AP Invoice Exception Management – How to Reduce Exception Rates

• Vendor error: Errors in the invoice provided by the supplier, such as incorrect amounts or missing details.
• Data entry issues: Mistakes made during manual entry of invoice data.
• Incorrect invoice coding: Coding errors that mismatch invoice line items with general ledger accounts.
• Discrepancies: Mismatches between the invoice, purchase order, and receiving documentation.
• Duplications: Duplicate invoices submitted for payment, either by accident or by fraud.
• Non-PO invoices: Invoices submitted without corresponding purchase orders, often requiring additional verification or approval.

Automated vs. Manual AP Process

A manual AP process is the biggest culprit for exceptions happening. When AP staff are responsible for manually entering invoice data, matching invoices with purchase orders (POs) and receipts, and identifying discrepancies, the risk of human error increases significantly. Mistakes in data entry, missing or incorrect information, and delays in approval workflows all contribute to a higher rate of invoice exceptions. Each exception then requires additional manual intervention to resolve, which consumes valuable time and resources, slowing down the entire payment process.

In contrast, an automated AP process reduces the likelihood of exceptions from the start. Automated systems capture invoice data accurately and match it against POs and receipts without manual input, minimizing errors and discrepancies. When exceptions do occur, automated tools and systems for invoice exception management can quickly flag and route them to the appropriate approvers for faster resolution. This ensures a smoother workflow, allowing AP teams to process invoices more efficiently, reduce exceptions, and focus on higher-value tasks.

The Challenges of Exceptions in Invoices

Getting the highest percentage of straight-through processing when an invoice arrives is an admirable goal, considering that teams working in AP spend inordinate amounts of time on invoice exception handling. Not only are exceptions a challenge in terms of the time and effort involved, the number of exceptions your organization has is probably rising. That’s because more growth means more supplier invoices.

AP staff spend time interacting with various suppliers, tracking down missing information, calling approvers, and other administration related to clearing exceptions. And it’s not just a few minutes here and there – more like 15 minutes to an hour for just one invoice exception task.

Exceptions as a Symptom of Inefficient Procurement Practices

Ineffective procurement processes can prevent companies from processing invoices in a timely manner, get timely discounts, or negotiate more favorable terms with suppliers. This happens when companies:

• Rely on error-prone manual processes for approving requisitions
• Do not issue purchase orders for new orders
• Lack processes to prevent over/under payments, duplicate payments, missed payments, and late payments
• Don’t confirm if deliveries match to contracts
• Fail to take advantage of volume rebates*

How to Reduce Exception Rates

Reducing invoice exception rates begins with optimizing processes and implementing automation technologies. By leveraging AP automation solutions, companies can decrease the number of exceptions they encounter and achieve faster invoice exception handling. Automation not only ensures that data is captured accurately but also matches invoices with purchase orders and receipts seamlessly, cutting down on discrepancies that lead to exceptions.

Here’s some other strategies you can use to improve your invoice exception management:

• Implement AP Automation: Use automation tools to capture invoice data, perform three-way matching (invoice, PO, and receipt), and streamline workflows to minimize manual errors.
• Conduct Regular Audits: Frequently review your AP process and procurement systems to identify common sources of exceptions and fix them proactively.
• Set Clear Vendor Guidelines: Establish clear guidelines for vendors on submitting accurate invoices, including proper PO numbers and complete documentation, to reduce discrepancies.
• Utilize POs for Every Transaction: Ensure POs are generated and used for all purchases, as this reduces the chances of non-PO invoices and associated exceptions.
• Standardize Coding and Approval Processes: Develop consistent coding and approval workflows to ensure invoices are processed accurately and efficiently.
• Monitor and Optimize Supplier Performance: Work closely with suppliers to ensure they meet your invoicing standards and address any recurring issues that lead to exceptions.

Resolve Exceptions Faster with Rillion

Organizations that do follow best practices and take advantage of AP automation technologies reduce their exception rates. In most companies accounts payable staff do not have the data or knowledge of the purchase to be able to clear exceptions. Where the AP staff member might not have the information at hand, Rillion’s PO matching function isolates the problem that is preventing a proper match, ensuring easier and more streamlined invoice exception handling:

• Centralized Dashboard: Accessible on both desktop and mobile, Rillion’s platform enables users to easily view, track, and manage invoices, purchase orders (POs), and receipts.
• Automated Matching: Invoices are automatically matched against POs and goods receipts, eliminating the need for manual data entry and reducing human error.
• Cascading Matching System: Rillion’s unique system matches POs at either the header or line level, accommodating complex situations such as:
  • Matching one invoice to multiple POs
  • Matching one PO to multiple invoices, even with partial deliveries
• Automated Exception Flagging: When discrepancies arise, Rillion automatically flags exceptions and routes them to the appropriate approvers.
• One-Click Approvals: Approvers can validate and resolve exceptions with a single click, from either desktop or mobile devices, speeding up the resolution process.

Find out more about Rillion’s PO Matching functionality here.