By Anant Kale
Huge effort is put into negotiating the best terms with suppliers. Procurement teams regularly spend weeks or months going back and forth on contract terms and volume discounts to get the most bang for the buck. Too often, though, the savings aren’t realized. Suppliers may ignore the negotiated terms when invoicing, and accounts payable teams – faced with a deluge of invoices and a limited time to get payments out the door – only sample select transactions and do basic two- or three-way matching of volume and price. This means costly invoice problems fall through the cracks, from mismatched invoice and contract terms, to unapplied discounts, to bogus charges, and more.
Optimizing the accounts payable process may seem like a big undertaking, but it’s easier than it might seem … and well worth the effort. According to the International Association of Contracts and Commercial Management (IACCM), companies that work to improve controls over invoice payment see a return of more than 4% of invoice value.
Even if you’re ready and willing to improve your accounts payable process, do you know how to actually do it? Once upon a time, it would have been necessary to hire more people to check every transaction. Today, technology can provide a crucial and cost-effective assist for overstretched accounts payable teams.
Artificial intelligence (AI) is becoming more common in business contexts. Nearly 90% of companies had planned to increase their AI spend in 2019, according to a Deloitte survey. For some, though, the idea of using AI may feel a little unrealistic. Yes, more corporations are automating their accounts payable function, but 30% of businesses still rely on manual invoice processing, according to The Institute of Finance and Management.
If you’ve already implemented other technologies in your workflow, AI can fit in seamlessly. AI-powered spend automation software integrates with existing expense management, invoice automation, contract management, and enterprise resource planning systems.
Here are a few problems AI-powered solutions can help your team avoid during the spend audit process.
Fraudulent invoices – When it comes to invoice fraud, if you can dream it, fraudsters have tried it: from inflated invoices, to made-up charges, to shell companies, to vendor impersonation, and more. Too often, the fraud originates from inside the house. The Association of Certified Fraud Examiners (ACFE) found that occupational fraud (fraud committed by employees against the employers) resulted in more than $7 billion in total losses in 2018. AI systems with a compliance component can spot risk factors commonly associated with fraud so your team has a chance to review these invoices before they’re paid out.
Duplicate invoices – Up to 2% of the average company’s invoices are duplicates, according to AuditNet. This may seem like a relatively small number, but for larger businesses working in the millions or billions of dollars, the figure is far from trivial. Some vendors double up charges on purpose, but often duplicate invoices are mistakes. While some invoice automation systems try to catch double charges, they usually only succeed if the invoices are labeled with the same number or have the exact same total – which isn’t always the case, particularly if there’s someone scheming behind the scenes.
Missing discounts – How often do you check invoices to make sure your hard-fought volume discounts are applied? AI-based systems can compare contract and invoice terms automatically to make sure you’re not missing out on early payment, loyalty, or quantity discounts. You’ll be notified of any missing discounts so you can remedy the situation before you pay. In the case of early payment discounts, an AI system can notify you that the invoice should be prioritized to get payment out in ample time.
Mismatched service levels – It is not uncommon that you sign up for a standard service package, but you’re being charged for the premium offering. This mismatch is easy to overlook amid the monthly deluge of invoices. The correct AI solution can compare agreed-upon service levels in your contract with every invoice you receive to make sure this type of costly problem doesn’t fly under the radar. When it comes to physical items, it can ensure you receive all the items you’re being billed for before you pay by double-checking shipping documents against inventory systems.
Double payments – Apart from duplicate invoices, the problem of double payments can also originate from your own team. Accounting systems hold up invoices for all sorts of reasons, such as requiring further approval or failing a match. Sometimes, an employee will intervene to get the halted invoice paid manually (to meet a deadline, because they’re being pestered by a supplier, or don’t want to damage a relationship). Meanwhile, the original invoice continues through the system, and when the hold is later cleared up, it’s processed and paid … again. This is another source of spend leakage of which most companies never become aware. AI-powered systems constantly cross-check invoices and payments and flag any duplicate payments before you send them out.
Exorbitant pricing – It can be time-consuming to keep track of the market rates for all the various services and products your business requires. AI can regularly compare current costs to thousands of other sources to determine whether your invoices reflect the market rate for the goods or services provided. It can also flag individual invoices where your price exceeds the market rate. Knowledge is power, and this information helps your business negotiate more effectively with existing suppliers or look to new ones if there’s an opportunity for cost savings without sacrificing quality.
Unsatisfactory work activity – When it comes to hiring contractors, there are situations when it’s particularly difficult to understand and assess whether they’re fulfilling their agreed-upon duties. AI-based tools can ingest nearly unlimited data to build a profile of what comprises satisfactory work activity and highlight changes in the typical patterns. This helps you verify that you’re paying contractors fairly for the work product they’re providing.
Overpaying for software – Are you licensed for seven software seats, but only using three? It’s not uncommon for organizations to overpay for software licenses without ever realizing it. AI-based software keeps tabs on your organization’s software usage and compares it to the charges on your monthly invoices to help alert you to savings opportunities.
Implementing a best-in-class AI solution can support a consistent process and add an additional layer of scrutiny. These solutions make it possible to audit 100% of invoice spend prior to payment, automatically and near-instantaneously checking every invoice in the system for risk factors before they’re paid, and flagging the highest risk items for review. This will help your team get ahead of problems and potential leakage, rather than try to recover it afterward.
Below are critical requirements when considering an AI solution for accounts payable spend management. It must …
The best AI software can help your team regain control by checking every single transaction to identify high-risk invoices in your pipeline – saving time, streamlining processes, and ultimately reducing spend leakage.
If your accounts payable team’s efforts to find problematic spend feels never-ending, you’re not alone — but it doesn’t have to be that way. AI has changed the paradigm for modern finance teams, giving them greater visibility into their accounts payable process and the time they need to address the highest risk issues. Not only can AI transform the way finance teams operate, it also saves them business money by spotting problems consistently and before invoices are paid. By implementing an AI solution, your team may be able to audit 100% of spend, make sure that every invoice complies with its contract terms, and ensure you’re receiving every savings opportunity you’re entitled to — all while paying your bills on time.
Anant Kale, CEO of AppZen, founded the company in 2012 to bring AI into back offices. He has 15-plus years of experience in software development. Kale can be reached at anant@appzen.com.
Sign up for weekly professional and technical updates in PICPA's blogs, podcasts, and discussion board topics by completing this form.
Order by
Newest on top Oldest on top