Right First Time Invoices – The role of Visualization in solving the P2P Errors

/Right First Time Invoices – The role of Visualization in solving the P2P Errors
Right First Time Invoices – The role of Visualization in solving the P2P Errors2017-10-05T08:13:26+00:00

Right First Time Invoices - The role of Visualization in solving the P2P Errors

Right First Time Invoices – The role of Visualization in solving ‘the P2P Error problem’ on Field Tickets, Orders, Invoices, and Remittance docs.

Increased efficiency in Procure to Pay (P2P) / Order to Cash have come a long way within the Oil & Gas Industry.  That said even with the increased adoption and benefits of eCommerce and  the associated advancements in document transmission Standards we are still a long way off getting to right first time / 100% accuracy in electronic P2P documents. If we accomplished this we could not alone reduce cost further, but we could also free up resources to focus on driving further innovation and cost saving on eCommerce/P2P initiatives. In this article we look at Right First Time Invoices – The role of Visualization in solving ‘the P2P Error problem’ on Field Tickets, Orders, Invoices, and Remittance docs.

100% right first time would mean that we could significantly improve cashflow, we could reduce risk associated with wrong or late part arrivals.  Overall the Operator / Supplier relationship would be a lot healthier.

Meet Jill, Jill works for a major Oil & Gas service company. Jill is a very organized person. Looking at the picture above it is clear that Jill is becoming very frustrated with her job in the Accounts Receivable.  The reason is that her Boss the CFO is concerned that on average, over 17 million dollars is tied up for approximately 30 to 40 additional days due to errors. This is bringing the Order to cash cycle to over 100 days for her company. In April 2015 the CFO has tasked Jill with fixing the problem.

Having worked in the Oil & Gas Industry now for many years and mostly within  roles involving eCommerce, SRM / SPM, and  supply chain risk management, the main problem I see is not as the lack of Standards or technology for conducting eCommerce, nor the lack of adoption, the driving factor or root cause for invoice error is actually a people and communications problem.

Within the eCommerce landscape the feedback loop is not always highlighting root cause of  the Invoice / order or field ticket rejection back to the person responsible for the error in the first place.   Even when communicated back when its caught its not being highlighted or reported on for others in similar roles to observe, manage and ultimately learn from.

Metrics play an important role on the supply chain, and whether its field ticket processing times, order efficiency, order accuracy, invoices in error %, there is a root cause event or series of events driving the positive and the negative case studies that can be presented by various Operators and Suppliers in relation to eCommerce initiatives.

The strides to reduce errors in eCommerce documents is most often been solved, or attempted to be solve with technology, partly because we can invest money in IT rather than upsetting the people who caused the problem in the first place.  Its simply not enough to fix problems, unless everyone involved in the eCommerce initiative learns from the collective mistakes we will never get to that golden 100% Tight First Time.  We need to Visualize the problem and push such reports out to those involved.

As Bill Gates wisely put it :

  It’s fine to celebrate success but it is more important to heed the lessons of failure. 

I for one agree with Bill, that without the ongoing availability / reporting on lessons learned we run the risk that the next shift (big crew change ) have little in the way of of Knowledge Management to prevent them from making similar mistakes.

Meet Jack, Jack works in the accounts payable department of a major Oil & Gas Operator.

Jack, just like Jill is frustrated that his desk is being over whelmed by angry letters from suppliers whose invoices are 40 or 50 days beyond terms..  Most of the reasons why these invoices are not paid by Jack’s company is that they are in error.  Yet the supplier has no system of record to determine which invoices have encountered which errors. Quite often the response comes many weeks later in the post, or if emailed gets lost in junk mail from a system generated email.

Jack does track which invoices they rejected.  “Its the pile on the right hand side of my desk” he comments.   What Jack needs is an automated way of seeing which suppliers are being impacted and which ones he urgently needs to work with on a plan to get their Invoice production right first time.

Lets leave the technological advances to one side for a moment and focus on a core concept of learning.  The basic  building blocks of learning is visualization. Whether you are the Accounts Receivable Manager, the Accounts Payable Manager, or even the Director of Sales or even the CFO, the fact is we all love seeing reports showing improvements in Order Processing Times, reductions in Days Sales Outstanding etc.

What is needed to help both Jack and Jill is Visualization of not alone, the Percentage of invoices in error, but graphs, charts , dashboards that show Jack and Jill a breakdown of errors that caused either, the field ticket to be rejected, the Order to be passed back, or the invoice to be stalled.

Something like this would be very helpful for Jill’s team even better if it were system generated and automated so that it updated each time an invoice was kicked back.

While the graph is a good illustration of a few different error types its only representative of a small proportion of possible errors that can happen in electronic commerce.

On the Order side some examples include

– Incorrect Part Number

– Incorrect Product Price

– Incorrect Currency

– Incorrect Units of Measure (UOM)

– Missing Deliver to Address

– Missing Delivery Date

…etc

On the Invoice side examples include

-Purchase order Number not provided on invoice

-Purchase Number incorrect on invoice – missing digit

-Purchase Number incorrect on invoice – digit misrepresented (1,I or 0,O)

-Purchase Order Closed

-Duplicate Invoice Number

– Missing Invoice Date

– Missing WBS / Cost Center

– Missing of wrong Line Item Detail

– Invoice Date prior to Delivery Date

– Multiple invoices in single PDF Document

– Document Type (invoice or credit)

– Tax / VAT missing

–  Incorrect VAT / Tax Amount

–  Missing Total Amount

– Invoice Out of Balance

– Invoice Not approved

…etc

These rejections often add weeks to the process on both order processing and cash collection, and often at a huge cost to both the Supplier in terms of cashflow, and also the Operator in terms of risks and costs associated with not having the parts in the right place at the right time. In this respect if Jack and Jill have the detail of errors and can trace what caused the error and communicate this internally in order to ensure that the likelihood of happening again decreases.

Metrics play an important role on the supply chain, and whether its field ticket processing times, order efficiency, order accuracy, invoices in error %, there is a root cause event or series of events driving the positive and the negative case studies that can be presented by various Operators and Suppliers in relation to eCommerce initiatives.

If we provide reporting and visualization tools to those closest to the errors then the likelihood of month on month error reductions will happen.  The goal here will be 100% right first time invoices and a smoother and faster turnaround on Orders and Invoices resulting in improved cashflows.

If we measure these metrics and split out the breakdown by individual root cause then we give Jack and Jill the reporting interface upon which they can strive to improve the metric. Its not going to happen immediately but over time Jack and Jill will want their metrics to improve.  This will happen and in combination with advances in three way matches, technological processing improvements, we will make huge strides in further advancing our goal of Right First Time eCommerce.

The outcome of our little ‘Jack and Jill went up the hill’ to fix the invoices in error problem.  Jack agreed that all Rejected invoices would get a system generated message that would explain the reason for rejection through the inclusion of an error code.  They both agreed the error code classifications to elevate any ambiguity. Jack also gave Jill access to a web based portal where she could see all the invoice status as well as dashboards showing the various invoices in error.

Since they first met in early 2015 to solve the problem things have been getting much better as a result of the dashboard visualization on errors and as you can see in the below graph produced in late 2015 that they are on track to a projection of zero invoices in error by June 2016.  Thats $17 million more in Jills Company’s cashflow than was the case at start of 2015. Her CFO is delighted. Its all thanks to the partnering approach they took with their client to visualize and track the problem.  The system of reporting is now fully automated and both Jack and Jill have clear desks.

Challenges

While the the Jack and Jill story is between one operator and a supplier.  Jill then reached out to their other Operator clients and asked them if she could have similar access to reporting.  Those success stories have not been written yet. Stay tuned for future episodes.

That said while the main challenge in many cases is primarily a people one, improvements can also be made to existing systems and transmission standards to ensure that we cater for the efficient feedback loop of error types.  Unless we have a global agreement on classification of error types between all operators, suppliers, and networks / solution providers we wont be as effective as we could be.

Good News

The good news here is that PIDX  (www.pidx.org ) have done a lot of work on this and now have developed “Response Documents”  which indicate a trading partner’s acceptance or rejection of a particular transaction (Purchase Order, Field Ticket, Proforma Invoice or Invoice).   This document produced in the last year defines a new unified Business Process Guideline for document response that supersedes previous guidelines for (Purchase Order, Field Ticket, Proforma Invoice or Invoice) Response.

Most importantly the response reason (error code and description) is also included. Effective communication of the reason a particular transaction is being rejected improves the efficiency of the dispute resolution process in the short term, and provides feedback to the trading partner for long term business process improvement.

There are already 28 possible error codes already identified by the PIDX member companies and with your help we can add to this list additional error examples / codes.  The industry should look forward to the benefits this functionality will bring in providing more clarity on reasons why a document such as an invoice or PO was rejected.

In addition to enhancing the list of approved codes, some members suggested that it would be useful if standard rejection reason codes were used, even outside the PIDX response documents. An example would be email notifications of document rejection.

I would agree totally with that enthusiasm as such an message could then be routed via email to the appropriate persons or group of persons to highlight the error.  This would allow them to act quickly, even forward it to another member of their team to increase the transfer of lessons learned.

The Way Forward

So how do we accomplish this and who’s responsibility is it ?

In my opinion each operator should be providing not just the “document response” but also be providing dashboard portals with metrics to their suppliers on the number of occurrences and causes for invoice rejection with full drilldown to the document in question that was rejected.  This will allow both sides to work together and track how the number of such errors is reducing.

Likewise the supplier should also have a mechanism for ensuring that order errors coming from the Operator are also visualized and turned into action.  Doing this not alone helps the supplier / operator track and rectify the problem but also benefits the operator and supplier  in ensuring that paperwork errors do not result in cashflow delays, and other costs / risks associated with hold ups /  delays in drilling or production.

Ecommerce Solutions Providers and Trading Partner Networks also benefit from providing the metrics and drilldown to root cause associated with document rejection.  How so ? well because the higher the percentage of document accuracy on a right first time as a percentage of overall documents processed makes the Solutions / Network Provider look even more appealing.

The suppliers should also be demanding access to this level of detail either direct from their operator clients, or via their Solutions Provider / Trading Partner Network Provider.  Call today and get on the first wave of suppliers to be given access to e-invoice accuracy reporting capability.

Thanks / Feedback / Experiences Welcome

I welcome any feedback on this post and would encourage you if you don’t already have access to these metrics in a visual graphical form then its time to ask your trading partners for access to such metrics.  Likewise if there are any positive or negative experiences you would like to share by all means feel free to share your experience by reply post.

Also keep any eye out for the other adhoc articles I post on SRM, SPM, e-Procurement, and Supply Chain Data Management. See List below.

Kind regards

Daryl


 

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About : Daryl Fullerton 

Daryl is a Supplier Performance and Relationship Management Specialist at Outperform SRM. He provides guidance and consultancy on the design, development and Implementation of various Supplier Performance & Relationship Management Systems for Global Oil & Gas Operators and Service Companies across Upstream, Midstream and Downstream Sectors.

Specialism’s include Supplier Performance & Relationship Management, Supplier Risk Management, Supplier Enablement, Operational Risk Management, Contract Compliance Management, Scorecards, KPI’s, P2P Process Automation, PIDX Standards, and Management Information & Reporting Systems.

A keen promoter and believer of the importance and focus on his ‘partnering to solve approach‘ in improving Operator / Supplier Relations in 2015 Daryl was awarded the honor of “Supply Chain Pros to Know” in recognition of the leading supply chain professionals and experts worldwide.

Connect with / follow Daryl on Linkedin

 


About : OutPerform SRM
OutPerform SRM is a management consulting firm that helps leading Oil & Gas businesses establish value added solutions for effective Supplier Relationship Management (SRM). We help our clients reduce inefficiencies, reduce costs, and make lasting improvements within their Supplier Relationship Management (SRM), Supplier Performance Management (SPM), and many more important business critical Supply Chain Initiatives . Through our hands on experience with Major Oil and Gas Operators over the last 17 years we’ve now built a firm uniquely equipped to this task across all Major Category Lines.

Our Experts have Experience of working with a wide range of internal and external stakeholders with the ability to build relationship and influence outcomes. Our Experience of supplier performance management includes detailed knowledge of processes and frameworks including commercial performance management of contracts and knowledge of supplier risk management techniques.

You can also follow OutPerform SRM on Linkedin

 


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