As mentioned in prior articles, an Accounts Payable Workflow System can systemically apply business rules . . . but only if the system can “read” the details needed to do so.
For example, an AP processor may know an invoice is from a Vendor that offers a Prompt Payment Discount because the terms are printed on the invoice or the processor just knows; tribal knowledge. How could an AP Workflow System determine this? By pulling the necessary information from the Vendor Master file details loaded into the Workflow System.
Let’s step back for a moment here and talk about the Vendor Master. How is it managed within your company? For example:
- Are vendor names entered as they appear on a W-9?
- If a “Doing Business As” name is supplied on the W-9, is it included in the Vendor record as Name 2?
- Are all components of a remit to address entered into the Vendor’s record? Including the Country?
- Are different Payment Site Codes used for various remit to address for the same vendor?
- Does the company currently fully utilize the fields available in the Vendor Master system?
Within a Workflow System, the Vendor name and remit to address supplied on an invoice are compared to the details supplied in a Vendor file. If an exact match is not found, the invoice is routed to an Error queue. The result? An AP processor needs to take the time to address the issue defeating one of the benefits of an AP Workflow System.
The Payment Method and Payment Term codes, when entered correctly into the Vendor Master, can also bring benefit when using an AP Workflow System.
Imagine that payments to vendors offering Prompt Payment Discounts are scheduled on Fridays. Hopefully, in the Vendor Record for each Discount Vendor, the Payment Term descriptions reflect a discount percentage and a Payment Method is assigned that specifies how the invoices will be paid and what the Vendor Type is. For example, discount vendors could have a Payment Method code of CKDIS or any other code AP would know to associate with discount vendors being paid by check.
To ensure the highest percentage of allowable discounts is taken, all applicable invoices would need to be processed into the ERP by the end of the day on Thursday. If processing invoices manually, what does it take to identify all of the discount related invoices? Can they be processed or are they out for approval, waiting for a goods receipt to be posted or are there exception issues? Imagine being able to pull a report from one system that could tell you where all unprocessed discount related invoices are.
With an AP Workflow System, by using a Payment Method and/or Payment Term code, one report would list all invoices that should be processed before Friday’s payment run along with the location of the invoices, what action needs to be taken and who is responsible for taking the action. Once this report is run, Accounts Payable can take the appropriate action to optimize discounts taken. But, the first step is ensuring Vendor Record has the correct Payment Term and Method codes.
Are invoice coding, approval or processing business rules different for certain categories of Vendors? Consider Utility, Building Lease, IT, Intercompany, or Sub-Contractor vendor invoices as examples. It is possible that these business rules can be applied automatically but the AP Workflow System would need to identify such invoices. Consider assigning a Vendor Type within the Vendor Record for each applicable vendor. Not only could reports be pulled listing the unprocessed invoices by specific Vendor Types, the Workflow System could be configured to apply business rules so invoices could be systemically routed to the correct system users for actions to be taken. Utility and Building Lease invoices to the person managing real estate, IT related invoices directly to IT, Sub-Contractor invoices to a plant manager, etc. There is no value added in the time it takes Accounts Payable to forward invoices to the correct coder or approver in either the manual or automated world.
Improve the efficiency of an AP Workflow System. Whether you are thinking about implementing a system or you already use one, building a strong foundation will improve efficiency and effectiveness. Leverage your Vendor Master system. Be sure each Vendor Record is complete and accurate.
Want to learn more? Contact New England Document Systems. They have the experience, and the resources to assist you; from answering your questions about available solutions to helping you implement the right tool. Contact us to discuss just how much improvement you want to see in your Accounts Payable Operation.
This article is part of New England Document Systems’ partnership with industry experts. This contribution was written by Anne Wheeler of CS Process Flows, LLC. Anne is a Consultant and Project Manager specializing in Accounts Payable Processes and Systems.