Billing inefficiencies increase costs
As businesses grapple with inflation across the board, it is important for them to offset some of this price crunch and induce some deflation by removing inefficiencies from their processes. One way to do this is to update their invoice management practices by adding automation, transparency and data analytics that help companies negotiate better terms with their suppliers.
Varun Tejpal, co-founder and CEO of FourQ, shared with PYMNTS some of the areas where multinationals are tackling the problem.
Add transparency to complex transactions
One problem, Tejpal said, comes with sourcing in cases where there are large and complex transactions. For example, there might be cell phone invoices that the accounting team needs to allocate, with 10 invoices for human resources and 22 for sales. When the accounting team does this manually, without the right level of transparency, they often have to deal with someone from HR, for example, saying they only have nine cellphones, not 10.
A multinational enterprise can eliminate this inefficiency with an invoice management system that covers both intercompany and global supplier invoice management.
âBy marrying these two, you show it end to end,â Tejpal said. âThe invoice arrives, and until the end, you can invoice it in any part of the world, and you have an allocation engine that gives you 100% transparency and ensures that you respect the different tax rules in force. Over 100 countries.
Compare invoices to contracts
A similar situation arises in companies that outsource functions such as finance and back office activity. When the company to which they have outsourced these functions sends an invoice, someone has to manually verify the number of people and the amount of work for which they are being invoiced.
This too can be improved with an automated system.
âThe contract is already loaded, it compares the incoming invoice line by line with what is in the contract, then it tells the company that receives the invoice that it can process it,â Tejpal explained.
Another inefficiency comes from large and increasingly complex invoices. Invoices matter as procurement and procurement teams attempt to gain a cost advantage by consolidating suppliers. For example, rather than buying laptops from two companies, they will buy them from one supplier. In addition to being large, invoices are complex because a multinational company can then ship these products to different countries, each with their own tax and compliance rules.
âCompanies have to deal with this complexity, and they do it very manually,â Tejpal said. An automated system will solve this.
Consolidation of several invoices
Another common problem for businesses is that multiple invoices come from a single supplier. Often the invoices are the same every time, and the company’s accounting team has to waste time checking each one separately.
This can be improved with a system that allows mass approval of invoices and consolidates them into a single transaction. âThis not only makes the manual work of approval easier, but also from a payments point of view, because you don’t pay them at different times, you pay them collectively,â Tejpal said. .
Such inefficiencies can strain the relationship between companies and their suppliers. For example, slow payments can affect the supplier’s cash flow, so they can add extra margin to future purchases, anticipating that the customer’s next payment will be slow as well.
Improve relations with suppliers
âIt’s a losing proposition, and it has had an impact on the relationship,â Tejpal said. âWe want to come back and say, ‘you negotiate a deal between the supplier and the buyer in good faith and then basically make sure that from that point on it’s not a pain for the supplier to. get paid on time. And on the other hand, you don’t pay late fees or pay more than you bargained for. ‘â
On the other hand, sellers may not meet their contractual obligations. For example, a vendor that provides cloud service or technical support may only have a certain amount of downtime or resolve the issue within a specified amount of time. Companies can solve this problem by using a system to monitor supplier performance. This can mean that a system can automatically compare a consumption database to the requirements specified in the contract each time an invoice arrives.
“If it fails any of them, it sends the invoice back to the supplier saying, ‘Look, you failed here, you didn’t have uptime for over 95%, so you have to give credit on the invoice and then send it back, âTejpal said.
Improvements like these, big and small, can add up. With enough changes in the right direction, businesses can improve their supplier relationships, lower costs, and mitigate some of the damaging effects of inflation.
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