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How to Identify Problem Invoices

Chris Doxey

Accounts payable organizations would love to focus only on the exceptions related within the process. Many, however, are faced with problem invoices. And as any accounts payable professional knows, problem invoices bog down the process and create several pain points. But these pain points can be levers for process improvement and automation initiatives if tracked and acted upon.

The first—and arguably most important—step is to define problems stemming from invoices.

The 25 top reasons for problem invoices

Purchase Orders (POs)
1. PO Not Approved 4. Purchase Order Line Discrepancy
2. New PO Required 5. Invalid or Stale PO
3. Blanket PO Limited Exceeded  
The Approval Process
6. PO Approval Pending 8. Incorrect Approval Levels
7. Invoice Approval Pending  
Pricing and Quantity
9. Contract Pricing Discrepancy 10. Quantity Discrepancy
Invoice Process Discrepancies
11. Outstanding Credit Balance 14. Incorrect Freight Calculations
12. Invoice is Missing Information 15. Invoice Keyed with Incorrect Date
13. Invoice Already Paid 16. Invoice Coded Incorrectly
Tax Calculation Errors
17. VAT Error 19. Other Incorrect Tax Calculations
18. Sales and Use Tax Error  
Supplier and Shipment Issues
20. Invoice Sent for Unreceived Goods 22. Supplier Referenced Wrong PO
21. Short or Shipment Errors  
Supplier Master Issues
23. Duplicate Supplier in Master File 25. Fraudulent Supplier
24. Remit Address Doesn’t Match  

 

Addressing these problems

Today’s ERP systems have the capability to block or park an invoice and assign a reason code for the specific problem identified. A blocked invoice report can then be reviewed to determine the most common reason for the bottleneck.

Next, use those “problem” categories suggested above to develop data analytics and tracking procedures for your biggest pain points. Identify other types of errors that are more specific to your company or industry.

Many accounts payable teams have established common procure to pay (P2P) metrics with procurement to ensure a level of accountability for the accuracy and timeliness of contract, purchase orders, pricing, and quantity discounts. Organizations refer to this team effort as the P2P transformation process.

Ultimately, a third-party audit or a self-audit tool are very valuable in your strategy for invoice processing. Companies use these results to identify and implement process improvements—to which many organizations have found that a problem invoice often results in a duplicate or erroneous payment.

 

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