According to a 2021 report by PayStream Advisors, 48% of respondents listed manual approvals and manual data entry as the top challenges in their invoice workflow process. Despite this acknowledgement, a large percentage of the business world still operates in this way. In fact, 86% of SMEs – those with an annual revenue of between USD $1 million and USD $100 million – rely on manually processing invoices.
As we’ve discovered from working with hundreds of customers, when the finance department uses an automated purchasing platform, it eliminates hours of billing reconciliation, prevents invoice discrepancies, and accelerates the month-end close.
If you’re in that percentage of companies still struggling along with manual processing, you may not realize how large a problem it poses. Today, let's look at the realities of manual invoice reconciliation, and how automating the process can create a whole new world of productivity for AP teams.
Why is invoice reconciliation important?
Invoice reconciliation is a key component of an accurate accounting process. Skipping reconciliation—or worse, allowing inaccurate data to persist within the books—has severe negative consequences for the business:
- It impacts the accuracy of accounting records.
- It slows down month-end close and results in errors in financial statements (especially balance sheet and cash flow statements).
- It reduces confidence in business finances, potentially impacting access to credit and investment capital.
How is invoice reconciliation “broken?”
Although reconciliation is a vital process, many organizations are ill-equipped to handle the workload. Problems increase as the company grows, resulting in issues that have a cumulative negative impact on the business.
The two main difficulties with accurate invoice reconciliation? Time and accuracy.
1. Invoice reconciliation is time-consuming
Invoice reconciliation is a huge source of busywork for a team. It pulls top talent away from strategic activities and buries them in stacks of invoices and rows of bank account transactions.
Even the most efficient, well-staffed finance departments struggle with the burden of manual billing reconciliation—it’s slow and error-prone. A Small to Medium Business (SMB) or small business owner may find this process even more onerous.
Why? Manual reconciliation requires a large amount of redundant data entry, research, and cross-checking on a monthly basis.
An Ardent Partners study found the average invoice takes 10 days to process. Consider the hundreds or thousands of supplier invoices your business receives each month and the fact that fully manual invoicing takes up to 15 steps.
Teams must first reformat and recategorize invoices sent in various invoice formats (e.g. paper, digital files)—including converting paper documents into digital files or manually entering invoice data from PDFs into the system. Considering half of all invoices are sent as paper documents, the team will spend significant time on this step before they even process them.
At close, these same invoices must be reconciled against bank statements or ledgers to be sure payments are correctly applied, open invoices are resolved, and you don’t under- or overpay. Teams, therefore, touch every document multiple times in order to complete the process.
2. Manual invoice reconciliation is error-prone
It doesn’t matter how talented a team is, anyone tasked with matching thousands of paper invoices against endless spreadsheet lines is bound to make a mistake. And teams know it. One report revealed invoice-to-payment matching as the second biggest concern for AP departments.
Spreadsheets are a primary contributor to these concerns. According to an oft-quoted statistic, over 90% of large spreadsheets have errors. Considering this, relying on the humble Excel spreadsheet to reconcile an exponentially growing number of invoices is a recipe for disaster. This could be the reason why 40% of finance leaders don’t trust the accuracy of their financials.
If you can’t trust spreadsheets, and teams are falling further behind every month using outdated methods to reconcile, what’s the best solution? A growing number of businesses are moving to automation.
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Reconcile invoices in real-time with an automated platform
When you use an automated purchase-to-pay platform, you accomplish each invoice reconciliation step simultaneously at the time of purchase. The end-of-the-month reconciliation push vanishes because there are no redundant sets of records, and no discrepancies exist.
Take a look at the 5 steps of reconciling invoices before vs. after automation.
1. Get organized
Before: When you reconcile invoices manually, getting organized becomes a process within a process. It’s time-consuming and requires teams to put on the detective hat each month. You must collect invoices across each delivery method (paper, emailed, and electronic) and transactions from each account. You must also check for outstanding invoices to tie up loose ends, check for incorrectly coded payments, and attempt to verify the accuracy of the spreadsheet data from month to month.
After: Once the purchase-to-pay process is managed through a single platform, there’s nothing to organize. The same system generates purchase orders and invoices. If those two don’t match, the transaction isn’t approved. Without approval, no money leaves the company. The system communicates with other financial tools (such as accounting software, ERP systems, and FP&A platforms) to automatically maintain database accuracy.
Automation also makes it easy to sort invoices by vendor or purchase category. Automation gives you complete visibility with a few clicks. From purchase to pay, every transaction is tracked and perfectly organized.
2. Matching
Before: Matching is the painstaking exercise of going through each line item on spreadsheets and comparing transactions against invoices. The reviewer is looking for mismatched transactions that need reconciliation.
In many cases, matching isn’t a one-to-one process. Discrepancies and issues make it harder to tell what payments correspond to associated invoices. Common issues that complicate matching are:
- Incorrect due date or deposit dates
- Early payment or late payment issues
- Recording to the wrong bank account
- Incorrect ledger book entry
- Miskeyed invoice numbers
After: Automated purchasing platforms integrate with payment systems, automatically matching bank statements to known completed transactions. Payment terms and information are centralized in the system for seamless processing. Transactions must match at the time of purchase, otherwise payment isn’t sent.
3. Mark off each line
Before: Reviewers mark off each clearly-matched transaction/invoice pair to indicate reconciliation isn’t needed. The remaining pieces will require more research.
After: Transactions are essentially matched at the time of purchase. The platform doesn’t allow payment for unmatched transactions.
4. Research discrepancies
Before: Circling discrepancies is the opposite of marking off approved transactions. Reviewers flag transactions that don’t match invoices and that require reconciliation.
After: Since the automated system ensures that each transaction is matched at the time of purchase, no transactions require further investigation.
5. Add up invoices
Before: Conduct a vendor-by-vendor review to double check the first four steps. When the total amount paid to a specific vendor does not equal the total invoices from the vendor statement, further investigation and reconciliation are needed.
After: Automated matching and checking make redundant accuracy checks unnecessary.
The Hidden Risks Behind Your AP Balance Sheet (Some Will Surprise You)
If your company’s balance sheet is not portraying an accurate picture, you’re shooting in the dark. Download the ebook to learn how to avoid this lethal pitfall.
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What an improved invoice reconciliation process looks like
SoulCycle spent five to six hours each month on financial reporting. This included chasing invoices, reconciling those invoices, and hopefully closing accurate books. The company relied on Excel spreadsheets for its financial review.
Now SoulCycle completes these tasks faster by simply consolidating its invoices with a software-driven, purchase-to-pay platform. Instead of purchasing from dozens of different portals with invoices flowing in throughout the month from various suppliers, the company pays a single invoice each month.
SoulCycle no longer has to work through a slew of vendor invoices, making processing multiple invoices unnecessary. There are fewer invoices for the finance team to manage, so they complete month-end close more easily.
Sarah Richman, a former SoulCycle operations manager, expanded on the benefits:
“I can… get a report without waiting for someone to provide me with the data. 90% of the things I need to do, I’m able to do in the moment.”
The time SoulCycle previously spent on invoice reconciliation is now dedicated to more value-added activities:
- Managers review spending trends to stay under budget.
- Managers track vendor-specific metrics to increase fulfillment rates.
- Managers spend more time training new hires on strategic initiatives instead of reconciliation and reporting.
Ardent Partners found that “best in class” AP departments (the 20% of enterprises with the lowest invoice processing costs and shortest invoice cycle times) were 125% more likely to use fully-automated purchase-to-pay systems. SoulCycle’s experience with an automated system illustrates how these platforms empower finance teams.
I can… get a report without waiting for someone to provide me with the data. 90% of the things I need to do, I’m able to do in the moment.
-Sarah Richman, Operations Manager, SoulCycle
The end of invoice reconciliation as we know it
Invoice reconciliation is broken at most companies. But the existence of invoice reconciliation indicates a larger problem in the purchase-to-pay process. An effective, automated purchasing platform eliminates the need for end-of-month invoice reconciliation, saving the finance department hours of work each month.
Want a deeper understanding of how to optimize your accounts payable process through finance automation? Order.co’s Finance and Automation Webinar features expert advice from WeWork on how businesses can use technology to overcome key challenges and revolutionize growth.
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It’s the burning question for every retail financial officer: how can our business stay afloat after COVID-19?
At Order.co, we hear this often from clients and prospects who are evaluating changes to their operations in light of the pandemic.
Retail sales dropped 8.3% in March and 16.4% in April, according to Reuters—the sharpest decline in retail sales since the government began tracking the data 28 years ago. Although June data showed a decent recovery, 16.4% is an incredible drop to bounce back from, and it’s complicated by the new normal that retail businesses must operate in.
Amid safety concerns, in-store operational costs have risen, but sales may continue to cool. Consumer behavior has also changed irreversibly, with wavering brand loyalty and a much stronger preference for ecommerce.
To adapt to this new normal and succeed long-term in a post-COVID-19 world, businesses must make operational investments everywhere, from their supply chain to their website. It will be up to retail financial officers to pave the way for this evolution.
Understand that consumer behaviors have changed irreversibly
Empty shelves in the lead-up to lockdown left consumers with little choice but to experiment with new products and shopping experiences. The result has been an altered consumer sentiment that will change the future of retail forever. Over 60% of consumers globally have changed their shopping behavior, and between 65-85% of those consumers aren’t planning to revert back, according to research from McKinsey.
These behavioral changes have solidified the domination of ecommerce. Most retail categories saw more than 10% of online growth between March and July 2020, McKinsey data revealed. In May alone, online apparel sales grew 65%, according to Adobe’s Digital Economy Index.
New behaviors also suggest diminished brand loyalty. Consumers who were unable to purchase their favorite products at the peak of the pandemic have adapted to using new ones and are more open to the idea of change.
These behavioral changes cannot be dismissed as a one-off event. While consumer preferences will continue to evolve over time, there is no going back to the way things were before the pandemic.
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Evaluate risks in the supply chain
As we’ve seen with decreased brand loyalty in the wake of COVID-19, supply chain failures can have a long-lasting impact on a business. Businesses can guard against this risk by creating redundancy in their supply chains, even if it comes at the cost of everyday efficiencies. Unfortunately, many essential businesses failed to do so before the pandemic. The most obvious examples occurred in grocery stores and pharmacies, where essentials like bread, canned vegetables, and toilet paper completely sold out.
According to Brittain Ladd, who consults for Kroger and Amazon, empty shelves could have been avoided if grocery retailers had focused more on reducing risk in their supply chain than reducing costs.
“The coronavirus has proven the weaknesses in having an efficient supply chain with minimal inventory. Many retailers had only two to three weeks’ worth of safety stock in their facilities when the virus hit,” Ladd, said in an interview with GLG.
The result of this supply chain failure—in addition to chaos—is lost revenue. For essential goods, crises are actually a business opportunity. Failure to meet consumer demand ultimately means leaving money on the table.
Failure to meet consumer demand ultimately means leaving money on the table.
Another key issue the pandemic unveiled is that companies tend to rely too heavily on one geographical area, in spite of geopolitical risks. This became a huge source of disruption when China was quarantined.
Colin Hunter, president of menswear brand Alton Lane, says his company has intentionally created redundancies in the supply chain across multiple countries for this very reason.
“Over the years we have been very thoughtful and methodical about that expansion of our supply chain, and it really has been a benefit for us,” Hunter says.
Whether it’s an abundance of inventory or a lack thereof, each retail category will face unique supply-chain challenges during future crises. That’s why it’s so important now for retail financial officers to pay close attention to how COVID-19 has impacted their own sector and to make adjustments that will safeguard their businesses against future risk.
Digitize the in-store experience
Retail brands have been under pressure to digitally transform their physical spaces for several years, and COVID-19 has served as the catalyst for many to actually do so. With lingering fears of infection and future pandemics, retail brands have little choice but to incorporate digital tools, which, by streamlining facets of the in-store experience, also create an environment where consumers feel comfortable shopping.
Retail businesses should take this opportunity to win customers’ trust and regain some brand loyalty.
One easy way to do this is to incorporate contactless payments so customers can minimize their exposure to other shoppers and in-store associates. Although the United States has been slow to adopt this technology, survey data from Mastercard shows that 8 out of 10 global consumers are already using it, and pressure on merchants to adopt a contactless option is quickly mounting.
Retail brands with cash to play with R&D should also think bigger than existing technologies, as Amazon has with the smart shopping cart it plans to launch later this year in its brick-and-mortar stores.
The “dash cart” will automatically scan a product as it is inserted into the cart, so customers don’t need to check out at all. This, again, is more convenient for shoppers and makes a trip to the grocery store faster and safer.
5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
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Break down any barriers to online purchasing
In the same vein, retail brands need to invest in transforming the digital experience. On average, almost 70% of online shoppers abandon their carts without purchasing, according to Baymard Institute. Of those shoppers who leave behind empty carts, 50% of users do so because extra fees are too high, and 28% abandon because they are asked to create an account. Those are easy barriers to fix, and it would be foolish to overlook them.
But even if the checkout experience appears seamless, retail brands should pay close attention to their conversion rates. If a high volume of web visitors are leaving their carts behind, there may be an underlying issue with the site’s technology.
It could be that the checkout process simply takes too long, which gives the customer time to second-guess their purchase. If this looks like it might be the case, try incorporating digital tools, such as Shopify’s Shop Pay, which increases the speed of checkout up to four times, or another one of Shopify’s best plugins.
Or, if your business is having trouble getting traffic to your site to begin with, consider selling with tech giants, like Amazon, that already have a mass following. While it’s true that Amazon has accelerated the shift to online shopping, it can still be a valuable tool for brick-and-mortar shops that are trying to raise brand awareness and sell to new audiences.
Adapt purchasing decisions to support new operations
While many of the long-term business changes needed to succeed in a post-COVID-19 world require buy-in from the broader organization, the retail financial officer can take steps within their own department to alleviate challenges.
One way to do so is simply to streamline the purchase of new supplies, such as masks and hand sanitizer. In the lead-up to lockdown, individual stores within a franchise likely found themselves rushing to local pharmacies to buy up masks, hand sanitizer, and disinfectant wipes in bulk. Now, those products are an essential part of everyday business and should be treated as such.
Another easy step is to cut existing costs by investing in procurement technology. This technology can centralize ordering, helping businesses identify the best vendors and save money on bulk orders. And, as businesses learn to operate with a leaner staff, procurement technology allows finance managers to streamline their purchasing and accounting processes without sacrificing quality.
Embrace the new normal
The health of the organization depends on the health of the consumer, and that must remain every retail business’s top priority as they navigate through COVID-19. Retail financial officers, however, cannot afford to forget that the new normal is here to stay and that succeeding in a post-COVID-19 world will require the business to make significant operational changes.
Order.co has helped premier retail and fitness brands adapt their operations through major business changes since 2014. Check out our case studies or request a demo.
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The procurement process is a major ongoing effort for many organizations. Over time, it becomes a larger task as additional vendors and transactions are needed to support a fast-growing company. At some point (sooner than most organizations would like), the procurement process outgrows accounting’s ability to keep up.
Procure-to-pay (P2P) technology helps these organizations stay ahead of a sea of invoices. It automates the most time-intensive and repetitive tasks—and provides a wealth of data in the process.
Today we’ll look at the process of using technology to enable your purchasing practice. Read on for answers to the most common questions:
- What is procure-to-pay technology?
- What are the benefits of moving to automated procure-to-pay technology?
- What are the best tools for procure-to-pay technology?
What is procure-to-pay technology?
Procure-to-pay technology is a term used to describe the systems and processes organizations use to manage purchasing supplies and services. The technology typically includes creating purchase requests, building and submitting purchase orders, tracking purchases, invoice matching, and issuing payments.
Download the free ebook: 5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
Identify top areas where your current purchasing process might be falling short—and costing you BIG.
What are the benefits of procure-to-pay technology?
Procure-to-pay technology helps companies simplify and optimize their business processes to realize cost savings. Specifically, procurement software helps in several ways.
Streamlined order and payment
Ordering and payment processing are time-consuming. Even when the process goes smoothly, it requires hours of attention and manual labor for your accounting or procurement teams.
Automating these processes allows approval, ordering, and payment to proceed through the procurement system in the background. This frees your procurement team or accounts payable department to focus on more valuable activities.
Reduced overhead
Keeping staff busy with tedious manual processing isn’t just slow, it’s costly. Technology allows your current team to do their job more efficiently, eliminating the need to expand future headcount just to keep up with the growing mountain of invoices.
Technology also eliminates errors associated with manual entry, meaning your accounting team spends less time chasing down discrepancies and more time completing impactful work.
Better price efficiency
When you know how much you order and which suppliers offer the best incentives, you can optimize your procurement process to take advantage of strong supplier relationships. A P2P solution makes it possible to quantify your supplier relationships, identify areas of redundancy, and negotiate better terms with suppliers.
Access to data
A centralized process leaves a detailed audit trail. This wealth of information drives better decision-making, optimizes negotiations and pricing, and reveals opportunities for more process refinement. Spend management becomes far easier when most (or all) of your procure-to-pay processes are automated.
Reduced risk
Third-party vendor risk is both expensive and difficult to control. A fully transparent process reduces these risks by eliminating opportunities for mistakes and fraud.
Technology like Order.co also gives buyers secure access to pre-approved vendors to eliminate problems from fraudulent or low-quality suppliers.
Download the free ebook: 5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
Identify top areas where your current purchasing process might be falling short—and costing you BIG.
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Top 5 procure-to-pay tools
Selecting the best procurement solutions is vital to a high-performing procurement process. Check out the following best-in-class tools when considering a purchasing solution for your organization.
To read detailed reviews for these tools and more, find full reports in this review.
Order.co
Order.co is a simple yet powerful solution for purchasing. Order.co offers robust features and a strong user experience to centralize your procure-to-pay process.
Order.co allows even casual users to buy from a network of over 15,000 pre-qualified vendors within our network.
Pros:
- Provides a ‘frequently ordered item’ feature for fast re-orders
- Creates automatic general ledger (GL) coding and correct allocation every time
- Invoice consolidation feature allows you to pay hundreds of invoices with one click
Cons:
- While Order.co is constantly adding vendors, some users expressed that more pre-loaded curation options would streamline the catalog-implementation process
PRM360
PRM360 offers procurement automation for enterprises and the mid-market. This platform focuses on supplier bidding infrastructure for supplies (e-procurement), giving teams access to transparency in the vendor-bid process. Pay automation is a key feature of the system.
Pros:
- Easy to use and customizable in both its dashboard and workflow development
- Notification system keeps users up to date on bidding and order changes
Cons:
- Loading speed can be an issue for some users
- Some teams would like the platform to add a multi-login feature
Coupa Procurement
Coupa Procurement helps enterprise businesses manage purchasing, from intake to payment. It allows users to purchase goods with buying guidelines and spend limits and to submit a purchase requisition within the system. The platform enables easier supplier management, inventory management, and supply catalog curation.
Pros:
- Fast and easy-to-use platform that allows casual users to build POs and submit requests independently
Cons:
- Users report a learning curve or the platform, which slows initial use
- Reporting is a little stiff and sometimes requires third-party reporting tools
SAP Ariba
SAP Ariba is a SaaS-based procurement system for organizing purchasing, budgetary controls, and cash flow management. The platform offers guided purchasing, invoice automation, and reporting solutions to automate buying.
Pros:
- For savvy users, SAP offers a lot of customization and strong integrations with ERP, accounting, and other tools
- It offers interconnected systems potential that saves time and extends data capabilities
Cons:
- Casual users may encounter difficulties using the system as many feel it lacks an intuitive UI
- Some users had trouble getting questions answered through customer service
Basware
Basware enables data-driven decisions through transparent data. This procure-to-pay software solution streamlines purchasing and invoicing using artificial intelligence (AI). The company is eco-conscious, using the platform to help customers shrink their carbon footprint and increase sustainability.
Pros:
- Invoice automation is a key feature
- Data capture capabilities are highly accurate
- Good tool choice for P2P-savvy users
Cons:
- The system is a little basic for some applications
- Improved platform coding and better roll-up and approval workflows would improve the experience
Choose Order.co for superior procure-to-pay technology solutions
Order.co provides the best of both worlds for users seeking procure-to-pay software. It’s a data-rich, dynamic platform that satisfies the requirements of back-end users. It also provides the flexibility and intuitive functionality that makes ordering easy for casual users across various locations.
Use Order.co to create an ideal procurement environment for users in every level and department:
- Intuitive, flexible UI that allows your company to order from thousands of approved vendors or user-added vendors with ease
- Powerful, AI-enhanced accounting and general ledger (GL) coding features that accurately record purchase categories without manual input
- Risk-savvy features, including three-way matching and spend analysis tools that provide full visibility and confidence in the numbers
- Easy payment features that enable accounting to pay hundreds of invoices in a single transaction
If you’re ready to disrupt your manual P2P process with an industry-leading, robust, and scalable procurement management solution, sign up for an Order.co demo today.
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