The Top 7 Causes of Invoice Exceptions

Exceptions

For many accounts payable (AP) departments, invoice exceptions are a substantial barrier to operational efficiency. That’s because they require manual effort to address, which costs businesses time and resources, slows invoice processing time, and stresses supplier relationships. 

In fact, a recent survey on invoice processing found that AP exceptions were the cause of 32% of all late payments and 36% of supplier-related phone calls. With this in mind, here are six reasons why invoice exceptions occur to help you identify friction points in your own internal AP processes.

1. Data Entry Mistakes

Many suppliers still send invoices in paper or PDF format, which AP professionals enter into their AP or ERP software by hand. This requires a substantial amount of manual effort by AP staff and results in frequent transcription mistakes. In addition, enterprises are often forced to hire additional full time employees as the company grows and invoice volume increases. Short-staffed AP departments introduce more invoice exceptions as they try to keep up with the constant deluge of invoices, which in turn, leads to the need for more staff.

2. Digitization Errors

Digitization errors are one of the leading causes of invoice exceptions for AP departments. A digitization error occurs when a scanned image of a paper or PDF invoice is analyzed by a tool known as Optical Character Recognition or OCR. OCR attempts to convert each character of an invoice image into digital data. The problem is that digitizing invoices using OCR software doesn’t always result in correct information due to limitations of even the best OCR technology.  Add to these software constraints poorly scanned images, smudges, handwritten text, and other imperfections and you can see why OCR is problematic. Even the best OCR tools that boast an accuracy rate of 99% can introduce thousands of invoice exceptions when used at the scale required for enterprise AP departments.

3. Incorrect Supplier Information

There are times when suppliers send invoices with incorrect information that AP departments need to identify and resolve. Suppliers can easily misspell company names, input the wrong address, or make other minor mistakes. In other cases, supplier invoices could be missing information like an itemized breakdown of products delivered or services rendered that is required for compliance reasons. Each of these errors require the AP professional to contact the supplier for an amended invoice, which can greatly slow the payment cycle time and stress supplier relationships.

4. Incorrect Amounts

Suppliers may also send invoices with the wrong amounts by accident. For example, the price, quantity, or payment terms for an invoice may not align with the latest contract. Sales tax withholding calculations could be inaccurate as well. For multinational corporations that have international transactions with suppliers, the currency or exchange rate could also be an issue. These invoice exceptions often occur during contract renewals, tax jurisdiction changes, or other events that need to be updated in suppliers’ systems.

5. Purchase Order Mismatches

Most large enterprises send purchase orders (POs) to their regular suppliers, but not every supplier invoice includes PO line information. That means it can be challenging or impossible for AP staff to match POs to invoices, which leads to invoice exceptions. Even if the purchase order number is available, any discrepancies related to addresses, line items, amounts, and other minor information will result in an exception.

6. Non-PO Invoices

Invoices not based on a PO, by definition, result in an immediate invoice exception that requires manual intervention. Non-PO invoices must be verified and approved to ensure the order was authorized and that the terms are correct. With the right solution, coding, routing, and approval can be entirely automated. Even if total automation cannot be achieved, automating invoice exception resolution for non-PO invoices is a must. 

7. Duplicate Invoices

There are a number of reasons why suppliers send duplicate invoices to a customer. For instance, if an AP department is running behind on payments, a supplier could issue a second invoice, and the enterprise could pay both accidentally. In other cases, data entry inconsistencies like erroneous invoice numbers or wrong supplier codes could lead to duplicate invoices in AP systems. Duplicate invoice exceptions are complicated to resolve and often result in lengthy emails chains and frequent phone calls with the supplier.

Eliminate Invoice Exceptions with Straight-through Processing

When your company is receiving thousands of invoices each month, there’s likely to be a number of invoice exceptions. But resolving these issues manually by contacting suppliers can be a huge resource drain on AP. That’s why advanced software that prevents invoice exceptions from occurring is invaluable for AP departments operating at the enterprise level. 

Transcepta is an intelligent procure-to-pay platform that enables Accounts Payable and Procurement teams to achieve 100% straight-through invoice processing across their supply chains, without scanning or OCR Imaging. Using artificial intelligence, the platform eliminates invoice exceptions, surfaces potential supply chain disruptions, and transforms the way that enterprise organizations manage and collaborate with suppliers. 

If you want to learn more about how Transcepta reduces AP processing friction, download our whitepaper: How to Achieve Straight-Through AP Invoice Processing.