CloudX Blog

Accounts Payable Automation & Optimal Non-PO Invoice Processing

Posted by Chris Cosgrove

Jun 18, 2013 1:51:00 PM


 Accounts Payable automation abides!

The Dude Abides


Perhaps one of the most hilarious movies to come out of Hollywood in the late 90’s has to be the Coen brothers’ The Big Lebowski.  In this classic opening scene the raspy southern twang of Sam Elliott lays out a grandiose tale of the hero (or should we say anti-hero), Jeff “The Dude” Lebowski amidst the song the Tumbling Tumbleweeds from over half a century earlier.  It’s beautifully laid out and a great metaphor for how Lebowski lived his life and how events blew him around…and for the purposes of our conversation today around Accounts Payable Automation Answers, directly on point for how most businesses handles their Non-PO based invoices.


The Challenge of Non-PO Invoices without Accounts Payable automation


Non-PO invoices are defined as invoices that are received (or originated) without an underlying Purchase Order in place prior to the sale of the goods or services being invoiced.  With that said, from a processing perspective there are two fundamental components that have to be addressed in order to book a Non-PO invoice transaction.  They are:

  1. Approval – Non-PO invoices must be approved by the issuing authority (or authorities based upon the escalating dollar amounts and most businesses’ approval matrix).  This is typically done by getting a physical signature and date (for manual AP processes) or electronically via a workflow solution (for the smarty pants who have invested in those).
  2. General Ledger Coding – Every expense that an organization has to account for must be accurately booked into the proper expense codes for compliance and audit purposes.  As such, the GL coding component of the Non-PO invoice process is done after the invoice has been received in the organization and may be done by the Approver mentioned above, or by a coder (Agent of the Approver, ie. administrative assistant),  or by Accounts Payable staff directly.  This is not an issue for PO (Purchase Order) – based invoices, as the GL coding component is done on the front end of the requisition process as each expense is formally defined in accordance with the organizational procurement guidelines.


So, in comparison to their PO-based counterpart, they are relatively simple to process as once you generally have the authorization and the correct accounting booking in place, you’re pretty much home.  With respect to PO invoices, there is a proverbial ton of matching to do between procurement, receiving, and invoice documents on a vendor and line item level, not to mention the issues that surround tax, freight, and units of measure.


Additional Challenges 


However, challenges arise from how invoices are received, distributed, and collaborated at on without the presence of a good Accounts Payable automation platform.  As a result, most companies in a manual environment rely upon interoffice mail, physical couriers, e-mail, and even many cases express delivery, all of which can be costly, klunky, and limit visibility to where critical information and invoices are at in the organization in terms of processing states.   Additionally, receipt of invoices can be more complex if invoices are received at branch levels and then funneled back up to a centralized Accounting environment.  In some cases invoices may have to make two or more physical stops in their process, all of which add time to the equation, and from the invoice get-go (receipt), time is against, not only from a Early Payment Discount perspective, but also, from a late fee viewpoint.


The Answer?


So, the solution to addressing these issues is to use Accounts Payable automation to effortlessly automate the routing and approval process as well as the GL coding.  How so?  Simply put…triggers.  Triggers can be used to identify GL codes by items including specific Vendors or locations.  The same is true of Approvers…and by capturing the data off an invoice and applying a business intelligence engine to it, you can use multiple triggers to accurately automate burdensome, time-consuming processes.  This way your processes can be transformed from the malaise of the tumbling tumbleweeds, that are haphazardly blown about from location to location without any accountability and instead guided like a heat-seeking missile that finds its target every time in the fastest way possible.


You can check out more in depth intel in our eBook below on Best Practices to Accounts Payable Automation.

Topics: Accounts Payable Automation, ap automation, Non-PO Invoices

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