platform on a take it or leave it basis. Few organizations have such a position so that they can do that. Even if you have that buying power it might still not be the smartest thing to do as it might give priority to suppliers willing to comply with your requirements rather than to those who have the best offer. The best solution for most organizations is one that provides some flexibility for the suppliers but strongly gives them incentives to send invoices electronically. Some electronic invoicing operators provide interoperability with others so that a company can send invoices through one ”house-operator” who then forwards the invoices to their final destination. For suppliers who don’t want to join an electronic invoicing scheme or for those who are of one-time or few-time character it’s good to have the pdf-e-mail option at hand. To summarize, try to convince and give incentives to suppliers to join an electronic invoicing scheme but leave a general option for pdfs open. It is best to try to discourage paper invoicing.

For organizations using a procurement platform it is usually possible to create the invoices in that platform by ”flipping” a purchase order. That means that when a purchase order is fulfilled (which usually means that delivery has been made according to the purchase order) then the platform creates an approved invoice which is transferred to the accounting system for payment. The efficiency of such a solution depends on how well this is set up technically and how well the deliveries match the purchase orders. A few examples among the large number of procurement platforms available are Ariba, Jaegger, BasWare, Oracle and Coupa. A procurement platform works to some extent like a web shop where approved suppliers offers their product catalogues and the customer orders from these catalogues. Some platforms like Tradeshift also cater to organizations who only use it to send invoices without placing product catalogues or using ordering functions on the platform.

Self-billing is another interesting option for customers to efficiently ‘receive’ invoices from suppliers. Under a self-billing scheme, the supplier and customer must enter into an agreement which outlines the procedures to follow. Self-billing works so that the customer itself produces the invoices when the supplier has fulfilled certain requirements, and this has been documented and approved. The most important advantages of self-billing are that it saves time, guarantees that the format of the invoice is correct and, usually, the approval is automatic. As a self-billing set-up requires some work and incurs cost it is suitable for regular, large suppliers.

For expenses incurred through business travel or for various purchases by employees outside the procurement system, invoices or receipts also need to be received and registered. Traditionally employees would deliver paper invoices and receipts to an accountant who would book and archive them. Today more and more organizations use tools that allow employees to submit scans or photos and these tools also have approval and accounting functions. Example of such tools for corporate use are Expensify, Concur and Webexpenses. These tools offer, among many functions, travel planning and reporting, ocr- recognition of receipts and integration with accounting systems.

As is evident from what’s written above invoices and receipts can be received and registered in many ways. It’s an important decision for an organization to decide on which methods to use. Should all channels be used, or should options be limited? There is a trade-off between the flexibility of a multi-channel approach and the lower costs of limiting the options.

Home office

In accordance with our internal regulations, any EFF employee has the right to work from home for 40 days in a year, and if the need arises, anyone can apply for an extension of this period. However, the pandemic has forced us to prove that it is indeed possible to close all accounts from home, and that all processes regarding external clients from outside DUNI GROUP can go smoothly as well.

Recently, we have slowed down with any recruitment processes, as the current situation does not require us to hire any new employees. The company is considered trustworthy and appreciated by clients and employees alike, thus the rotation remains low. Currently, our team still consists of nearly 80 people. This low rotation means that our team can stay solid and integrated. We carry on managing internships (our internship consists of 10 students), which is not such an obvious choice, as many companies decide to part ways with their contract for work employees. Our intern team supports all of our main payables, receivables and general ledger processes, and their work is supervised by one of our team leaders, appropriately distributing tasks and controlling their working hours by means of e-Time, implemented last year as part of SAP Success Factors. Our students are provided with necessary hardware, software access and are given their tasks through Microsoft Teams, integrated with out IT system. Joint mailboxes have also proven useful for task distribution, controlling the number of responsibilities, progress and giving or receiving feedback.

Our recruitment

Thanks to state of the art technologies, nothing stands in the way of remotely recruiting new employees for our developing departments: VAT compliance (handling VAT registration for e-commerce companies and filing declarations) and payroll (an international payroll and HR department), as parts of our offer for external clients – should the need arise.

This pandemic has turned out to be a time of many trails – in this case, both for Duni EFF as an employer, and for Duni EFF’s employees. What we need right now is optimism. Fortunately, this situation has verified the efficiency of our teams, which is the source of our pride. For years, we’ve been putting emphasis on good communication in our company. EFF’s organizational culture closely follows the founding values of so called teal organizations which focus on the man in manpower and aim to create an atmosphere of trust, partnership and kindness. We greatly cherish values such as respect, loyalty, cooperation, and professionalism, thus we try to build our relationships with both employees and clients alike in an atmosphere that reflects them. We are fully aware that working from home requires more self-discipline and mutual trust than our standard routines. We are well acquainted with these rules and the pandemic has posed an opportunity for us to further experience what our employees have already been prepared for.

One of the most valuable projects our employees have embarked upon is the mutual sharing of experiences from daily remote work. It appears that each country has their own vision of what a break from work means. We exchange different ideas for arranging work spaces at home and how to best benefit from a break. We find inspiration all around the world. Some nurture their bodies with food, some prefer headstands or meditation and some still prefer to relish a cup of coffee on the porch or balcony, appreciating the beautiful weather.

Managing teams from all areas of remote work is supported by additional, less official projects, such as our Virtual Kitchen. It’s a daily, half hour long virtual meeting over coffee, where all employees are invited. During the first stage of transitioning to home office, Virtual Kitchen was scheduled twice a day – at 9 am and 2 pm. The purpose was to mimic what or routines at the office were – breakfasts, lunches or coffee breaks, so common in Swedish organizations and referred to as fika, meaning small talk over coffee, which usually revolves around our work. Sometimes, it’s simply more efficient and pleasant to engage in an interesting conversation face-to-face and then get back to work.

Times change and so do work standards, but our culture of prioritizing the employee and professional stability remains the same.