One of the key selling points of electronic invoicing is reducing or eliminating exceptions, or errors, when submitting invoices to customers. There are other benefits, including the speed in which the customer receives the invoice, accuracy concerning the amount due, payment confirmation, and reduced DSO. Each of these benefits is very worthwhile and can significantly improve your company’s cash flow and bottom line. With all of these benefits and the fact that e-Invoicing has been around for 20+ years, why are there still significant errors when suppliers sign up for it?
It’s essential to define what constitutes an error when submitting invoices. In our 2021 Perceptions Study, we asked suppliers whether they experienced errors when submitting invoices through any solution provider we identified. While there were significant benefits to e-Invoicing in virtually every category across the board, there were still errors with which suppliers had to contend.
Exceptions experienced when using third-party electronic invoicing often result from misalignment of supplier information with their customers’ business rules. These business rules usually include verifications such as three-way matching, the order of information presented, and other requirements. Without properly aligning information with customer business rules, supplier invoices cannot be submitted and will not be approved. These issues must then be addressed manually, resulting in the exception. The manual correction of these exceptions completely negates the whole purpose of submitting invoices electronically.
We discovered in our Perceptions study that errors occur when suppliers sign up for and use third-party electronic invoicing solutions.
The percentage of exceptions
Before we get into the severity of errors, let’s first examine what percentage of companies experienced errors when submitting invoices. Of those participating in the study, 56% indicated they experienced errors when submitting invoices via their selected provider, and 40% indicated they did not. Only 4% were not sure if they experienced any errors at all. Each third-party electronic invoicing provider scored differently in terms of the percentage of errors encountered when suppliers use their service.
Of the 56% who said they experienced errors, 30% identified those errors as very significant, while 10% indicated they were somewhat significant. Of the remaining respondents indicating errors, 25% said those errors were minor, and 28% said they were very minor. Only 7% responded as neutral (not significant or minor).
Of those suppliers experiencing errors, we also asked whether they were resolved and how quickly they were resolved. To see this information and how each e-Invoicing solution provider performed in relation to errors experienced by suppliers, sign up for a free 3-day trial for Perceptions Analytics.
How to reduce exceptions
There are steps suppliers can take to ensure they reduce or eliminate exceptions when submitting invoices using a third-party network. It might appear that once a supplier joins a network, all their invoicing problems disappear. This is not necessarily the case, as different suppliers have varying degrees of resources to connect to a third-party e-Invoicing network properly.
Making sure you’re connected to the right e-Invoicing network
Not every e-Invoicing network is created equal. Furthermore, connecting to one network doesn’t mean you won’t have to connect to several more, depending on which network your customer uses.
The Perceptions Analytics research portal allows suppliers to see which e-Invoicing network performed the best when it comes to exceptions suppliers experienced once invoices start flowing. Using this data as a guide will help supplier organizations in terms of how much they should prepare and customer organizations in their initial selection of third-party networks to use for their supply chains.
Make sure someone is dedicated to overseeing the network connection
While there are multiple ways suppliers can submit invoices through a third-party e-Invoicing network, it generally boils down to two methods: keying in the invoice information or automatic file upload. When connecting to the network, especially when opting for the automatic file upload, it’s vital that suppliers have the resources dedicated to ensuring a smooth connection.
Those resources could include dedicating someone to project manage the process to IT resources being available to configure the connection on the supplier end. Being prepared for the connection is often half the battle when reducing or eliminating exceptions.
Work with your customer
Trying to handle all exceptions on the supplier side may not be necessary, as customer organizations are often available to help address exceptions when they occur. The answer could be found in how POs are set up, the method in which the invoice is submitted, or requirements around business rules.
To reduce exceptions when submitting invoices using an e-Invoicing solution provider, make sure your accounting or ERP system is configured to meet the needs, and business rules, established by your client when onboarding.
Electronic invoicing can provide significant benefits, especially if your organization is adequately prepared to connect to the third-party e-Invoicing network. Preparation will go a long way in reducing or eliminating exceptions as you take advantage of all that electronic invoicing has to offer.
Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He currently chairs the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.
