CHAPTER 2: UNDERSTANDING YOUR B2B CUSTOMER’S PROCURE TO PAY PROCESS (P2P)
In these situations, when your company sends the ordered goods or services, the requestor receives them and then uses those goods or services to do his or her job. This is where the process often comes to a halt. The requestors are so involved in doing their job that they don’t forward the invoice to accounts payable to be paid. They may not realize that the invoice has also not been received by AP. So, when someone from AR/collections calls AP on a past due invoice, AP really does not have any information about the order—it does not even have the invoice.
Herein lies the problem: Maverick spend is uncontrolled – the spending has not been pre-approved, it is not recorded anywhere, and AP often does not receive the invoice.
When the invoice reaches a past due status, and if it is significant in terms of dollars due, the collections team will call accounts payable. Since AP has no knowledge of the purchase, they will request a copy of the invoice so they can begin a lengthy process of gaining the proper approvals to pay the invoice. Your collections staff may think this is a ploy to delay payment, but in fact it is not a ploy—AP never received the invoice. The invoice might have been in the box with the product, which went to the requestor, or was taped outside the box and very likely went in the trash. Alternatively, the invoice was mailed to the requestor, who put it in the “to do later” bin and returned to their real work. The collections staff must then send a copy or – if in a VAT country, a reprinted original—to the accounts payable department, who now must get approvals and validations prior to paying the invoice.
The invoice becomes the customer’s trigger to pay, rather than a purchase order (PO), which is a commitment to pay upon receipt based on negotiated terms.
The following diagram provides a pictorial of the cumbersome non-PO process.
Common Non-PO Invoice Process / Maverick Spend
The Requestor Process
Purchaser Places Order
Order Delivered
Product Received & Put to Use
Packing Slip in “In Bin”
Process Stalls / End
The Consequential AP Process
AP receives a collection call on a past due invoice and requests a copy of the Invoice
A Collector hears “send a copy” and thinks it is a ploy to delay payment
AP sends to Requestor who assigns GL nbr attaches packing slip
Invoice Mailed to AP
Sent for Budget Approval
Returned to AP who matches and verifies all information
Audit also verifies the information
Controller Signs Checks
Checks Mailed
Checks Printed
Vendor Master File
Checks Received by Cash Application
FIGURE 3
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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