0 Errors in Receiving Your Supplier Invoices

In the typical scenario involving the supplier receiving the invoices, the former is usually given priority to submit invoices to initiate the process of aging. By handling the invoice manually, as per the cases that were discussed previously, the suppliers were under the impression that the thirty or sixty days of payment term will start from the time they turned in the invoice. Besides, the supplier will be willing to pay regularly because the sooner they submit their invoice for aging, the sooner they can receive their payment.

The account payable & procurement team try to avoid any confusion by following the company process. This process assures that they will only be paying for the things delivered to them. For example, in this case, if they receive an incomplete invoice, the standard protocol will be to call the supplier in question and request the delivery of the additional information.

On following the procedure mentioned above, suppliers started to complain about payment delays. They requested corrective actions be implemented, which was their right. The previous method was arduous, causing prolonged wait time for the suppliers to receive their money, who were not aware that their invoices had been delivered in the wrong form for the company. The fault does not lie with the suppliers, who had already given their service and we're now following up on their payment. However, the responsibility does not lie with the client, who has specific rules and regulations to follow to avoid the misplacement of any invoices. The fault lies in human error. To make this whole process more accessible, the client should have rejected the suppliers’ invoice if it didn’t follow the format of submitting the invoice.

An example I have witnessed in the workplace is: 

One of the suppliers is responsible for delivering resources to our company. These resources are required to aid our team in delivering customer projects. The group contacted the suppliers directly and requested the delivery of the funds. These resources were provided, forgoing the company process. The company process is as follows:

• A work order should be delivered to the client about the quote of the resource
• Post the work order; a purchase order should be issued containing the following (Start date, End date, price, PO number, payment terms). This step signifies the agreement between the two parties to avoid any future conflicts
• Service will start based on the PO, where the invoice should be submitted based on a sign-off or delivery note that should be signed from the responsible person of the client
• Upon completing the above, the Invoice will be accepted, and the payment will be processed

What happened, in the scenario mentioned above, was as follows:

• The resources were delivered based on trust
• Supplier management assumed that there would be a PO issued from the client-side
• Requestor from the client-side start working with the funds without sending the PO
• Client management and operation team were not aware that they have a running cost in the project
• Supplier submitted the invoice to the requestor without any rejection received and started the aging from his side

The situation above created a conflict based on misunderstanding and miscommunication. The team is working on a service, and the supplier is assuming revenue coming monthly, at the same time. However, the company is not aware of the costs running simultaneously on that specific project. Out of the blue, a statement of account was received from the supplier; depicting a large sum, the company must pay for resources our finance department had no evidence for requesting. After some investigation, we discovered that by not following the right processes from both parties, both the client and the supplier, it led to this mishap. The following factors were taken into account:

• The supplier was submitting invoices that did not follow the process and without PO

The suppliers’ cash-flow gets affected:

• The client was blamed for a payment that was due from the supplier’s perspective, while as per the process nothing owing from the client.
• The supplier agreed to work without a PO considering the ability to submit his invoices
• The account payable team gets loaded with invoices, to fix previous mistakes
• Procurement team was charged with working to deliver resources pending as PO’s to enable suppliers to submit their invoices
• The clients’ cash flow gets affected since there was a change in events, and a substantial payment order was due
• The clients’ in-house statement gets affected, in light of recent events; the finances must be recalculated to make up for the loss

By having the ISP, we were able to create all the invoice process. This invoice process follows a procedure that is impossible to forgo. The suppliers must first submit all the prerequisites along with their invoices. This helps us prevent any miscommunication by bridging the gap between the suppliers and the client.

ISP was able to aid us in the following:

• Defines all the processes that we have for invoice submission
• Organizes the various suppliers based on their service type
• Represents all the prerequisite required for submitting any invoice
• Avoids the errors that we used to have previously with invoices

It also helps our supplier. This is achieved by the following:

• Guides all the suppliers in the right process to follow
• Stops them from submitting their invoices with missing documents
• Gives them visibility on what was submitted, accepted, and the amount and timing of their payment
• Increases their satisfaction by having full disclosure and transparency in their dealings
• Helps any new team member from their side to familiarize themselves of submitting an invoice

The moral of the story is that ISP is mutually beneficial in helping both the supplier and the client with the invoice issue. This helps us avoid any error in the invoices submitted and allows both parties to have transparency regarding the timing and amount of payment.