A Phone Network for Business Commerce? Proceed at Your Own Risk (Part 2)

Last week, we distinguished cell phone, EDI, and e-invoice only networks with networks designed for true business commerce collaboration. The main advantage of an “intelligent” business network is the ability to validate data, not just deliver documents electronically, and apply generic and configurable business rules across many business processes and document types.

Taming the procure-to-pay process is an area of focus for many organizations, and high rates of touchless processing require robust data validation, especially for the invoice. Here, there are many areas where validation comes into play. There are general invoice rules; invoice address rules; PO, blanket PO, and non-PO invoice rules; and VAT rules to name a few. The inability to configure validation business rules for any of these areas can compromise the reliability of the transaction. That means your staff must spend extra time and effort resolving errors and exceptions, which defeats the purpose of automation.

Let’s look at some examples of data validation that apply to an invoice:

General invoice rules

• Number of days a supplier is allowed to back-date an invoice
• Checks against duplicate invoice
• Allow suppliers to send invoice attachments
• Allow suppliers to send invoices with service information
• Require line-item credit memo to reference another invoice

Invoice address rules

• Require Bill-to and Sold-to address
• Require Ship-from and Ship-to address
• Enforce strict address validation for required address fields

PO and blanket PO invoice rules

• Check that the correct PO number has been used and that there are open lines on the PO
• Check that items such as quantity and price are within ERP tolerances
• Require a final approval step for high-value PO over certain thresholds
• Allow suppliers to create a tax rate and type for invoices and credit memos

Non-PO invoice rules

• Allow suppliers to send them, and require a valid email address
• Require a requester on the invoice
• Automatically assign account codes by supplier or commodity
• Require a final approval step for high-value invoices over certain thresholds (similar to PO invoices)

VAT tax rules

• Enable country-based invoice rules that leverage the independent analysis performed by an auditor to check that invoices meet all the legal requirements for electronic invoicing.
• Check that suppliers have used the correct tax rates and identifying fields.

Contract invoicing is another area where business networks add substantial value. Following a similar process that matches POs to invoices through a PO-Flip® process, buyers can send contract elements to the business network and have invoices checked against contracts. This capability is extremely valuable for service-based invoices, so you can check that the right price has been used or that a supplier is invoicing against an agreed upon time period.

As these examples of an intelligent business network suggest, restricting data validation to header-level information will limit the impact and results of your e-commerce initiative. Without robust data validation, you will continue to manage errors and exceptions manually, driving up costs and dragging out the processing cycle.

What’s more, the examples above focus only on the purchase order, contract and invoice. New opportunities for business process transformation exist when you can extend validation to related supply chain documents such as change orders, order confirmations, advance ship notices, and vendor profile documents and certificates, along with business documents that serve other parts of your business such as Human Resources.

As you begin to chart your course into the networked economy, make sure you compare the value of an intelligent business network that provides validation for many business processes and documents against a network that focuses on data transmission, or validation only for a single document type or process. In the Accounts Payable world, without the ability to broadly apply business rules and validate line-level invoice detail, you will only pass invoices to AP faster, not through AP faster. That may improve your current process, but it won’t deliver the high match and touchless processing rates that drive the return on investment from P2P automation.

The Networked Economy blogger and Ariba Director of EMEA Solutions Marketing Richard Downs also contributed to this article.