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The Compliance Conundrum: Are You Reactive or Proactive About Your Invoice Management Processes?

Compliance has become a big concern for many organizations over the last few years, even within the accounts payable world. But the question is whether companies are taking a proactive approach to compliance or a more reactive stance, just dealing with regulatory and legislative requirements on an as needed basis.Compliance Conundrum image

In January 2013, ADP and CFO Research, a unit of CFO Publishing, surveyed 150 senior finance executives about their strategies for keeping their companies in compliance with employment-related tax and payment laws. The results of the online survey indicate that finance executives are under pressure to take a more comprehensive view of compliance, streamlining activities to help improve efficiency and ensure that they can continue to increase the strategic value that they provide.

The survey revealed that a clear majority (nearly 90 percent) of respondents view employment-related tax and payment compliance as a priority, only one-third reported that their approach is more reactive than proactive.

Within the accounts payable world, significant emphasis is placed on regulatory compliance, with organizations often focusing budgets and resources on tasks like:

  • Processing and filing of 1099 forms;
  • Vendor master maintenance for TIN matching;
  • Sales and use tax reporting requirements; and
  • Escheatment or unclaimed property management. 

But while regulatory compliance may take the front seat, process compliance may often be delegated to the back burner. Is your AP department paying the same attention when it comes to complying with policies and procedures around invoice and payment processing?

  • Validation of invoices at submission: Do you have the necessary checks and balances in place to verify the information on invoices coming from suppliers – appropriate purchase order numbers, requestor information, duplicate invoice validation, for example? 
  • Price compliance against contracts: Do you check whether pricing on invoices is in alignment with any contracts that have been negotiated by the procurement department to ensure that you are not being overcharged for goods and services or missing any volume discounts? 
  • Capture of early payment discounts: Do you know if you are able to capture all discounts offered by suppliers for making early payments? Or are you missing discounts either because your approval process is longer than the discount window or because the AP department lacks visibility into negotiated discounts? 
  • Duplicate/erroneous payment checking: What measures do you have in place to check payments before they go out the door to ensure that you are not paying the invoice twice or that you are paying a supplier that has not been set up correcting within your vendor master? 

Some organizations lack the necessary policies and procedures to help them minimize these errors within the AP process. But even the ones that have strict guidelines in place may find it difficult to actually ensure and monitor compliance when chasing paper. Automating invoice and payment management processes can go a long way in helping to address some of these issues.
 

 



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