A Better Way To Manage Contractor Invoices In The Software And IT Services Industry

Corporations that deliver software and IT services find themselves concerned with an ever-increasing demand for transformation and improved customer experience, growing requirements around cybersecurity and data privacy, various types of geopolitical influencers that only appear to be increasing in severity, and the “ordinary” lineup of competitive pressures.  To effectively address these and other challenges, they often find it smarter to seek external expertise in the form of third-party service providers.

But working with third-party service providers is no easy task, as there may be little clarity around the quality, or long-term relevance, of the service rendered even after its completion, and whether it was ultimately worth the time, cost, and effort involved.  

The process, beginning with the identification of a problem or need and the decision to look outside the organization for a solution, through specifying requirements, identifying, and selecting service providers, governing their work, and measuring their outcome, may involve several departments and individuals.

Once a service is rendered, the buying organization must verify that the service was received as ordered, and that the provider’s claims of service rendered are accurate.  This is the point at which the difference between the provision of services and goods becomes clear as there is no “goods receipt” or stock to prove that the invoice is justified.  As there are typically multiple parties involved, the invoice ends up floating around the organization, going from the original requester to finance, Accounts Payable, and potentially other groups before once again ending up at the requestor’s desk, waiting for approval. 

This long process opens the door to a new set of problems, potentially resulting in lost invoices, delayed payment, double-payment, wasteful interactions, and a negative impact on cross-organizational as well as buyer-supplier relations.

One way to address this final set of challenges begins with getting all involved parties on the same page, or platform, and creating full transparency into the invoice management process for all parties in the buying organization as well as the supplier.

Invoice approval could be performed rapidly using a three-way matching mechanism.  The invoice would first be converted into a service entry sheet in the ERP system, allowing the requester to validate it, and other finance and procurement stakeholders to approve or reject it.  Once the service entry sheet is validated and approved, the invoice would be automatically matched against it and against the purchase order – a three-way match validation mechanism that mimics the approval a goods invoice.

An automated solution of this type could go a long way towards improving buyer-supplier relations.  It would result in faster and more accurate payment, reduced paperwork, and manual archiving, and far less time wasted on addressing phone calls from angry suppliers.