Accounts payable is seen as a value driver by many business leaders. Advances in business automation technology offer automation of the invoice intake, review and reconciliation process, but there is still tremendous opportunity to accelerate this process further.
In an Ardent Partners 2022 survey, 57% of business leaders said invoice payment and approvals take too long. In addition, AP’s top hurdles remain tactical in scope and are linked to everyday activities.
The average processing cost for an invoice is $9.25.
In fact, in an analysis of invoices in OpenInvoice between January and December 2022 (figure below), 52% were less than $1,000, 85% were less than $5,000 and 89% are less than $10,000.
Most industry invoices are less than $1,000.
This pattern is consistent throughout operating areas and operation type. Exceptions include offshore development and production, where spend per invoice is slightly skewed to higher values, and EPCM projects, where invoices are often consolidated through one service company.
Since this is required of every invoice regardless of the value, automating invoice approvals, especially on low-value invoices, will pay huge efficiency dividends. You get time back and can choose where to focus more time and energy, especially with highly-skilled knowledge workers like engineers, accountants and senior management.
Automating invoice approvals on low-value invoices pays huge efficiency dividends.
Before the advent of digital invoicing, all invoice and backup document generation, routing, coding, scope/quantity/price validation, and the vendor’s approval process were done manually. With the introduction of digital invoicing in the 2000s, solutions like OpenInvoice, the Enverus digital invoicing solution made for oil and gas, automated some of the invoice processing components required.
In operations, the person responsible for the review and authorization of supplier work is often the same person who approves the invoice. This requires double effort because the approver must review the scope, quantity and pricing related to the work done and ensure the work is coded correctly. The invoice often comes in long after the work has been done, requiring the approver to do additional research. This is an unnecessary use of time and resources, particularly when both are in short supply.
With the 2016 introduction of OpenTicket, a digital field ticketing software solution from Enverus, scope and quantity are captured digitally. For companies using OpenInvoice, it is not necessary for operations engineers to review scanned PDFs as a backup with every invoice processed because the data is validated and coded automatically when a field supervisor verifies the scope and quantity on a digital ticket.
In OpenInvoice, a touchless invoice means when an invoice is submitted, the system automatically validates the coding and auto-approves the invoice based on controls put in place by the operator. Once the invoice is auto-approved, it posts to the operator’s ERP system for payment. Two powerful capabilities make this possible: automatic invoice validation and auto-approvals. Every invoice attribute (scope, quantity and price) is automatically reviewed and validated between the approved digital field ticket in OpenTicket and agreed prices in OpenContract PriceBook, and the invoice; if there is a match, the invoice is automatically approved. Auto-approvals allow operators to automatically route, code and approve invoices at or below a specific spend threshold. By reducing the number of touches required by accounts payable and operations, you speed up the entire invoice process.
What if you could auto-approve your high-volume, low-value invoices like water hauling tickets? How much time would this save your AP team, providing them more time to focus on core tasks that drive the business forward?
Each of these attributes below is reviewed and validated between the digital field ticket and invoice with no manual intervention. Internal teams (engineers, accountants, senior management) gain more time to work on high-value tasks.
Operator and supplier have agreed to contract pricing and this contract is referenced on the digital field ticket and the invoice. If the pricing does not match the contract, the invoice is automatically rejected.
The company field supervisor validates scope and quantity of work done on the digital field ticket. If the scope and quantity on the digital invoice do not match what is on the field ticket, the invoice is rejected.
The field supervisor enters the AFE or Cost Center on the field ticket, analogous to the stamp used on the paper field ticket. The AFEs and Cost Centers are provided directly out of the corporate ERP.
The system uses smart coding to automatically allocate goods and services from a given supplier to the correct GL. The system can even use a different GL for the same goods or service from the same supplier if it is used during a different phase of the operation (i.e., drilling versus production).
The same process that validates the pricing through the digital price book can apply a procurement code to any good or service identified when the item is generated in the field ticket. It will automatically carry through for the life of the document.
Every invoice under $1,000 can be automatically routed, coded and approved in this new digitized process. If a field ticket is approved by someone in operations with the financial authority to approve an invoice based on that field ticket, the invoice is automatically approved. No one is required to review the invoice any further. Once this is realized, and company can examine invoices under $5,000, then $10,000, eliminating 90% of the accounts payable burden.
Also, this workflow doesn’t need to be implemented all at once for companies to reap the benefits. Rules can be configured to automatically route invoices under a defined threshold, coded and approved. A company can also choose to automate approvals by invoice type, starting with invoices with consistent coding like overhead and utilities, then automate pre-approved spend invoices, then end with all LOE and capex invoices. Essentially, the approach and controls in place will be unique to every company.
Watch the video to learn how Discovery Natural Resources automated 40% of its invoice approvals with touchless invoicing.
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