A shared services model offers many advantages for multinational companies. But when it comes to managing vendor invoices across multiple entities and countries, this centralized approach can present challenges. Maintaining compliance with tax regulations across borders, properly recovering indirect taxes, accounting for global currency and foreign exchange differences, dealing with disparate ERP (enterprise resource planning) systems, and keeping current with an ever-changing regulatory environment can prove more difficult when vendor invoicing is centralized.
These challenges all come at a price—from direct costs such as vendor late fees, penalties, and missed opportunities for discounts, to less tangible but equally costly issues like payment inaccuracies, internal inefficiencies, unnecessary overhead, and compliance risks.
For organizations that operate globally and do business with many vendors, effective invoice management is essential to avoiding these challenges and the associated costs. Best practices like the following can improve vendor invoice management for multinational organizations.
1) Leverage automation to avoid manual processing risks.
Even in the largest organizations, vendor invoice management may encompass manual steps. However, the more manual the process, the greater the potential for inaccuracies, inefficiencies, late fees, and penalties. Instead, when a fully automated process is adopted within a shared services vendor invoicing model, the work can be streamlined and unnecessary costs avoided.
2) Take a fresh look at how you manage invoices.
That’s not to say you should re-engineer your process from the ground up; but being open to process improvements can pay dividends. For example, some multinational companies direct their vendors to submit all invoices to a central services group in the US for simplicity. However, the decision maker who directs this approach may not realize it could possibly result in a 20 percent cross-border VAT (value-added tax) in some countries. Submitting invoices in-country can eliminate such unnecessary tax premiums. Or perhaps a vendor is willing to offer a discount if it’s permitted to submit a single invoice for products/services provided to entities in various countries. If your vendor invoice management process and systems don’t support this approach, you’ll miss out on such price breaks, leaving money on the table.
3) Dig into the details.
The typical invoice—a one- or two-page PDF—often contains limited detail about the billed products/services. However, a greater level of detail can prove important for validating the invoice or conducting audits. An automated vendor invoice management system can take electronic feeds directly from the vendor, unlocking a tremendous amount of supporting detail without manual intervention.
4) Simplify internal recharges.
When services are shared across an organization, the easy way to allocate vendor charges is to spread them equally among all the participating entities. Large organizations often gravitate to this approach for ease, especially if their vendor invoicing processes are primarily manual. But when those vendor invoices provide a sufficient level of detail (see best practice #3), the costs can be allocated accurately without increasing manual work or incurring unnecessary VAT payments. Let’s say a global organization has 100,000 employee cell phones with a single carrier. If those cell phone costs can be allocated to each entity’s budgets appropriately, they will each gain a truer picture of their overhead costs, which is crucial to running a profitable operation.
5) Carefully define the business rules.
When automating vendor invoice management, organizations may be hesitant at first to completely abandon manual invoice reviews. Giving careful thought to how the system’s business rules are defined can eliminate those concerns. If you can identify that “We only need to see an invoice before payment if…,” then the accounting staff only needs to focus on exceptions—freeing them to handle more important tasks. It’s critical to define the expected vendors, products/services, and geographic routes the company will allow buying and billing from, as well as any not-to-exceed criteria. Well-defined business rules support the acceptance criteria that a vendor invoice management system can perform checks on automatically, reducing the resources spent on billing investigations, disputes and resolutions, settlements, and reconciliations.
6) Leverage secure access to data extracts.
When organizations consider moving to a fully automated vendor invoice management system, it is understandable that they’ll want to avoid tying up IT resources providing the necessary data. Yet, access to the full spectrum of accounts payable and cost center data is critical to replacing inefficient manual steps with a streamlined, automated process. Technology providers can use highly secure mechanisms to access the internal systems that house the requisite data that must be extracted to support automated vendor invoice management.
7) Seek to eliminate “bad data.”
Across large organizations, there are inevitably instances where an accounts payable system has blank data fields, or someone has listed the cost center as “N/A.” However, when this data is clean, complete, and accurate, it yields important benefits, including greater accuracy of internal recharges and a faster, more streamlined implementation of a vendor invoice management system. As the organization moves from manual processes to an automated system, cleaning up incomplete or incorrect data is an essential step that will bear fruit for the long term.
8) Set up robust, actionable reporting.
For example, the ability to view a dashboard showing all outstanding liabilities can greatly improve cash flow management. Other reporting can simplify annual or semi-annual reconciliations. When moving to a vendor invoice management system, look for robust, flexible reporting options that provide actionable information.
9) Keep all invoices in one electronic repository.
It sounds simple enough, but across a large multinational company there are invariably instances where paper invoices are still stored in files—and not easily found when they’re needed for an audit or a vendor reconciliation. Requiring all invoices to be stored in a central electronic repository ensures that data is readily available whenever it’s needed.
10) Standardize your customized workflows.
That may sound contradictory; however, a good portion of a vendor invoice management process can be standardized. For instance, of a 12-step vendor invoicing process, only step 1 (how vendor data gets into the system) and step 12 (how data flows out of the system) may need to be customized to the individual organization. Standardizing the rest makes it easier and more efficient for the organization to support and maintain the process.
If your multinational organization works with many vendors and is still managing their invoices manually, contact the invoice management experts at FourQ. Our Paymaster solution supports automated, centralized invoice management—eliminating inefficient manual processes and the associated costs.
Take these tips with you.
Download Ten Best Practices for Improving Vendor Invoice Management below: