In today's fast-paced business environment, enterprises strive to optimize their supply chain processes to achieve accelerated growth. A key aspect of this optimization lies in establishing reliable sourcing partnerships that ensure the timely receipt of vendor invoices. Timely payments not only foster successful vendor relationships but also contribute to the overall efficiency of the accounts payable function.
According to a recent survey conducted among 170+ North American Accounts Payable teams, 23% of companies identified non-PO invoice processing as one of their most significant pain points. This means that nearly a quarter of organizations are grappling with the challenges associated with managing invoices that do not have a purchase order reference. The remaining 77% are actively seeking ways to expedite the processing of PO-based invoices as part of their digital transformation initiatives.
To address these challenges effectively, accounts payable teams are leveraging various digital tools such as Enterprise Resource Planning (ERP) systems, Accounts Payable (A/P) automation tools, and even platforms like ServiceNow to implement streamlined workflows for approving PO and non-PO invoices. In this blog, we will delve into the differences between PO and non-PO invoices and provide insights into best practices for implementing a successful invoice approval workflow using the ServiceNow platform.
Understanding PO Invoices A PO (Purchase Order) invoice is generated by a vendor based on a purchase order created by the buyer. When processing a PO invoice, the accounts payable team typically matches it against the corresponding purchase order to ensure accuracy in terms of quantity, price, and PO number. In some cases, organizations also perform a three-way invoice matching process, cross-referencing the PO invoice details with the purchase order and the receipt number of the goods registered in the procurement system. PO invoices primarily encompass invoices for direct goods or services purchases.
Exploring Non-PO Invoices Non-PO invoices, on the other hand, are raised by vendors without a corresponding purchase order. These invoices are often utilized for indirect purchases or when the invoice amount falls below the tolerance limit. In some cases, a preparer and an approver are involved in the management of non-PO invoices, and the organization's cost center or internal order may come into play. Non-PO invoices provide flexibility for discretionary spending or emergency procurement of goods and services.
Differentiating PO vs. Non-PO Invoices The key distinctions between PO and non-PO invoices lie in the underlying logic that led to their generation. Parameters such as association with a purchase order, usage for direct or indirect procurement, pre-approval status, processing time, clubbing of goods, and transparency of the invoice payment process all contribute to the differentiation. PO invoices are ideally suited for normal procurement processes, while non-PO invoices find utility in discretionary spending or emergency scenarios.
Best Practices: PO vs. Non-PO Invoice Approval Workflow Organizations looking to optimize their invoice approval workflows should consider the following best practices:
-
Ensuring Correctness and Compliance: Preparers and Approvers must meticulously review and validate the transactions they submit, paying close attention to warnings and errors. Compliance with payment policies and accurate record-keeping are crucial factors in the invoice approval process.
-
Allowable and Accurate Payments: It is essential to verify that payments are allowable, acceptable, and accurate. Procurement Services should maintain the original vendor payment request within the department for reference. Additionally, spot audits can be conducted to ensure compliance with Non-PO Invoice processing guidelines.
-
Workflow Design: Establish clear workflows for Preparers and Approvers involved in non-PO invoice payments within each department. This ensures transparency and accountability, streamlining the approval process.
Automating PO & Non-PO Invoice Processing The manual processing of invoices received in paper or email format is time-consuming and prone to errors. While Optical Character Recognition (OCR) technology offers some automation, it still requires manual effort for 62% of OCR invoices. For organizations keen on optimizing their invoice processing efficiency, a digital workflow solution like ServiceNow is indispensable.
Aavenir Invoiceflow, a robust touchless invoice processing solution, offers intelligent invoice data extraction, AI-based invoice validation, and flexible invoice processing workflows. Leveraging pre-configured metadata identification, it automatically assigns relevant approvers based on the organization's approval hierarchy. Recurring invoices can be matched to payment plans, facilitating automatic approval. With complete visibility into the procurement and tracking of invoices, Aavenir Invoiceflow minimizes touchpoints, reduces errors, and maximizes early payment discounts, thereby enhancing vendor invoice processing efficiency.
Conclusion A streamlined supply chain, driven by efficient vendor invoice processing, plays a pivotal role in the success of enterprises today. By implementing best practices and leveraging automated solutions like Aavenir Invoiceflow on the ServiceNow platform, organizations can optimize their invoice approval workflows, improve transparency, and drive cost savings. Embracing digital transformation in this critical area empowers businesses to achieve faster invoice processing, minimize errors, and strengthen vendor relationships, all contributing to a competitive advantage in the marketplace.
