Integrated
expense management
part 1
Many organizations struggle to optimize processes related to spend. A major challenge is to process different types of spend in the right place. Policies and systems can direct spend to the process where it’s taken care of most efficiently.
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.
