Avoiding the Invoice Validation Iceberg
Peru's Lizzie Mellor looks at ways to avoid budget-sinking inaccuracies in IT invoices through more effective validation processes.
Here's two challenging questions:
It's likely you can't answer these questions in detail and that's not unusual. They're also often influenced by some key challenges:
Very few IT leaders would happily see their IT budget sink without trace and not know the reason why. Yet, that’s the reality when inaccurate invoices are signed-off. It's a budget iceberg.
Even with a will to check invoices, it’s often hampered by suppliers failing provide enough data to validate against, even if they're contractually obliged to do so.
Large IT departments are likely to be faced with monthly invoices of thousands of billable line items, set against complex rate cards and multiple billing systems. Often a ‘crevasse’ opens up in relation to which department is responsible for validating the invoice. Checking massive quantities of IT billing data is rarely the role of the finance team. Equally, validating invoices is not an ideal fit for most IT teams’ skillset.
Clarity of the whole invoice ‘picture’ is needed; consistent, transparent invoicing processes, driven by accurate background data that holds suppliers to account. IT billing errors can drain as much as 15% from IT budgets. Accurate invoicing can potentially deliver savings of some 3-8% according to Peru's Invoice Validation Service.
Resolution often involves tricky negotiations to realise savings for the client, while probably resulting in loss of earnings for the supplier. An independent facilitator can help here.
For many organisations, it’s enough to simply have identified and assessed the inaccuracies and put the correct validation process in place. For some, a lack of in-house resources, tools, or strong supplier relationships, requires third party assistance to monitor the validation process on an ongoing basis.
Lizzie Mellor joined Peru Consulting as a Commercial Analyst before being rapidly promoted to Consultant, working with a number of clients. Specialising in analytics and data modelling she had previously worked in commercial roles focused on sourcing and finance.