In some purchasing organizations, Buyers are responsible for approving, tracking and/or resolving issues pertaining to supplier invoices. Other companies utilize other departments or personnel to process the invoices, including accounts payable, engineering, planners or the end-users of products and services. But whether or not the Buyer is directly responsible for supplier invoices, it’s a given that they will ultimately become involved in supplier invoicing issues.
Here’s a typical scenario I’m sure you’re familiar with: A purchase order is placed to a Supplier. The Supplier successfully provides the goods and services tied to the order. The Supplier invoices against the order for the goods and services provided. But the invoice payment is not received by the Supplier in a timely manner, if at all. The Supplier refuses to send additional goods or services until the invoice is paid. The client’s Buyer is then pulled into the middle of it and all hell breaks loose. The ending of the story depends on how much time, information and cooperation takes place between both parties.
There are numerous reasons why an invoice is paid late, if at all. Sometimes it’s the fault of the client. Sometimes it’s due to the supplier. In the case of the client, an understaffed accounts payable department may be the culprit. Invoice approvers, whomever they may be, will at times intentionally not authorize an invoice either based on an unresolved supplier issue or based on that fact the person is an ass. (Pardon my French.) Of course they are a vast number of reasons why invoices don’t get paid, some justified and some not. Whatever the reason is, the payments of invoices is an essential and sometimes explosive issue. It is, after all, directly tied to the lifeblood of a supplier’s cash flow.
When I first started in automotive purchasing, I found that a good portion of the Buyer’s time was spent chasing invoice issues; invoices that, for whatever reason, just weren’t getting paid. And even though the Buyer’s in my department didn’t directly approve invoices, it was still our responsibility to resolve any commercial issues they created. Some issues were directly related to the end-users not being happy with the performance of the products and services and were therefore holding back payment. Please note that the resolution of those types of issues will be made during a future Blog.
But for now let’s focus on one of the main reasons why invoices aren’t being paid . . . reasons that you the Sales Professional can quickly resolve. After spending some time in purchasing I noticed that 75% of the invoice issues were due to the fact that the information on the invoice didn’t match the information on the purchase order. And if there’s one rule in accounts payable it’s this: Invoices that don’t match orders don’t get paid.
After comparing notes with other Buyers from across the country, most of us agree that a good portion of invoice payment issues could be easily resolved at the supplier’s own facility. This is good news because it’s something you have direct control over. So here’s some FEEDBACK: Sales Advice from the Buyer’s Desk regarding the resolution of invoice issues:
1. Before your company submits an invoice, especially for a significant sum of money, you should always first contact the individual(s) who will be approving the invoice. If you have no direct contact to those individuals (especially in accounts payable), then ask to contact the Buyer or End-User. Inform them that an invoice for a specific amount of money is being sent that covers specific products and/or services. Then ask if they are aware of anything that would inhibit the payment of the invoice per the payment terms of the contact. In other words, make sure the invoice will be approved before sending it in. Make sure there aren’t any unforeseen issues regarding the payment of your goods or services. You should never assume that all issues have been resolved and that the invoice will be approved. This is because you never know what others are thinking but not necessarily telling you. So it’s always in your best interest to spend a few minutes to find out before submitting the invoice.
2. Find out who actually receives and approves the invoices. What is the step-by-step process and what department and/or specific individual is responsible? What is the general timeframe for each step? Make certain you have the proper contact information instead of bothering people who may not be involved. I’d be more than happy to share that process and contact information with my suppliers but I’ve rarely had anyone ask. But most important, if the Buyer does not receive or approve invoices and doesn’t wish to be involved in the resolution process, you need to know that ahead of time.
3. Find out the preferred way to submit your invoice to the client, be it e-mail, regular mail, fax or some other means.
4. If an invoice is rejected do you know who the preferred person is to contact about it? Is it accounts payable? Is it the Buyer? This is another good question to ask and know the answer to. For instance, if the reason is due to some technical issue should you call the engineer, the end-user, or the Buyer? Find out how your client prefers to handle this ahead of time.
5. It’s important to know as a Sales Professional that a large percentage of rejected invoices are due to supplier oversight. So it’s imperative that your accounts receivable department has an updated copy of the purchase order to verify the information on the invoice against the order for any potential mistakes. Anytime you receive a PO update form the Buyer, make sure it makes its way to accounts receivable.
6. In order to reduce supplier oversights, the supplier should verify the following invoice information and compare it with the PO: The correct purchase order number. The correct Line Item Number as it appears on the purchase order. Any special numbers, letters or characters that should be included on the invoice per the client’s request. The correct price associated with the Line Item Number per the order. The correct Unit of Measure (U/M) or Quantity associated with the Line Item Number exactly as it appears on the order. The U/M could be LOT, or EA (each), or MILE, or HR (hour), or some other unit of measure. Your supplier vendor code as indicated on the purchase order. This specific advice is the best I can provide because a mismatch between information on an invoice matches information on an order is the biggest issue of all. I found out that some suppliers do not even look at the purchase order while creating the invoice. They simply charge what items actually cost without verifying the contractual cost. They also manage to do what I’m notorious of doing: fat fingering while typing. They will input an incorrect order number or part number on an invoice without double checking it. Not taking a few extra seconds to double checking has just cost the supplier days if not weeks of non-payment. Again, invoices that don’t match orders don’t get paid.
7. Finally, find out if the client has a supplier information package document with directions as to how to prepare and submit invoices. I created such a document at one of my former companies that I would hand out to suppliers. It drastically reduced the amount of invoice issues on both my side and the supply side.
From “The Buyer’s Desk” you need to know that the vast majority of Buyer’s, End-Users and Accounts Payable personnel really do want to get the supplier paid as quickly as possible. In fact I sat in on a purchasing department meeting this afternoon that covered this very topic. Most of us are smart enough to know that non-payments will most likely result in non-receivership of goods and services, which means having to answer to senior managers in production and purchasing. And yes there are a percentage of clients who prefer to make your life miserable by jumping through hoops to get paid for things that you successfully and contractually completed, while some refuse to pay at all. Unfortunately there are countless suppliers who have gone out of business for that reason.
A last bit of advice is to ask the Buyer ahead of time, before any order is received, who you should contact in the chance that an invoice isn’t paid within a reasonable amount of time. Most will be happy to point you in the right direction.