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October 3, 2009

Matching Invoices to Contracts - Opportunity for Reduced Spend...

The AP optimization software provider Palette has introduced a Contracts module, which allows AP and Purchasing to monitor terms and duration of supplier agreements. There's obvious benefit to linking AP business processes to specific terms in original supplier contracts.

A useful element of Palette's Contracts module is the ability to auto-match inbound invoices to relevant contract data elements within the matching/approval process before AP, buyers or other corporate resources have to spend time comparing contracts to invoices in the approval process.

As an example, when invoices from suppliers arrive and the buyers negotiated terms and conditions are not met, the invoices will not auto-match and the Palette application will suggest necessary and appropriate action.

There doesn't seem to be any crisp quanitifiable information about the overspend in buyer organizations from invoices that do not comply with contract terms. But a number of industry sources have intimated that there is significant savings to be realized from an automated contract-to-invoice matching process....

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1 comment:

Anonymous said...

Taking the "invoice to contract matching" principle one step further, has anyone taken proactive steps to accurately and consistently analyze when vendors overbill a company, even though the invoice matches the terms of the contract? For example, Supplier A delivers their product to Company B digitally via the Internet. Supplier A invoices Company B for their product, but applies the wrong tax treatment to the invoice.

As far as the Supplier and Company are concerned, the invoice and the contract match, however Company B might be paying more than they should because some digital products delivered electronically over the Internet are taxed at a different rate than if they were shipped on DVD, tape, etc. via FedEx to a physical address.

I'd be curious to know if any companies or ERP systems are addressing this type of issue.