Leveraging Accounts Payable Automation to Conquer Exception Handling and Drive Strategic Value
While most conversations around AP automation focus on invoice capture and approvals, real ROI is often buried in how well your system handles the unexpected — price mismatches, missing POs, discount/terms discrepancies, additional charges/surcharges (including tariffs), duplicate invoices, and more — commonly referred to as exception handling.
Accounts Payable Automation: Streamlining Your Procure-to-Pay Process
Accounts Payable automation addresses a critical part of the complete enterprise procure-to-pay process. And although different solutions provide varying levels of automation, your ideal solution should include:
- Invoice capture: Efficiently extracting data from various invoice formats.
- Validation: Verifying the authenticity, accuracy, and compliance of the invoice.
- 2- or 3- way matching: Automatically comparing invoices against purchase orders and goods receipts, in compliance with your defined business processes.
- Routing: Directing invoices to the appropriate approvers.
- GL-coding: Assigning general ledger codes for accurate financial tracking.
- Vouchering for payment: Preparing invoices for payment in your ERP system (in different ERPs, this may be referred to as “posting”).
Accounts Payable automation replaces the costly manual labor of mundane invoice processing tasks with robotic automation and intelligent workflows. Automation not only eliminates work, but also eliminates human error and late payment penalties, dramatically reduces invoice processing time, captures more early pay discounts, and enables reporting and analytics that aren’t possible with manual processes.
In the most sophisticated solutions, when configured to the requirements of your business, the regulations of your industry, or different local, state, or national laws, intelligent workflows can streamline processes, ensure compliance with your business policies, and establish audit trails. More than that, advanced ERP integration and AI are being used at different points in the process to enhance speed, accuracy, and effectiveness.
As a result, AP teams can focus on higher value tasks and objectives, like identifying process bottlenecks and improving supplier relationships. Finance leaders have improved analytics for financial planning, and the savings improve financial positions.
Straight-Through-Processing: The Goal of Efficient AP Automation
When invoice data is captured effectively, everything matches the data in your ERP, and all the requirements of your business processes are met, the invoice is processed from invoice capture to GL coding and vouchering in the ERP system with no human intervention. The processing time can drop from days — or even weeks — to minutes.
Mastering Accounts Payable Exception Handling
When things don’t go smoothly, exceptions happen. According to a report by Ardent Partners, 22.5% of all invoices require AP staff to manually address errors or discrepancies.
But consider this: your choice of automation solution is a significant determining factor in the amount of work required to handle exceptions, as well as the impact on processing time, costs, and supplier relationships.
The most robust solutions are AI-enabled, include intelligent workflows that learn and become more efficient over time, and use advanced, real-time, two-way integration with your ERP. Without these features, an automation solution may simply stop when encountering an exception, requiring manual exception handling by AP processors. And if exceptions are frequent, the ROI you expect from labor savings may fall far below your expectations.
To illustrate what we mean, consider five of the top exceptions in AP processing:
- Purchase Price Variance
- Unplanned Charges
- Unit of Measure Discrepancies
- Duplicate Invoices
- Item Number Mismatches
Figure 1 below illustrates examples of all of these exceptions on one hypothectical invoice.
Figure 1: Examples of common AP invoice processing exceptions.
Purchase Price Variance (PPV) Explained
A PPV occurs when the purchase order price differs from the invoice price. In this example, there are two PPVs. One is relatively minor, while the other is more significant. A more basic automation solution will flag both as exceptions that require the intervention of your AP processors. A more sophisticated solution, like IntelliChief’s AI-enabled Accounts Payable Automation solution, offers the flexibility to set tolerances, either by percentage or dollar amount. And as you can see in Figure 2, the difference between the PO unit price of $10.00 and the invoice unit price of $10.02 is within tolerance, allowing processing to continue without requiring manual intervention. A new GL line is added as part of the workflow, charging a PPV account with the difference and requiring no costly human intervention to handle the exception.
Figure 2: Purchase Price Variance within established automation tolerance automatically processed.
If there were no other exceptions, this invoice would be processed straight-through to GL coding and vouchering, incurring no labor costs or processing delays. But we have intentionally complicated this example, so let’s move on to the next PPV.
In this case, the difference between the PO unit price of $10.00 and the invoice unit price of $13.25 exceed the tolerance and is flagged as an exception requiring intervention. But a more sophisticated solution doesn’t just stop there. Push notifications alert the buyer of the issue, providing links to related documents required to resolve it. The system monitors key discount dates and payment deadlines, pushing reminders or even escalating the issue to keep processes on track. And while this is happening, different workflows actively and simultaneously work to resolve the other exceptions we have identified.
Handling Unplanned Charges in AP Automation
An unplanned charge exception occurs when the invoice has valid charges that are not on the PO. Examples may include:
- Taxes (city, state, GST, VAT, or even tariffs)
- Shipping and freight
- Other charges (pallet, environmental, etc.)
Intelligent workflows may determine, for example, that the item is not tax exempt and allow the charge, adding a GL line and coding the charge to a specified account. Similarly, shipping charges may fall within established tolerances or be confirmed by a lookup of previous transactions on the same contract. And again, if there were no other exceptions, this invoice would be processed straight-through to GL coding and vouchering in the ERP with no labor costs or processing delays.
However, if the charges exceed tolerances, or are specifically prohibited in the contract — for example, the transaction is tax-exempt — then the exception is flagged and a push notification is generated, along with links to all the relevant documents, to an AP processor for resolution. And once again, the system monitors critical dates, pushing reminders and escalations to keep processes on track while simultaneously working to resolve the other exceptions we have identified.
Completing the Process: Seamless Exception Resolution
When all the exceptions have been addressed, either within the automation or with the assistance of human AP processors when required, automation completes the process by GL coding all corrected, matched, and approved exceptions into the ERP and vouchering the approved invoice for payment, eliminating the need for an AP processor to do any of those steps in the ERP.
This highly automated and dramatically faster exception handling is only possible with advanced ERP integration, like what is made possible with IntelliChief’s proprietary Match-2-ERP technology.
Download the Full Article!
In this article, we have shown how AI-enabled robotic automation and advanced ERP integration combine to streamline or even eliminate two of the common exceptions in AP invoice processing. Download the complete article to learn how AP Automation tackles many more!