When BirchStreet implements our Procure-to-Pay (P2P) solution for our customers we typically implement the process illustrated below. Often the details are modified to fit each customer’s specific needs.
The diagram shows the process for invoices with an accompanying Purchase Orders or “PO Invoices”. Invoices with no accompanying Purchase Order or “Non-PO Invoices” (not shown in this diagram) are routed for coding and payment approval.
The BirchStreet Auto-Matching engine sits at the core of the solution. Configured with your specific matching rules and tolerances, it performs the three-way match (comparing Purchase Order, Receiving Event and Invoice) as a 100% automated process running in the background.
Invoices that pass your tolerance rules require no human touch-points to reconcile, code, process and pay. Interfaces are implemented to send approved invoices to your back-office accounting system for payment.
GL codes added to the Purchase Order during the procurement cycle to support our budget tracking feature (Checkbook Drill Down) are used to automatically code the accompanying invoice(s).
To do its work, the Auto-Matching engine needs an electronic version of all three documents:
Some organizations do not have the resources onsite to perform a formal receiving event for every delivery. In these cases, we setup an automated Two-Way Matching process.
The process of obtaining electronic versions of your suppliers’ invoices is called Invoice Capture. There are a number of approaches. It’s best to get it straight from the supplier. Many suppliers offer electronic invoices in CSV, XML or other formats. BirchStreet has numerous e-Invoice interfaces in place to bring electronic invoices into our system directly from industry suppliers.
However, many midsized and small suppliers cannot offer electronic invoices. For these suppliers, BirchStreet has partnered with organizations that specialize in the invoice capture process. These Invoice Capture partners have large processing facilities that leverage technology and human resources to cost effectively convert thousands of paper invoices into electronic documents. The resulting electronic invoices, along with an image of the paper invoice, are transmitted to BirchStreet via automated interfaces and used in the Auto-Matching process.
Images of the source document can be made available in the BirchStreet solution. Either the images can be stored directly in the BirchStreet application or we can link to a third-party document management system.
The Invoice Capture Challenge
Even a small group of full service hotels will have thousands of suppliers. Many of these suppliers are small specialty vendors that do not offer electronic invoicing. Except for a few high-volume suppliers the transaction volume is typically distributed fairly evenly across the supplier base. It would be nice if the 80/20 rule applied, but unfortunately the distribution is far more challenging. In the graph below from one of our customers, you can see that the top 22 suppliers account for only 25% of all transactions. On average that’s about 1% per supplier. As you add more (smaller) suppliers it gets worse. In the graph below the top 300 suppliers only account for 45% of the total invoice count.
A good invoice capture strategy is to use both direct supplier e-Invoice interfaces (for your suppliers that can offer it), and an Invoice Capture partner for the rest of your suppliers. This allows you to capture 100% of your invoices electronically enabling an fully automated AP process.
Click here to read more about AP Automation.