- Open Access
- Authors : Padmanaban Sanjeevi
- Paper ID : IJERTV9IS100025
- Volume & Issue : Volume 09, Issue 10 (October 2020)
- Published (First Online): 08-10-2020
- ISSN (Online) : 2278-0181
- Publisher Name : IJERT
- License: This work is licensed under a Creative Commons Attribution 4.0 International License
Increase Cashflow Position by Improving Accounts Payables Invoice Matching Process
Office Depot Inc
Abstract:- In any retail organization, one of the major issues encountered is on how to improve the effectiveness and efficiency of the Accounts Payables invoice matching process while preventing any loss to the organization. This is due to the limitations of the information system being used for day-to-day operations.
This article provides the details on how the matching process can be effectively improved to meet the client specific requirements to improve the cash flow position and vendor score card.
Keywords: Matching Engine, holds, chargeback, custom dashboard
In any organization, invoices will come from different sources for trade as well as expense related invoices. Most of the retail organizations use Oracle E-business suite as their ERP system. Generally, invoices are captured by importing into Accounts Payables using Payables Open Interface or entered manually by Payables Specialist for Paper Invoices. Invoices could be based on the services rendered or good received. If the invoices are service based, then invoices would be automatically approved and processed, and payments are issued to the supplier. For the goods received invoices, during the Invoice Validation process, matching rules are applied to match invoices with the purchase orders and the necessary holds are placed on the invoice lines for any shortages or price discrepancies when the variance falls within specific tolerance amounts. Due to high volume and low-cost transactions, even within tolerance, organizations are losing huge dollars per annum due to supplier invoice discrepancies.
The Oracle standard process does not provide the capability to meet the requirements of client specific scenarios. Three step process to improve the matching process to meet the client specific requirements
Required custom setups to be utilized during automatic matching process.
Automatic Matching Process
Using the configuration, Oracle Custom programs will be utilized to apply specific holds on the invoices, automatic creation of chargeback for supplier invoice discrepancies, processing of invoice with line variances and automatic release of custom holds if the hold release criteria are met.
Custom Dashboard – Manual Matching Process
Custom user interface to allow the users to analyze the invoices which are hold and perform action to match invoices with Purchase order.
Ability to delete the invoice lines at the invoice line level
Ability to update the price and quantity at Line
Ability to auto chargeback an invoice line if the supplier wrongly invoiced a line
Ability to auto chargeback a freight line if the allowed freight amount is zero
Assign Matching Process Specialist (Vendor Assistant)
For a retail organization, which processes around 20,000 invoices per day, which needs user intervention can be assigned to users by setting up Vendor Assistant/Users at the supplier site level by enabling descriptive flexfield. Users can process the invoices which are assigned to them based on the supplier site using a custom workbench. When a user logs in, they can see only the invoices which were assigned to them.
Assign Custom tolerance controls
At Supplier Site, custom tolerances can be assigned using custom user interface
Favorable Price %
To capture negative variances in case of billed prices are less than the PO Prices, to identify vendor performance
Max Price Amount
To capture the price variance is within the standard tolerance and greater than threshold max price amount
Min Chargeback Amount
To capture invoices which are within tolerance but exceed the min Chargeback Amount
Max Freight Amount
To capture the invoices whose Freight Amount is greater than the threshold
Distribution Variance Amount
Invoice total amount doesnt match the total lines amount and if the variance is within the threshold (Distribution Variance Amount) at the Supplier Site level, a pre-balance Miscellaneous line will be added to the invoice
Custom Invoice Holds
Automatic Matching Process
Custom Pre-Validation Process
Once the invoices are imported using Payables Interface Import, Custom Holds will be placed on the invoice lines based on the custom tolerance controls and custom holds using a custom pre-validation process. Using this approach, all custom-specific checks are applied on the invoices. Otherwise this would not have been captured using the Oracle standard invoice validation process, and the invoices would have been approved which results in a loss to the organization.
The following custom holds will be placed if the invoices meet the criteria: OD Max Price Hold:
For each invoice line, if the price variance is within the standard tolerance and greater than the threshold (Max Price Amount) at
the Supplier Site level, an OD Max Price Hold will be placed.
Later from Custom Dashboard, Vendor Assistants will release the hold by creating a Debit Memo for the price variance greater than the threshold amount or accepting the price.
OD Line Variance Hold:
Before importing into Oracle Payables, if the invoice total amount doesnt match the total lines amount and if the variance is within the threshold (Distribution Variance Amount) at the Supplier Site level, a pre-balance Miscellaneous line will be added to the invoice with the charge account derived from reason code setup. Once imported, an OD Line Variance Hold will be placed on the invoice.
OD Max Freight Hold:
If the Freight Amount on the invoice is greater than the threshold (Max Freight Amount) at the Supplier Site level, an OD Max Freight Hold will be placed. Afterwards, from the Custom Dashboard, Vendor Assistants will release the hold creating Debit Memo for the Freight Amount greater than the threshold amount.
OD Favorable Hold:
The Oracle standard invoice validation program applies necessary holds when variances exceed the tolerances assigned at each supplier site. However, there will be no holds placed if the variances are negative, when billed prices are less than the given PO Prices. Assigning an OD Favorable hold will help capture negative variances if the variance is greater than the threshold Favorable Price at the Supplier Site level.
This will help in improving Vendor Performance Score and the relationship between the organization and the Supplier. OD NO Receipt Hold:
If the received quantity for all invoice lines are zero, then OD NO Receipt hold will be placed. If any of the lines receive quantity
afterwards, OD NO Receipt hold will be released.
Subsequently, from Custom Dashboard, Vendor Assistants will create a Debit Memo for that invoice by choosing Chargeback action. Invoice accrual account will be charged with negative amount for the debit memo.
Custom Automatic Chargeback Creation
The Custom Automatic Chargeback Creation process will check for the all the invoice lines, if there are any variances within the standard tolerances at invoice line for both quantity and price. If the calculated totl variance amount is greater than the threshold (Min Chargeback Amount) at the Supplier Site Level, an automatic chargeback/Debit Memo will be created for that invoice, provided there are no lines which are outside the standard tolerance.
Line variance that are greater than the Standard Tolerance will be processed by Standard Invoice Validation process with necessary holds being placed if needed.
Subsequently, Vendor Assistants will process the invoice by either Creating Debit Memo or Pay the Invoice. Automatic Release of QTY REC holds for multiple invoices for the same item
For an item, if two invoices are received at the same time with one invoice having a billed quantity that is less than the total
received quantity and other invoice having a billed quantity greater than the total received quantity, the Oracle invoice validation process will place a QTY REC hold on both the invoices.
A custom process will check for those invoices, will release the QTY REC hold on one of the invoices based on the invoice matching, by checking billed and received quantity.
From Custom Dashboard, Vendor Assistant will complete the matching for the other invoice by creating a Debit Memo or by keeping the invoice on hold until the remaining quantity is received from the Supplier.
Automatic Processing of Invoice Lines Having Cost Variances
A custom process will capture the invoice lines that are having price variances, and it will be sent to the Item Control team which will analyze and upload the answer for the variances using an upload tool.
If the invoice line has a Price Hold and cost variance with an output as PO from the Item Control team and if no other hold exists for that invoice, then a Debit Memo will be created automatically.
If the invoice line has a Price Hold and cost variance with an output as INV from the Item Control team, a Price Hold will be released automatically.
Custom Dashboard – Manual Matching Process
Vendor Assistants will use the Custom Dashboard to resolve the matching process of the invoices that have holds. Match Out of Tolerance Invoices
The Match Error Employees Workable Summary User Interface displays all the invoices that are validated and have holds (Custom and Standard)
It displays the summary information such as Total Invoices and their amount, Line Hold Amount, invoices which does not have any receipt and invoices that have holds other than No Receipt Holds by Vendor Assistant.
Vendor Assistants can navigate to the next level by clicking Vendor Assistant or Match out of Tolerance (MOOT) or No Receipt Invoices (NRF)
Employee Vendor Summary
The Employee Vendor Summary User Interface displays all the invoices which are not validated and have holds (Custom and Standard)
It displays summary information such as Total Invoices and their amount, Line Hold Amount, Invoices which does not have any receipt and invoices that have holds other than No Receipt Holds by Vendor Assistant and Supplier.
Vendor Assistants can search by specific Supplier or Supplier Site.
Vendor Assistants can also navigate to the next level using drill down either from Vendor Assistant or MOOT or NRF (No Receipt Invoices)
Vendor Match Out of Tolerance Details
Vendor MOOT Details displays all the invoices which are not validated and have holds (Custom and Standard) that have that due dates are within 8 days
Displays detailed information for that supplier managed by the Vendor Assistant such as Supplier Information, PO #, Invoice #, due date and quantity hold and price hold amount.
Vendor Assistant can search by specific Supplier or Supplier Site or invoices having only Price/Quantity/Freight exceptions. To view all invoices irrespective of due dates, Vendor Assistants can search by checking All Pending Exceptions.
Vendor Assistant can navigate to the next level using clicking from the Invoice # to complete the matching for that invoice. Invoice and Hold Details
Invoice and Hold Details User Interface is the backbone of the manual matching process and will be heavily utilized by Vendor Assistants to resolve the invoice issues in order to complete the matching process.
Once you navigate to this user interface, the invoice is assigned to the Vendor Assistant, and no other user can work on this invoice unless this invoice is disassociated by clicking Unassign User button
Invoice Information will be displayed as:
Invoice Header Information
Invoice Level Holds (Header level holds are displayed in the header region)
Invoice Line Information
Invoice Line Level Hold Information (Line level holds are displayed in this region) The user can navigate to the line to view the corresponding line level holds
By Default, displays only the lines which are having holds
By Clicking Save button, the system displays Line Variance Amount automatically instead of manual calculation by Vendor Assistant
By checking, Query All Invoice Lines, the user can view all lines for that invoice
By checking, Query All Unmatched PO Lines, the user can view all unbilled PO lines.
Ability to add Miscellaneous or Freight Lines at the invoice line level by clicking Create Button
Ability to delete the invoice lines at the invoice line level by clicking X
Ability to update the price and quantity at Line and Hold Level
Ability to auto chargeback an invoice freight line if the allowed freight amount is zero
Ability to cancel an invoice by clicking Cancel Invoice Button, thereby avoiding the need to navigate to the Standard Invoice Workbench
Ability to complete the matching by releasing the hold without creating Debit Memo or releasing the hold as well as creating Debit Memo by selecting Chargeback
Ability to swap the line with unmatched lines from PO and complete the matching process, if the supplier wrongly placed an item which was not received using Query All Unmatched PO Lines.
Ability to mass release the holds and chargeback for all lines by selecting Select All check box instead of line by line and selecting corresponding quantity or price reason code
Ability to chargeback an invoice freight Line, whose Freight Amount is greater than the threshold amount at the supplier site level
Ability to resolve the Line variance hold by assigning reason code, the system will balance the invoice by adding a miscellaneous line or Freight Line with the charge account, derived based on the reason code
Ability to split the QTY REC hold line and perform receipt adjustments with a reason code by clicking Create button in the hold region.
Ability to split the PRICE hold line and chargeback, based on the answer from the Item control team with an output as OTH, a debit memo will be created for the price difference between the Invoice and Item control.
All the actions performed can be saved using Save Button
Final Action can be performed by Clicking Apply button. The system will validate to see whether all the lines are resolved by either releasing the hold/Chargeback and the corresponding reason codes are applied and invoice total matched.
A custom program will be initiated to process the actions taken by the user.
If the action needs to add/update the invoice lines, invoice will be cancelled and recreated with new changes and invoice validation will be called to validate the invoice.
If the action is to chargeback, a Debit Memo will be created, and invoice validation will be called to validate the invoice.
If the action is to release holds, holds will be released.
A notification will be sent to Trde Payables distribution list with all the invoices processed as well as any errors encountered during the process.
Match rate provides a quick graphical view on each day, how much percentage of invoices are being processed without any manual intervention, how much percentage of invoices are on hold. This provides a historical view, which helps management to analyze the data and take any corrective action on how to improve the invoice matching process to help in managing the cash flow
Measurable matching functionality, tracking and reporting
Reduced manual processing and streamlined business processes
Configurable to quickly react to changes in business processes
Enhanced accuracy and consistency of data
Improved security (role-based access)
Detailed video of custom matching engine which explains the complex scenarios handled by the system can be accessed @
With this Systematic Automatic and Manual Matching Process, Accounts Payables invoice matching process will be improved tremendously and will help the management to quickly address issues with the vendors as well as huge cost savings to any organization which utilizes this solution by closing loop holes of the standard process.