Automating Intelligence for Rapid Invoice Processing Time

Slow and Unsure, Human Interference is the Root of Most Evil.

Research states that processing a single invoice requires 3 - 10 days on average, depending on the company itself. The processing time depends on several factors, such as the complexity of the business process, the frequency of transactions, headcount in processing invoices, and technology adoption. We all know that considering headcount in the calculation will not be scalable as the business grows.

It is an unproven myth that the payment can be delayed by 3 - 10 days due to the processing time. In fact, not only does the processing take up so much headcount cost, it also risks the business in several ways: (1.) executed late payment, which affects supplier trust and impedes operation, (2.) financial penalty caused by late payment fee, and (3.) increased error rate due to human error, leading to false data or wrong payment.

Facing The Law of Diminishing Returns

One of the growing cafe chain faces this issue when scaling from dozens to hundreds of branches, as they must keep the number of headcounts streamlined and the invoice processing time shorter. They realize that their business in handling fresh produce is complex, frequent, and needs to be executed in time. Hustling using existing human resources will increase the error rate, resulting in wrong payments being executed.

As they scaled, all procurement processes are centralized in headquarters. The order is delivered to the central warehouse or the branch, depending on the type of goods. Hence, the requirement will come from the branch and executed in headquarters. Using hard copy, the approval process in the branch and headquarters slows down the purchasing. Implementing the approver’s SLA (Service Level Agreement) can mitigate the slow approval, but still, without proper facility, the quality of the checker must be decreased to meet the SLA. This problem might not be critical in the ordering process but will be critical in invoice approval.

Before executing invoice payment, the finance team must check the correctness of the invoice. The checking consists of three layers:

1. Is the identity and legal aspects in the invoice submitted legitimate?
The invoice will be checked to see if it comes from the relevant suppliers and sent to the correct buyer. The legal aspect is also checked. Sometimes buyer requires stamp duty (materai) for the invoice with more than 5 million rupiahs.

2. Is the invoice submitted completely with supporting documents?

The invoice must contain all required information, such as the item quantity, unit price, discount, tax, tax id, etc. The mandatory supporting documents, such as the tax invoice, GR (Good Receipt), PO, and the signed contract for this purchase, must be attached.

3. Is the information in the invoice aligned with the supporting docs?

The most well-known invoice checking is called three-way-matching. The business has to ensure that the invoiced item has been received and the price stated is aligned with the order price in the PO. Therefore, invoice data will be matched against the GR and PO simultaneously. Furthermore, the supporting documents will be checked to see if the information aligns with the invoice.

These steps are carefully executed via hardcopy by the finance team at the headquarters to minimize the financial risk of making wrong payment. It takes a long time due to the vast frequency of the transactions and the abundance of information that need to be checked. A bigger problem comes from invoices that do not comply the invoice checking criteria. All of these cases must be revised by the suppliers completely, leading to a lose-lose situation where suppliers will not be paid on time, and the finance team has to do double work.

The correct invoice must be approved by the finance manager, to ensure that the invoice is correct from a high-level point of view. After the invoice has been approved, a payment request is created to trigger payment. The manager or director must also approve payment requests to minimize the risk of fraud. Both the approvals are still using hardcopy and taking 3 working days.

The Big & Fast Win: Hacking Growth at Scale with Supplier Portal

Analytically, it can be noticed that the wrong invoice submission from suppliers and wrong data input from the invoice received have a snowball effect. If the document submitted is complete and correct, the checking can be done at once. Suppliers are incentivized to do this since they expect payment to be received without any delay. The solution will be to provide a smart invoicing portal for suppliers to let them self-serve. Paper.id supplier portal enables the supplier to submit the invoice based on the PO received and processed with customized rules. Suppliers must submit the invoice with customized attachments & data depending on the type of the transactions. All invoices can be stamped by digital stamp duty (e-meterai). Furthermore, traditional suppliers can also utilize this technology since it is accessible via mobile and WhatsApp.

Not only does it ensure that the invoice received is legally acceptable and complete in terms of data and supporting documents, but the invoice can also be checked against PO and GR, making the checking process of the invoice done within seconds. All documents are centralized and can be seen by permitted members, minimizing internal disputes. Any dispute with suppliers can be resolved in the supplier portal, where both supplier and buyer can chat with real-time notifications embedded in the document. Paper.id user experience provides best-class collaboration tools to bride supplier and buyer.

The Major Impact

Approval module can be implemented not only for invoices but also for payment requests or even POs. By doing this, every approver can be notified in real-time, and approval can be done anywhere via mobile, cutting the approval time from 3 days to less than one day. A digital invoice has additional strength points where no human is required to input data from hardcopy to the buyers’ ERP system. Paper.id supplier portal enables document exchange to be digitally executed and integrated into the ERP via API integration.

By adapting Paper.id, businesses can now cut the invoice processing time from 3 - 10 days to less than a day scalably. Productivity is increased, and cost can be reduced by up to 80%. We gatekeep the invoice submission, automatically check data relevance, provide swift approval, and democratize data to relevant stakeholders. Learn more about how Paper.id can streamline your procure-to-pay and order-to-cash process and book our time now.