Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily, and I’m a digital transformation consultant at Hyperbots, I’m very pleased to have Jon Naseath on the call with me. Jon is a chief operating officer at Osmo. The topic that we’d be discussing today is why matching invoices with purchase orders and goods receipt notes is tedious, and also how AI solves it. Thank you so much for joining us, Jon. To start off, can you please explain some of the major challenges that organizations face with invoice matching to purchase orders and goods receipts?
Jon Naseath: The fundamental issue is, vendors want to get paid. You’ve got all this purchase order process upfront to get approval for payments, and accounting isn’t going to release the funds until you’ve verified that the services have been done or the goods receipts have been received. The hold-up is usually vendors calling up their contacts within the company and saying, “Where’s my money?” And then you have to verify, “Well, did you get the work or the goods?” Then you can pay them. Accountants love paying people, but they want to make sure the boxes are all checked.
Emily: Can you provide an example of how complex matching requirements can affect the invoice processing workflow?
Jon Naseath: Sure. It’s usually data disconnects. There was a plan when the PO was created, and then the invoice had something slightly different. With goods receipt, it should be straightforward. For example, the invoice lists 100 units of product, and the PO specifies 90, but the goods received say 85. They’re trying to charge you for 100, but you approved 90, and they only sent 85. So what are you going to pay them? It usually takes effort instead of flowing through automatically.
Emily: Understood. What are some of the common format differences between invoices, POs, and GRNs that complicate the matching process?
Jon Naseath: A lot of times, especially in international transactions, there are differences like month-day-year versus day-month-year formats. There are also differences in units of measure whether it’s quantities or services provided. Sometimes the invoice might be for work performed, and you have to verify if they completed the work. Did they do what they were supposed to, or are they just saying that? Also, is the person signing off on the work holding the vendor accountable, or just saying “pay them”?
Emily: Got it. So, Jon, how does data entry error impact the accuracy of invoice matching?
Jon Naseath: If it’s intentional, it’s a fraud, but if it’s an error, it can be small things like entering the amount in euros when you’re expecting US dollars. Data entry errors like this can cause issues with reconciling numbers. For new vendors or publishers, it can be a lot of work to chase down little data points. Meanwhile, vendors are asking, “Where’s my money?” Another example is when a customer uses a DBA (doing business as) name, and they send a slight variation of their name, like Vendor Inc. instead of Vendor LLC. Data quality matters.
Emily: It sounds incredibly overwhelming. So how can AI help in automating the data extraction and normalization process?
Jon Naseath: It’s two-fold. First, avoid the issue in the first place. AI can help by reconciling the data against the PO to catch discrepancies before sending it. This helps vendors get paid faster. On the receiver side, AI can flag errors quickly so they can be resolved before reaching accounts payable. Ideally, it flags the issue and sends it to the business owner of the account to fix it before accounts payable is even involved.
Emily: Got it. What role does AI play in detecting and correcting errors in invoice processing?
Jon Naseath: AI can identify common errors in documents like typos, incorrect item codes, or mismatched numbers. It also looks at historical data trends to detect patterns. If an accounts payable clerk is manually processing hundreds or thousands of invoices, they can easily miss these issues. I remember joining a company where the accounts payable clerk was buried under a mountain of invoices. We automated some of it, but it was still painful. AI can help people in these situations and reduce their workload.
Emily: Can you explain how AI algorithms detect anomalies and discrepancies in invoice matching?
Jon Naseath: AI is very effective at identifying patterns and spotting discrepancies in quantities, prices, or item descriptions. AI does this across hundreds of variables and can instantly flag issues that a human might miss. A typical accounts payable clerk might not be motivated to catch these anomalies, especially if they’re overwhelmed by the volume of work. AI helps mitigate those risks.
Emily: How does AI handle the challenges of matching invoices that reference multiple purchase orders or involve partial deliveries?
Jon Naseath: In accounting, it’s easy to think everything should line up perfectly in a two-way or three-way match, but in reality, you often have invoices referencing multiple POs or partial deliveries. You don’t want to delay payments by asking vendors to reissue invoices. AI can reconcile these discrepancies and help keep everything in order across big POs and multiple transactions.
Emily: To wrap things up, what are the key benefits of integrating AI into the invoice-matching process for an organization?
Jon Naseath: Integrating AI into invoice matching automates repetitive tasks, reduces manual errors, improves data accuracy, and enhances anomaly detection. It helps you get the job done faster and protects you from costly errors, like overpaying a vendor or missing a payment. AI is like having an extra set of eyes to help you avoid mistakes.
Emily: Got it. Thank you so much, Jon, for talking to us about why matching invoices with purchase orders and goods delivery notes is tedious, and how AI can help. It was great having you today.
Jon Naseath: Great, my pleasure.
Moderated by Sherry, Digital Transformation Consultant at Hyperbots
Sherry: Hello and welcome to all of our viewers on CFO Insights. I am Sherry, a financial technology consultant at Hyperbots, and I’m very excited to have Shaun Walker here with me, who is a seasoned internal audit leader, with a wealth of experience in driving risk management, compliance, and governance initiatives across diverse industries. Thank you so much for joining us today, Shaun. We’re going to discuss some important aspects of closing purchase orders and how organizations can improve this process. Now let’s dive right in. Before we talk about the best practices, I wanted to first start by asking you about some of the most common challenges you encounter when closing purchase orders.
Shaun Walker: Sure. So in my experience, some of the main things would be invoices not being matched, there being partial deliveries, items being returned, sometimes discrepancies between goods not received, purchase orders, and often there may be difficult workflows. Depending on the amount or the dollar value of the invoice, there may be several different people that have to approve before getting to the final.
Sherry: Adding on to this challenge, how do unmatched invoices contribute to POs remaining open for extended periods, and what strategies can be used to address this issue?
Shaun Walker: One thing is being able to automatically match those invoices. Having a system implemented that does it where it’s not a manual process and speeds it up. Also, performing regular audits or reconciliations will also make the process more efficient.
Sherry: As we are already talking about strategies, what best practices can be adopted to manage blanket POs and ensure they do not remain open longer than necessary?
Shaun Walker: Being able to track receipts is one thing. Also, having clear end dates for blanket POs would be really good for closing them out in a timely manner.
Sherry: One of the most commonly faced problems in the industry is regarding service POs, which often face challenges in the receipt process. How can organizations effectively manage and close service POs?
Shaun Walker: One thing they can do is integrate a service receipt process within their ERP system. Depending on the company, they’ll have different ERP systems and functionality. However aligning those systems will allow for PO closure, and that will help with the process.
Sherry: About yet another obstacle, how can a lack of diligence in PO creation affect the PO closing process, and what steps can be taken to improve this?
Shaun Walker: A couple of examples, there might be difficulties or complications with closing POs, different delivery, and invoice staging. One of the things that we can do is implement standardized templates and have a detailed approval process, and that’ll enhance the accuracy of the POs as they’re being created.
Sherry: Since AI is taking the finance industry by storm, I have to ask, what role does AI play in improving the PO closing process? And what specific AI applications have proven effective?
Shaun Walker: The great thing with AI is it’s able to somehow predict the future. It can look at data and potential issues. With AI, we can optimize workflows, and create automatic matching, and automatic reconciliation as well.
Sherry: From your experience, can you share some examples of how vendor performance issues have impacted the PO closure? And what strategies can mitigate these issues?
Shaun Walker: Sometimes when products are being delivered, they might be delivered in incorrect quantities, or even if it is the right quantity, it might not be delivered at the right time. Having systems in place that track these things for you, creating less likelihood of human error, is the key to improving the invoicing process.
Sherry: Makes sense, Shaun. What recommendations do you have for organizations or our viewers looking to streamline their PO closing processes and reduce the number of open POs?
Shaun Walker: The main thing is looking at their ERP system to see if there are any updates for optimization. Having a system in place that can perform reconciliations, update workflows, and automatically match these invoices will increase the overall efficiency of the system and the invoice processing in an AP department.
Sherry: Thank you so much for such an insightful session, Shaun. Your views on such notable concerns in the industry are invaluable for organizations looking to enhance their PO closing processes.
Shaun Walker: Absolutely. Thank you so much.
Moderated by Emily, Digital Transformation Consultant at Hyperbots.
Emily: Alright. Hello, everyone! This is Emily, and I am a digital transformation consultant at Hyperbots. Today we are joined by John Silverstein, and we’ll be talking about strategies for matching in accounts payable. John is the VP of FPNA at Extreme Reach and has over 20 years of experience navigating Fortune 500 giants and dynamic startups. Let’s dive right into the topic, John. Just to start with a very easy question: What is the choice of fields for matching in the accounts payable process, and why is it critical for any organization?
John Silverstein: This is one of the most important parts of the AP process. Once you set up the matching criteria, it controls whether your matching is efficient and accurate and whether you’ll need to perform rework. Essentially, it ensures that we pay for what we purchase. Proper matching can prevent errors, fraud, and overpayments while ensuring compliance with contracts and internal policies. However, being too strict on the matching can slow down processes. It’s not just about the matching itself; it’s also about what data you’re gathering. You might match on three or four fields, but you could be gathering 20 fields, which may not need exact matches but can help inform decisions down the line.
Emily: Got it. So, John, can you explain the difference between two-way and three-way matching and when each is most appropriate?
John Silverstein: Two-way matching doesn’t involve the receipt of goods; it’s based only on matching the invoice with the PO. This method speeds up the process since you’re matching PO fields against the invoice fields. It’s especially useful for services or low-value transactions where you don’t necessarily have goods to receive. Three-way matching, on the other hand, includes the receipt of goods. This ensures that what you ordered on the PO is what was received. This method is more thorough and is ideal for high-value or high-risk items.
Emily: In your experience, what are the most critical fields to include in three-way matching, and why?
John Silverstein: The most critical fields are the PO number, quantity, unit price, and total amount. These fields ensure that you’ve received everything as expected and that the invoice matches the PO. The PO typically contains all the necessary accounting details, which predetermines how the item is booked once received. The PO number links to the invoice, while the quantity and unit price confirm that what was ordered matches what was billed.
Emily: Should the address field also be considered for matching?
John Silverstein: The address field is hard to match but critical for capturing from a sales tax perspective. Matching addresses can be tricky because billing often happens through different entities with varying addresses, which can slow down the process. While it’s essential for tax compliance, in my experience, I don’t usually match the address due to the many nuances.
Emily: Makes sense. Should the dates on invoices be matched as well?
John Silverstein: Yes, but dates should be matched within a tolerance. An exact match isn’t always expected since invoices might be issued a day before or after the receipt of goods. There are multiple dates like order date and ship date, making it confusing. AI can help with this by identifying the appropriate dates, but it’s still important to have some flexibility when matching dates to avoid unnecessary back-and-forth.
Emily: What do you do for tax matching?
John Silverstein: Sales tax typically isn’t matched at the PO level as the PO might not include sales tax details. However, it’s crucial to capture and validate this information. If you’re tax-exempt, you want to ensure you aren’t being charged incorrectly. Even when there’s no sales tax, it’s still important to check since your organization might still be liable.
Emily: What are the potential risks of matching too many fields in the AP process?
John Silverstein: The main risk is that you’ll never achieve an exact match on all fields like descriptions, item codes, product codes, and dates due to differences between the vendor and your system. It’s crucial to only match fields that are necessary for catching fraud and discrepancies like quantities and amounts. Matching too many fields can lead to errors, confusion, and manual processing, which defeats the purpose of automation.
Emily: On the flip side, what could be the consequences of matching too few fields?
John Silverstein: Matching too few fields, like just the PO, could result in missing key details such as quantities received. It’s important to strike a balance matching enough fields to ensure accuracy without overcomplicating the process. Depending on your industry, you’ll have different rules and risks to consider, but finding the right balance is key.
Emily: How can AI play a role in optimizing the matching process?
John Silverstein: AI accelerates the process by allowing systems to read invoices and correctly match them with POs and receipts. In the past, this was a manual process, often involving paper checks. AI not only automates this process but also improves accuracy by identifying potential matches that might not be straightforward. As AI learns over time, it can even begin to match more fields that weren’t possible before, reducing errors and manual interventions.
Emily: How do you balance the need for accuracy with the need for efficiency in the AP process?
John Silverstein: It’s all about how many fields you’re matching and capturing. Accuracy is crucial because it impacts accounting, audits, and overall financial integrity. AI helps by learning and adapting over time, enabling you to strike the right balance between accuracy and efficiency. As AI continues to evolve, it will further optimize this balance by reducing manual checks and improving the precision of automated matching.
Emily: Looking ahead, how do you see the role of AI and technology evolving in the accounts payable process?
John Silverstein: AI will make AP processes much easier by taking over tasks that currently require manual effort, like data entry. The keystrokes and data entry AP clerks handle today should become minimal. AI will also improve the integration between AP and AR processes, simplifying how invoices are issued and paid. Eventually, AI will handle complex formats and requirements, transforming how organizations interact with vendors and customers. It’s exciting to think about the potential AI has to make accounts payable more efficient and less error-prone.
Emily: Thank you so much, John, for sharing your insights on such an important topic. It’s clear that the right approach to matching in accounts payable, when supported by AI, can significantly impact a company’s financial health and operational efficiency.
John Silverstein: No problem. Thank you.
Moderated by Sherry, Financial technology consultant at Hyperbots
Sherry: Hello and welcome to all our viewers on CFO Insights. I am Sherry, a financial technology consultant at Hyperbots, and I’m very excited to have Mike Vaishnav here with me, an experienced finance executive with experience in global operations, strategic leadership, and a proven track record in driving results across finance, M&A, controllership, and corporate strategy in diverse industries. Thank you so much for joining us today, Mike, to discuss the challenges and strategies for matching invoices with blanket purchase orders. First, could you briefly explain the key differences between a blanket PO and a specific PO?
Mike Vaishnav: Sure. Thanks, Sherry. The blanket PO is used for ongoing purchases with a predetermined amount or quantity. It is open for a specific period of time or amount where you’re going to receive goods, but there’s no perfect quantity or fixed price. The amount is set, but the exact quantity for each purchase may vary. A specific PO, on the other hand, is tied to a one-time purchase with a fixed quantity and amount. You know exactly what you want to order, and it ensures that the exact amount of goods or services will be delivered. For example, with a blanket PO, you might decide to buy 1,000 units over the next six months for $100,000. The quantity can come in multiple deliveries, and you would match the quantity received against the PO, such as 100 or 200 units at a time. Another example of a blanket PO is for consulting services or projects. You might set up a blanket PO to cover a specific project with a set budget, including services like legal or audit fees. Payments are matched against the progress of the services rendered. A specific PO, however, is for ordering a specific quantity of goods in a one-time or limited purchase.
Sherry: And given the open-ended nature of blanket POs, how do you approach the matching of incoming invoices with these POs?
Mike Vaishnav: Matching can sometimes be tricky with partial deliveries, but you need to match the delivery of the product or service to the PO. For product-based blanket POs, it’s relatively straightforward you receive 100 units, and you deduct that from the total PO amount. For services, it depends on the deliverables and how the service is invoiced. If it’s based on time, such as contractor hours, you can match the timecards to the PO but service-based blanket POs can be more challenging to match than goods, where quantities and delivery schedules are clearer.
Sherry: And how do you track the cumulative spend and quantities against a blanket PO to ensure the limits are not exceeded?
Mike Vaishnav: There are various ways to track this. One method is using a cumulative tracking system within the accounts payable function. The accounts payable team monitors what goods have been received and how much of the PO has been used. This allows for continuous monitoring of the remaining quantities and amounts, ensuring that invoices don’t exceed the PO limits. Some companies use integrated systems to track this automatically, while others may use add-on solutions or manual tracking to ensure compliance.
Sherry: And what role do tolerance levels play in the matching process for blanket POs?
Mike Vaishnav: Tolerance levels are crucial. They set the acceptable range for discrepancies in price or quantity, determined by the company based on the materiality of the item. Some products may have higher or lower thresholds depending on their nature. If the variance is within the tolerance level, say 5% plus or minus, the system can approve the invoice automatically. However, if the discrepancy exceeds the threshold, it requires further review and approval.
Sherry: From your vast experience, could you describe the approval workflow for invoices that exceed the set tolerance levels?
Mike Vaishnav: If the invoice exceeds the set tolerance levels, it triggers a workflow for approval. Based on the company’s workflow, it will route the invoice to the appropriate person for review, following the approval hierarchy and limits. If the variance is minor, a lower-level manager might approve it. However, if it’s significantly higher than the threshold, it escalates to higher-level management or even executive approval. The rationale behind the variance must be justified, whether it’s due to contractual terms or other factors like the vendor shipping more to clear out their inventory.
Sherry: Since AI has taken the finance industry by storm, I have to ask, how can AI enhance the efficiency of matching invoices with blanket POs?
Mike Vaishnav: AI significantly enhances the efficiency of matching invoices with blanket POs. It can analyze and flag discrepancies that require manual intervention by predicting potential mismatches based on past trends and patterns. AI can also streamline the process with ERP systems to match quantities and flag issues in real time, helping catch errors more quickly. It also speeds up workflow approvals, enabling faster resolution of any problems and ensuring compliance through predictive analytics.
Sherry: And since we’re talking about efficiencies, what are some best practices you follow to ensure effective matching of invoices with blanket POs?
Mike Vaishnav: First, establishing a robust process is key, whether through an ERP system or using AI-based tools. Regularly reviewing and auditing the PO matching process helps identify any discrepancies early. Clear communication with vendors is also essential. Discrepancies often arise from mismatches in received quantities or incorrect invoices. Timely reporting, reconciliation, and monitoring of open POs to address why they haven’t been matched yet are also critical.
Sherry: Finally, how do you ensure compliance and control in the process of matching invoices with blanket POs?
Mike Vaishnav: Compliance is ensured through strong processes. Setting up proper tracking and tolerance levels, implementing approval workflows, and following internal policies help maintain control. Regular audits, reconciliations, and system-based controls further ensure that blanket POs are handled efficiently and accurately. AI can assist in monitoring for unusual activity and ensuring that any issues are addressed promptly, improving overall compliance.
Sherry: Thank you so much for these insights, Mike. This has been a very informative discussion on the complexities and strategies for managing blanket POs.
Mike Vaishnav: Thank you. Nice to be here.
Moderated by Sherry, Financial technology consultant at Hyperbots
Sherry: Okay, so let’s start. Hello, and welcome to all our viewers on CFO Insight. I am Sherry, a financial technology consultant at Hyperbots, and I’m very excited to have Jon Naseath here with me, he is an accomplished executive with expertise in AI, machine learning, and computer vision driving impactful technology solutions in education, healthcare, and business. Thank you so much for joining us today, Jon, to discuss the challenges of invoice template standardization and how AI might offer a solution. Let’s dive right into the topic with our first question. In your experience, what are the primary challenges companies face when trying to standardize invoice templates across their operations?
Jon Naseath: Sure. The main issue is that the invoice is the representation of your transaction with that customer and just like there are every different type of transaction in the world, having to accurately represent that through a paper document is complex and as diverse as the transactions are personalized invoices often create similar complexity.
Sherry: And how do vendors typically react to requests for invoice standardization and what impact does this have on the relationship between vendors and clients?
Jon Naseath: Sure. Vendors usually want it to represent their point of view. So they’ll usually want some customized language or some format that represents their business model, and that creates complexity because it might just not be possible with the system they’re using. Oftentimes, you’re just like, “Well, this is what we can do,” and then you end up creating an addendum or some other side document, which isn’t ideal in any contract.
Sherry: And from your perspective, why do you think there hasn’t been a universally accepted standard for invoices, despite multiple initiatives like UBL and EDI?
Jon Naseath: Yeah, so that’s kind of like one end of the spectrum to the other. It’s either the customer wants it to represent their transaction, or we’re going to align and kind of force all transactions to comply with the same transactional standard. Within different industries, you can use EDI as an example if you’re doing high transactions of certain products. But oftentimes, again, if you’re trying to represent the unique nature of the transaction you’re doing, it just isn’t applicable. I think there could be interesting opportunities per industry, and I have seen different standardization around e-commerce transactions or things that go through, say, QuickBooks or whatever the ERP system is but that’s fairly generic and just isn’t applicable to a lot of transactions that exist.
Sherry: Right. And in the industry right now, some businesses prefer detailed invoices, while others prefer summary invoices. How does this preference diversity contribute to the failure of standardization efforts?
Jon Naseath: Sure, it comes down to what is the nature of the transaction that you’re doing. So if you have a complex multi-year transaction where there are a lot of details that go into figuring out that exact agreed-to price, that can cause complexity in what might otherwise just be a simple line item in your transaction. Also, if there are contingencies or sub-components, they want to show how these sub-components roll up to this overall product offering price. It’s just the nature of what you’re trying to represent and sell. If you don’t do that, if you don’t represent what the customer wants, then you often end up with the invoice just becoming a one-line item or an overly simplified document and then you have the statement of work or the agreement that has more details of what is actually the service order of what is being done.
Sherry: That makes sense, Jon. How do system interoperability issues contribute to the challenges of invoice standardization? And what are the potential consequences for businesses?
Jon Naseath: Sure. Well, one of the main issues, and using that same example that I just said, is if the actual transactional details of what your deal is going to be are not on the invoice, then finance and accounting might not be able to have the visibility to understand what that transaction was for or if something changes or needs to be different, which is represented in the service order, that can create a situation where finance or accounting just don’t have visibility in the ERP system or accounts payable to see what the change was for or why it happened. Then they have to go back to the service order, back to the transactional details that are on a different document, and try to understand what happened. So the more that the invoice can be an accurate representation of the transaction, it just helps everybody.
Sherry: Can you share some examples from what you have seen in the industry of past standardization initiatives and why they didn’t achieve the desired outcomes?
Jon Naseath: Sure. The main example that always pops into my head is when we were trying to create standardized invoices across a global company where we had merged together six or seven different entities that had been acquired. We found that overall, companies once we got standardized structure and line items all figured out everything was good. Then, we came to find out that in Japan, the standard was that if you’re going to have an invoice with a customer, they require a physical signature to pay it. That was something we hadn’t considered the need to physically sign the invoice before sending it in. We were able to work around it and find ways to have a place where they could sign and print it out to support their own need. So we had a standardized process overall, with an option for where a unique region needed a specific requirement, allowing them their own exception, while still recognizing that this process could be standardized globally with localized exceptions.
Sherry: And since everybody is talking about AI, how do you see AI potentially solving the problem of invoice standardization by handling non-standard inputs?
Jon Naseath: Sure. It just enables you to step away from the structured requirements. The invoices will still have their structured baseline, and each company could have its own standard. But when you receive an invoice or a bill from a client, AI can read it, digest the information, and let you know if theres something to review. More often than not, it will capture all the variations without needing to force the inputs to be standardized.
Sherry: What advice would you give to CFOs or our viewers considering AI-based solutions for handling non-standardized invoices in their organizations?
Jon Naseath: Yeah, be patient. It’s coming. The technology is coming, and it’ll be here sooner than later. One of the challenges will be finding the right opportunities for the people who are currently manually doing a lot of that work because AI is going to automate a lot of it and make it a lot simpler. For CFOs, start looking at who on that team you can help coach up and train to do other areas or more value-added tasks because AI will replace a lot of that manual workload.
Sherry: Thank you so much for these insightful answers, Jon. It’s clear that while standardization has its challenges, AI offers a promising future to navigate these complexities.
Jon Naseath: My pleasure.
Moderated by Emily ,Digital Transformation Consultant at Hyperbots
Emily: All right. Hi everyone. This is Emily, and I am a digital transformation consultant at Hyperbots. For today’s discussion on the evolution of the Procure-to-Pay process, I’m very glad to have Tony on the call with me. Anthony is the VP of Finance at Delcath. Anthony, would you mind telling us a little more about yourself before we get started?
Anthony Dias: Sure. I’ve over 30 years of experience. I started my career in public accounting many years ago and then moved into the private sector. I’ve worked in small to medium-sized companies, most of my career in companies that are probably in the startup phase that needed more experience to kick into the next level through public stages or acquisition phases of the company or growth phases. I’ve had an opportunity to work for a very large organization that got sold for five billion dollars as well. So, I have a good understanding of good processes, good business practices in both small and medium-sized companies. The industries I’ve been in are mostly manufacturing, high-tech manufacturing, and for the last 10 or so years, the bio-pharma space where we have manufactured both devices and drugs. Most of my experience has been at the senior level of finance, both as CFO and VP of Finance, in both public and private companies, including private equity and VC-backed companies. So that’s a high-level background.
Emily: That’s amazing and really glad to have you here on this forum today. Along with the many organizations that you have worked in, you have also been associated with all the processes of finances as well. Would you like to share what kind of Procure-to-Pay initiatives you’ve been a part of in the various organizations?
Anthony Dias: Yeah, I would say when I first started, the Procure-to-Pay part of the organizations I’ve worked at was really manual. As I mentioned, most of the companies I worked with were startups looking for the next phase. As a startup, your biggest priority is making sure you’re paying your vendors and employees. But as you grow, you need to look at other facets of growth, and bringing on additional accounts payable folks may not be the most ideal use of your resources and cash. So, looking at systems and more efficient processes around procure-to-pay becomes crucial for supporting the growth of the business. This includes having proper controls in place and better processes from the purchasing side, ensuring proper approvals, processing invoices, paying the right vendors, and controlling payments.
Emily: Got it. Tony, for the sake of the audience, would you like to break up the overall Procure-to-Pay process into sub-processes?
Anthony Dias: Yeah, I would say the front end of the process is primarily the procurement process, where you may have a requisition process for purchasing a service or product. This involves ensuring the person is authorized and getting the best price by putting a bid out, working with legitimate vendors, and having the proper approval to spend the money. Then there’s the purchasing process, where a purchasing department might vet the vendor, negotiate the best price, and handle contracts. Once the decision is made, they issue a purchase order committing the organization to the purchase. The next phase is in the finance realm, ensuring receipt of goods or services, verifying the pricing and quantities, and making timely payments based on contractual terms.
Emily: And how do you see the evolution of these processes over the last decade or so?
Anthony Dias: There’s been a lot of evolution in the last 10 years. My career started 30 years ago, and for the first 20 years, a lot of it was very manual. In small finance groups, the focus was on paying vendors and employees. As companies grow, they tend to invest in other areas like sales and marketing, often overlooking the accounts payable and Procure-to-Pay processes. The accounts payable group grows but without additional resources, leading to inefficiencies. OCR technology has been helpful, where invoices are scanned and processed electronically, reducing errors and lost mail. Electronic invoicing and payments through ACHs or wire transfers have also become common, making the process more efficient and reducing the risk of errors and delays.
Emily: So, apart from OCR or digital adoption, what other tools and technologies are used in different aspects of the Procure-to-Pay process?
Anthony Dias: In the requisition process, technologies have been adopted by larger ERP systems, making everything more electronic and web-based, which is crucial as businesses become more global and remote. Mid-sized and smaller ERP systems might not invest as much in these areas. Technologies include electronic requisitions, purchase orders, and vendor price comparisons. In the accounts payable process, the adoption of electronic payments, capturing invoices through OCR, and other technologies have minimized manual errors and improved efficiency.
Emily: After the adoption of such tools and technologies, are there still challenges that exist on the procurement side?
Anthony Dias: The biggest challenge is time. Getting a requisition approved by a manager who gets many emails can be slow. The purchasing department also needs time to find the best price. For someone needing a product or service quickly, this process can be frustrating. Speeding up approvals and negotiations can help. There’s also the issue of adherence to processes and the perception that controls and procedures slow things down. Improving the speed and efficiency of these processes is crucial.
Emily: Why do you see many organizations still having significant elements of purchases without a rigorous PO-driven process?
Anthony Dias: It often comes down to the hesitation of non-finance folks to follow the process, preferring the ease of direct purchases as they do in their personal lives. The mindset in organizations is still not there for some. They might feel that going through the approval process is unnecessary when they can quickly purchase items online. But organizational purchases need to comply with standard practices, regulations, and ensure consistency. The process also ensures the company is not at risk and is getting the best terms.
Emily: Apart from the timing, what other challenges have you seen in the procurement process in general?
Anthony Dias: The three-way match process matching purchase orders, receiving goods, and invoices can be time-consuming. Discrepancies in quantities, prices, or quality of goods received versus what was ordered can cause delays and require back-and-forth communication with vendors. Resolving these issues takes time and can affect payment timeliness, leading to potential leverage issues with vendors.
Emily: What are the best practices in streamlining the procurement process to have better financial control?
Anthony Dias: Best practices include a robust requisition process with manager approvals aligned with budgets, a purchasing group vetting vendors and ensuring the best prices, timely receipt and verification of goods, and accurate and timely payment of invoices. Good communication between procurement and finance is crucial, ensuring everyone is aligned on budgets and vendor payments.
Emily: What kind of collaboration would you suggest between the finance and procurement teams to achieve the company’s common business objectives?
Anthony Dias: Procurement and finance should have a strong partnership. Purchasing should understand budgets and approval limits, consult finance when needed, and ensure proper vendor documentation flows to the accounts payable team. Collaboration in budgeting and forecasting is also important, ensuring purchases align with the company’s financial plans.
Emily: Can you share the inefficiencies that still exist in the procurement process despite best-in-class ERP implementations?
Anthony Dias: Some inefficiencies still exist due to resistance to change, manual data entry, and writing checks. People are often slow to adopt new technologies due to risk aversion and a lack of understanding of how these technologies can minimize risk and improve efficiency. Educating staff on new technologies, demonstrating their benefits, and investing in these areas can help address these inefficiencies.
Emily: Apart from the mindset, what else do you think is needed to improve these processes?
Anthony Dias: Investing in these areas is crucial. As companies grow, they need to re-evaluate and invest in their accounts payable and procurement processes to avoid inefficiencies and risks. Continuous education and training for staff on new technologies and best practices, attending conferences, webinars, and networking with other professionals in the field can also help improve these processes and keep them up-to-date with industry standards.
Emily: One last question: what do you think could be done to address these inefficiencies better?
Anthony Dias: Education is key. Accounts payable clerks, CFOs, and controllers need to stay informed about new technologies and industry best practices. Networking with peers, attending conferences and webinars, and bringing in experienced people can help. Investing in technology and processes will help organizations grow efficiently and keep employees motivated and engaged by reducing manual work and improving job satisfaction.
Moderated by Emily Digital Transformation Consultant at Hyperbots
Emily: All right, welcome back Tony to this segment. Thank you so much for walking us through the Procure2Pay overview and the challenges involved. In this segment, we’ll be talking about the future roadmap of the Procure2Pay process, some examples, and the advantages of AI in the Procure2Pay space. Before we get into the questions, would you mind introducing yourself and telling us a bit more about you?
Anthony Dias: Yes, sure. I’m Anthony Dias. I’m Vice President and CFO for a biotech company in the Boston area. I’ve been a senior finance person in both public and private companies, ranging from smaller organizations to mid-sized ones, and I’ve had the opportunity to work for a large organization that sold for over five and a half billion dollars. Most of the industries I’ve been involved in are the medical space and manufacturing.
Emily: Got it. Thank you so much for that introduction, Tony. In the last segment, you mentioned that embedding AI in different tasks in the Procure2Pay processes could remove some inefficiencies. Could you highlight some examples of this?
Anthony Dias: Yes. Using AI could speed up the matching process, especially the three-way match process in AP. AI can read invoices faster and more accurately than a human AP clerk. It can process invoices quickly, matching the receipt, purchase order, pricing, quantities, and unit price. This process, which can be time-consuming and manual for AP personnel, can be handled swiftly by AI. AI can help identify mismatches quickly, allowing AP personnel to focus on resolving errors rather than processing entire invoices.
Emily: Correct. So apart from reducing redundant tasks, you also touched on how the roles of procurement or accounts officers would evolve with AI adoption. Could you elaborate on that?
Anthony Dias: Yes, it empowers finance teams by eliminating repetitive, clerical work. AP clerks, who usually handle a high volume of invoices, often find their tasks monotonous and unengaging. With AI handling the manual processes, clerks can shift to more analytical roles, examining data trends, looking for savings opportunities, and optimizing payment schedules. Similarly, AI can assist in purchasing by finding the best prices and making procurement decisions more efficient.
Emily: Correct. Can you delve deeper into the learnings and unlearnings necessary to fully leverage AI in Procure2Pay?
Anthony Dias: There’s often hesitation about integrating AI into AP processes due to concerns about security and risk. However, with strong security programs, segregation of duties, and robust controls, AI can significantly lighten the workload. AI can handle heavy lifting, such as checking for duplicate invoices and pricing errors, while humans can focus on approval processes. Learning to trust and adapt to AI’s capabilities while ensuring security measures are in place is key.
Emily: Got it. So, what are the risks you see in adopting AI in Procure2Pay?
Anthony Dias: People risk is significant. AP cler
ks might fear job loss or significant changes to their roles due to AI. This can be mitigated by involving them early in the AI adoption process, providing proper training, and explaining how AI will help them perform better and focus on more analytical tasks rather than clerical ones. Ensuring they feel part of the change and understanding AI’s benefits can ease the transition.
Emily: Got it. And any specific recommendations for the order of tasks for AI adoption in the Procure2Pay space?
Anthony Dias: Start with tasks that offer immediate efficiency gains and minimal risk, such as invoice processing using OCR technology and automating manual data entry. Gradually incorporate more complex AI functions, like payment term optimization and vendor management. Ensuring a phased approach allows for better adjustment and minimizes disruptions.
Emily: Understood. What would be your advice on building versus buying AI and automation solutions?
Anthony Dias: It depends on the company’s resources and focus. Major companies like Oracle, SAP, and NetSuite are developing AI solutions, but their primary focus isn’t AP or purchasing. Smaller companies might offer more specialized and adaptable AI solutions. The decision to build or buy should consider the specific needs of the organization, risk tolerance, and the capability to integrate these solutions with existing ERP systems.
Emily: What AI solutions do you see emerging in the Procure2Pay space currently?
Anthony Dias: AI can optimize cash flows by analyzing payment terms, cash availability, and ensuring timely payments. It can perform trend analysis, identify opportunities for savings, and suggest payment schedules. AI can handle tasks like coding invoices, matching them with purchase orders, and managing vendor relationships more efficiently. These capabilities allow finance teams to focus on strategic decision-making rather than routine tasks.
Emily: Great. So, what adoption rate do you foresee for AI-led Procure2Pay solutions over the next couple of years?
Anthony Dias: Adoption will increase as more companies realize the efficiency and cost savings AI offers. Manual tasks like data entry will become obsolete, replaced by OCR and AI-driven automation. Purchasing processes will become more streamlined, with AI quickly analyzing quotes and selecting the best vendors. Overall, AI will transform Procure2Pay processes, reducing the need for manual intervention and allowing finance teams to focus on strategic tasks.
Emily: Got it. Thank you so much, Tony, for sharing your insights on the evolution of Procure2Pay, the current landscape, challenges, future roadmap, and the infusion of AI. It was great having you here.
Anthony Dias: Thank you.
