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8 Ways your AP Process Leaks Spend – and How AI can Prevent it

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8 Ways your AP Process Leaks Spend – and How AI can Prevent it

Today’s companies put huge efforts into negotiating the best terms with their suppliers. Procurement teams regularly spend weeks or months going back and forth on contract terms and volume discounts to get the most bang for their buck.

Too often, these savings aren’t realized. Suppliers may ignore the negotiated terms when invoicing, and AP teams, faced with a deluge of invoices and limited time to get payments out the door, only sample select transactions and only do basic 2 or 3 way matching of volume and price. This inevitably means costly invoice problems fall through the cracks — from mismatched invoice and contract terms, to unapplied discounts, to completely bogus charges, and more.

Optimizing your AP process may seem like a big undertaking, but it’s much easier than it might seem, and worth the effort. According to The International Association of Contracts and Commercial Management (IACCM), companies that work to improve controls over invoice payment will see a return of more than 4 percent of invoice value.

Even if you’re ready to improve your AP process, one pesky question remains: How do you actually do it? Once upon a time, it would have been necessary to hire more people to check every transaction. But today, technology can provide a crucial and cost-effective assist for overstretched AP teams.

Artificial intelligence (AI) is becoming more and more common in business contexts. Nearly 90 percent of companies planned to increase AI spend in 2019, according to a Deloitte survey. However, the idea of actually using AI may feel a little unrealistic for some. While more and more corporations are automating AP processes, 30 percent of businesses still rely on manual invoice processing, according to The Institute of Finance and Management.

If you’ve already implemented other technologies in your workflow, AI can fit in seamlessly. AI-powered spend automation software integrates with existing expense management, invoice automation, contract management, and ERP systems to augment rather than disrupt your status quo.

8 common (and costly) invoice problems

Here are just a few of the problems AI-powered solutions can help your team avoid during the spend audit process:

1. Fraudulent invoices: When it comes to invoice fraud, if you can dream it, chances are fraudsters have tried it: From inflated invoices, to completely made-up charges, to shell companies, to vendor impersonation, and more.

Too often, the calls are coming from inside the house. The Association of Certified Fraud Examiners (ACFE) found that occupational fraud (fraud committed by employees against employers) resulted in more than $7 billion in total losses in 2018. AI systems with a compliance component can spot risk factors commonly associated with fraud so your team has a chance to review these invoices manually before they’re paid out.

2. Duplicate invoices: Up to two percent of the average company’s invoices a duplicates, according to AuditNet. This may seem like a relatively small number, but for businesses doling out millions or billions on business activities, the figure is far from trivial.

Some vendors might double up charges on purpose, but often duplicate invoices are mistakes (after all, your vendors’ finance teams are overworked too). While some invoice automation systems try to catch these double charges, they usually only succeed if the invoices are labeled with the same number or have the exact same total — which isn’t always the case, particularly if there’s someone scheming behind the scenes.

3. Missing discounts: You fought hard for volume discounts, but how often are you checking invoices to make sure they’re applied? AI-based systems can often  compare contract and invoice terms automatically to make sure you’re not missing out on early payment, loyalty, or quantity discounts. You’ll be notified of any missing discounts so you can remedy the situation before you pay. In the case of early payment discounts, this software notifies you that the invoice should be prioritized to get payment out in ample time.

 4. Mismatched service levels: You signed up for the standard package, but you’re being charged for the premium offering. This type of mismatch is all too easy to overlook amid your monthly deluge of invoices.

The correct AI solution can compare agreed-upon service levels in your contract with every invoice you receive to make sure that this type of costly problem doesn’t fly under the radar. When it comes to physical items, it can ensure you receive all the items you’re being billed for before you pay, by double-checking shipping documents against inventory systems.

5. Double payments: Double payments can happen as a result of vendors submitting duplicate invoices, but the problem can also originate from your own team. Accounting systems hold up an invoice for all sorts of reasons, e.g., it requires further approval or it failed a match. In many cases, an employee might intervene to get the invoice paid manually (to meet a deadline or because they’re being pestered by a supplier or don’t want to damage a relationship). Meanwhile, the invoice is still in your system and when the hold is later cleared up, it’s processed and paid… again.

This is another one of those sources of spend leakage that most companies never become aware of. AI-powered systems constantly cross-check invoices and payments and flag any duplicate payments before you send them out, so the money never leaves the front door.

6. Exorbitant pricing: It can be difficult and time-consuming to keep track of the market rate for all the various services and products your business requires. AI can regularly compare your current costs to thousands of other sources to determine whether your invoices reflect the market rate for the goods or services provided. It can also flag individual invoices where your price exceeds the market rate.

Knowledge is power, and this information helps your business negotiate more effectively with existing suppliers or look to new ones if there’s an opportunity for cost savings without sacrificing quality.

7. Unsatisfactory work activity: When it comes to hiring contractors, there are situations when it’s particularly difficult to understand and assess whether they’re fulfilling their agreed-upon duties, like professional and IT services. AI-based tools can ingest nearly unlimited data to build a profile of what comprises satisfactory work activity — e.g., regular activity in Slack or over email — and highlight changes in the typical patterns. This helps you verify that you’re paying contractors fairly for the work product they’re providing.

8. Overpaying for software: Are you licensed for seven software seats, but only using three? It’s not uncommon for organizations to overpay for software licenses without ever realizing it. AI-based software keeps tabs on your organization’s software usage and compare it to the charges on your monthly invoices to help alert you to savings opportunities.

How AI can help

Implementing a best-in-class AI solution can support a consistent process and add an additional layer of scrutiny. These solutions make it possible to audit 100% of invoice spend prior to payment, automatically and near-instantaneously checking every invoice in your system for risk factors before they’re paid, and flagging the highest risk items for your team to review. This will help your team get ahead of problems and potential leakage, rather than try to recover it afterwards.

Below are the critical requirements for considering an AI solution for AP spend management:

1. Audit 100%, prepayment. Automatically audit 100% of invoices before reimbursement with AI.

2. Understand documents. Instantly scan every line of every invoice to understand charges and track the correct spend category.

3. Enrich with intelligence. Check online sources to identify better prices for similar goods and services.

4. Assess and refine risk. Flag suspicious addresses or billing changes to avoid fraud. Spot duplicate charges from other invoices, other invoice systems, or from expenses.

5. Streamline process. Integrate into your existing AP automation system to audit every invoice in real time to spot errors, waste, and fraud.

Conclusion

The best AI software can help your team regain control over your spend by checking every single transaction to identify high-risk invoices in your pipeline — saving time, streamlining processes, and ultimately reducing spend leakage.

If your AP team’s efforts to find problematic spend feels neverending, you’re not alone — but it doesn’t have to be that way. AI has changed the paradigm for modern finance teams, giving them greater visibility into their AP process and the time they need to address the highest risk issues. Not only can AI transform the way finance teams operate, it also saves them business money by spotting problems consistently and before invoices are paid. By implementing a leading AI solution, your team can audit 100% of spend, make sure that every invoice complies with its contract terms, and ensure you’re receiving every savings opportunity you’re entitled to — all while paying your bills on time.

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Anant Kale founded AppZen in 2012 to bring AI into back offices around the world. As CEO he is responsible for the product vision and execution of the company’s broad mission. Previously he was the VP of Applications at Fujitsu America from 2009-2012, responsible for product management, and delivery of Fujitsu’s applications and infrastructure for enterprise. He has 15+ years of experience in software development. He has an MBA and a BS in Finance and Engineering from Mumbai University.

cryptocurrency

What is Cryptocurrency? Is It Accepted Globally?

Money is an ancient technology and is almost as old as language itself. Back in the day, before the introduction of money, all transactions were done with the barter system as products and services were not quite complex. For instance, a farmer who grew vegetables could exchange a reasonable quantity of it with wool from a Shepard. With the introduction of precious metal coins as currency, the barter system eventually faded out, and so did precious metal coins with the adoption of paper currency notes. With the advent of new technology, the older systems phase out giving way for new ones.

Cryptocurrency is a digital asset that is based on a network that uses strong cryptographic encryption techniques for carrying out secure financial transactions and is distributed across a large number of computers. Most cryptocurrencies employ decentralized networks based on blockchain technology which means every new block generated must be verified by each node before being confirmed. Simply put, a cryptocurrency is a virtual currency that is secured by nearly impossible to counterfeit cryptography.

Besides being the most secure way to conduct a transaction, it also happens to attract the lowest transaction costs, the prime reason for which is its decentralized system. Unlike conventional centralized systems used by banks, cryptocurrencies make use of each of the nodes to confirm the transaction. The conventional system can also be referred to as master-slave architecture in which the bank is the center of power, hence the master and all users are slaves whereas, in decentralized cryptocurrencies, each node is equipped with equal access to all financial services.

We humans are not exactly fond of change though. Despite the benefits of using a newer system, mass adoption takes a while. Did you know that until 1933, each dollar could be redeemed in gold? Did you know all Americans were required to turn in their gold on or before May 1, 1933, to the Federal Reserve in return for $20.67 of paper money per troy ounce? Yes, it was made illegal to own and trade gold by Executive Order 6102 by President Franklin D. Roosevelt whereas the gold standard was suspended in Britain on September 21, 1931. Many speculate that a similar blow from the government could happen anytime in the future since fiat currencies that are controlled by the government. Cryptocurrencies are global and will not be affected by decisions made by the government of one country or the other.

Currently, there are several thousand cryptocurrencies, Bitcoin, Litecoin, and Ethereum are the most popular ones. Check out this infographic by Total Processing to learn more about other advantages of cryptocurrencies.

Click here for a full-size image.

 

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This infographic originally appeared on TotalProcessing.com. Republished with permission.

5 Trends Changing Business Payments in 2019

Suddenly, business payments are hot. 

I’d say there’s a growing level of understanding of the space and a feeling that B2B payments are starting to come of age. That is good news for customers, considering decades have passed since there was innovation in this space.

Here are 5 trends for business payments in 2019:

B2B payments innovation has begun

Many of the people who wanted to meet me were venture capitalists and private equity partners. B2B payments is a very, very large market—36 trillion in payment volume—versus about three billion for consumer payments. Most business customers are still paying with paper checks. This has always been an interesting category because it’s so big, and so far behind in digitization. Now, as the consumer payments technology market is becoming saturated, B2B payments have captured the attention of the investment community. There are a lot of new investments happening, so look for offerings related to B2B payments in the next few years.

Payments as a backbone

Vendor payments are tied to a lot of other processes. Once you digitize payments, it opens up opportunities with procure to pay, dynamic discounting, supply chain financing, and lending to name a few. For example, we’ve already seen Uber experiment with making auto loans to its drivers and taking the loan payments directly out of their pay. Companies should look to digitize payments with an eye to efficiency and cost savings now, and as a springboard into other innovation opportunities down the road.

Full payments automation

The first wave of new entrants in B2B payments has already hit the market, and many of their value propositions sound the same—cloud, simple, automated. But, not all of them are really in the cloud, simple, or automating the whole process. B2B payments have long been plagued by partial automation, and that’s a big reason why so many businesses are still stuck on checks. Cards and ACH make the transfer of funds electronic, but they also introduce new manual processes for file preparation, reconciliation, and vendor enablement. New, truly automated solutions can handle every part of the process. The person in accounts payable should only have to select the bills they want to pay and click the “pay” button. Buyers need to look past the marketing language and check under the hood.

Banks embrace fintechs

Five years ago, the relationship between fintechs and banks was adversarial. There was a lot of talk about fintechs using technology to take over different aspects of banking and to do it faster, cheaper and better. Over the past 18 months or so, we’ve seen the conversation shift. There is a growing recognition that banks and fintechs have very different strengths and that they will be stronger together. Bank and fintech relationships are now starting to form. Examples include Bill.com’s relationship with JPMorgan Chase. The idea is to bring Bill.com’s solution to small businesses through the bank channel. Chase’s recent acquisition of WePay provides an application for three-party payments for platforms such as ConstantContact and GoFundMe. This is just the tip of the iceberg; we will see many more partnerships and acquisitions in 2019.

Blockchain is still a technology to watch

Blockchain, the distributed ledger technology that underpins Bitcoin, is still very much part of the conversation. This is the only technology that truly has the potential to change banking and finance as we know it, providing a new set of instantaneous, decentralized, global payment rails. Banks and fintechs such as Ripple and Earthport are collaborating and getting traction, demonstrating they have a value proposition. But, if banks find ways to control it, it may end up being a better experience, but it won’t be any less expensive than current options.

All of these developments are great news for customers because the market is picking up speed and companies will have a lot more choices than in the past. B2B payments are far more complex than consumer payments, and there’s next to no technological innovation applied to them until very recently. Companies have lived with the status quo for decades. That is all about to change.

As fintechs encroach on core bank activities like lending and payments, banks are going to step up their game by either improving their own services or teaming up with the innovators. 

Karla is Chief Executive Officer, Co-founder, and member of the Board of Directors at Nvoicepay. She has 20 years of experience in management, finance, and marketing roles in both large and early stage companies. Along with the founding team, she has grown Nvoicepay into a leading B2B payment network