How can today’s savvy Procure to Pay (P2P) leader manage risk? In this blog, we’ll explore how the ten top P2P automation solutions can help!
Supplier portals can be used by accounts receivable departments to not only determine the payment status of an invoice, but to gather key information pertaining to the supplier such as W9s, W8s, insurance information, certificates of incorporation, and payment information. Intelligent supplier portals can be utilized in the supplier onboarding process as a means to help validate the supplier before a new record is entered into the master file.
- Supplier validation can occur before the payment process with pre-established automated business rules.
- Supplier portals can be used not only in the onboarding process but throughout the P2P process to periodically screen supplier master data.
- A sound upfront supplier validation process reduces paying “phony” suppliers or even employee posing as suppliers.
An E-Procurement solution can be integrated with an ERP system to automatically generate a requisition, purchase order (PO), and even an invoice. To take things a step further, an advanced solution supports the 3 way matching process with embedded general ledger (GL) coding which can pave the way for a PO flip process.
- Requisitions and purchase order are created totally electronically using ERP data with no manual processes. This alleviates the risk of duplication, collusion with suppliers, and eliminates price manipulation.
- Integration with ERP system supports the 3 way matching process and removes the risk of any clearing account reconciliation issues since purchase orders and invoices can be matched electronically.
E – Invoicing
E-Invoicing is the foundation of automation within the accounts payable function since manual invoices are removed from the process.
- E-Invoicing eliminates the risk of processing a duplicate invoice, paying an incorrect amount, or paying the invoice to an incorrect supplier. E-Invoicing can also ensure that P-Card payments are not paid on invoices.
- Moves the accounts payable focus to controls, process improvements and analytics since manual invoicing is no longer a “core business process.”
- Reduces the risk of fraud and builds in Segregation of Duties (SoD) controls.
PO to Invoice Conversion
This solution allows the supplier to convert a purchase order directly to an E-Invoice. Pricing and terms are automatically converted in a seamless fashion which can eliminate possible invoicing disputes.
- Speeds up the approval time since there should be minimal invoice disputes.
- Improves supplier satisfaction. Specifically when establishing relationships with strategic suppliers.
Document Management, Invoice Scan and Data Capture
Storing paper documents in file cabinets should be no longer a challenge for today’s P2P departments. Today’s document management solutions that provide invoice scan and data capture options can pave the way in the E-Invoicing journey. Some companies utilize this data by solutions such as SharePoint and others.
- Eliminates the risk of processing a duplicate invoice, paying an incorrect amount, or paying the invoice to an incorrect supplier.
- Alleviates the risk of manual processing and can set the foundation for E-Invoicing and the 3 way matching process.
Automating the 3 way matching process is big step in improving controls in the P2P process. Matching errors can cause clearing account reconciliation problems which may lead to financial closing issues and possible misstatements.
- Automated matching performs the 3 way matching process - reducing the risk of paying an erroneous or duplicate invoice to a supplier.
- Improves the time it takes to get an invoice paid – resulting in improved cycle time.
Automated Workflow Approvals
In an automated workflow approval process, the process is linked to your company’s delegation of authority (DoA) policy. Approvals are automated generated via email to the designated levels of approval as reflected in the DoA policy. The levels of approval are usually defined in a table by levels of employee,
- An automated workflow can be linked to the company’s employee master file which reduces the risk of fraud since approvals levels cannot be manipulated.
- Escalation processes can be built into the workflow to link to the Delegation of Authority (DoA) policy and tables. Additionally, “out of office” notifications can be built into this process.
The E-Payment process includes all electronic payment processes along with the use of ACH supplier remittances.
- The use of E-Payment reduces check fraud, check reconciliation issues, and escheatment reconciliation issues.
- The use of ACH remittance in the P2P process ensures that that the invoice details are properly applied in the cash application process.
System Access Verification Tools
System access verification tools confirm that there are no system access issues within ERP systems and only authorized users for the defined roles are the system. Such tools include real time monitoring, and reporting.
- System Access Verification tools can prevent a fraudulent transaction from being processed within the P2P process. As an example, an individual cannot set up a supplier in the supplier master file, pay that supplier and void the transaction with proper system access controls in place. These are referred to “intra” SoD controls.
- These tools can also catch an “extra” SoD conflict in which an employee from another department may attempt to process an unrelated transaction. An employee in accounts receivable may try to process a fraudulent accounts payable transaction.
Accounts Payable Self-Audit Tools
Some companies consider third party or external audit firms to identify control weaknesses by reviewing historical databases. But many companies have worked with a solution provider to implement a self-audit process that identifies a possible duplicate payment before the payment is initiated. Self-audit tools consider “fuzzy” logic algorithms that flag a potential duplicate or erroneous payment.
- A self-audit tool can often be included in a company’s internal control program as a continuous control monitoring (CCM) initiative.
- Duplicate and erroneous payments are prevented before the payment is made.
- Process improvements can be immediately made to stop duplicate payments in their tracks.
About the Author
Chris Doxey, CAPP, CCSA, CICA is an independent management consultant providing Internal Controls and Business Process Best Practice Solutions. She has extensive experience in accounts payable, procurement, internal auditing, internal controls, Sarbanes-Oxley compliance, payroll, logistics, financial systems strategy, and financial integration at Digital, Compaq, Hewlett Packard, MCI, APEX Analytix, and Business Strategy, Inc. She was recruited to assist MCI (formally WorldCom) recover from their internal control challenges. She has a bachelor's degree in English, a bachelor's in accounting, a master's in business administration, and a graduate certificate in project management. Chris has written numerous articles and published two handbooks: AP Leadership Skills and Implementing a Controls Self Assessment Program for Your Accounts Payable Department.More Content by Chris Doxey