Review Those Invoices! – Invoice Reconciliation Leads to Savings

By Dr. Barbara Rembiesa

Financial Management is the focus of this month’s Quick Success Project, and is one of the areas within an ITAM program that can quickly recoup savings for an organization. Most C-level managers look towards some sort of financial payback to any new program implementation, and many view ITAM as a cost instead of a savings generator for the organization. This QSP article presents just one area where you can produce measurable financial payback and savings into the organization.

Financial Management is a key part of not only your asset management program, but it affects most departments across your enterprise. Financial IT Asset Management is the backbone to savings recognition within your IT Asset Management program from budgeting to invoice reconciliation. Financial IT Asset Management includes many operationally recurring functions: budgeting, fixed asset reconciliation, chargeback, invoice reconciliation, forecasting, financial audit preparation, and billing to name a few. In addition to these, the Financial IT Asset Management discipline must support a strategic view of IT spending for the organization.

Defining the invoice reconciliation process

The Invoice Reconciliation Process consists of a few very specific steps:

  • Verifying what was ordered during the acquisition process
  • That the IT asset was received at the price agreed to
  • That the IT asset was delivered to the correct location
  • The IT asset arrived in satisfactory condition.
  • And, it also helps to correlate the inventory and financial information within the ITAM repository with the information stored in the Fixed Asset Database.
QSP – Defining invoice reconciliation process

The information that is stored in both the ITAM Repository and the Fixed Asset Database needs to be reconciled for a few different reasons. The first reason is to ensure that the price at which the asset was acquired was the correct price and that it was in fact sent to the proper location. Second, the reconciliation is used to determine the nature of the asset. If the asset exists within the ITAM Repository, then the asset is obviously networked with the organization and is easier to track and maintain. If the asset exists exclusively within the Fixed Asset Database and is not discovered and entered into the ITAM Repository, then the asset is more than likely off the network and may only be discovered through a physical audit or through enactment of policies that force network connection at defined time intervals. Lastly, the reconciliation process helps the IT Asset Manager determine what assets are within the environment. By reconciling both the ITAM Repository and the Fixed Asset Database, The IT Asset Manager is able to fully comprehend all the assets that exist within the organization, which assets exist on and off the network, and which assets are mobile, etc.

Impact, benefits, and outcomes of this project to the ITAM Program and the organization:
  • Eliminates rework by Accounts Payable
  • Allows for accurate regular payments

All invoices should be reconciled at the ITAM program level. This ensures that everything that was received into the ITAM program matches what was ordered, and the items received are compared to what the organization is being billed for. This is an area that the ITAM program can find immediate, quantifiable savings for the organization many times through errors on the vendor invoices. Invoice errors should be found before payment occurs through the reconciliation process and then brought to the attention of the vendor for corrective action.

Performance data for vendor management:
  • Streamlines payment process that will enhance vendor relationships
  • Provides for leverage during future contract negotiations

Reconciliation of invoice data can also be used when conducting vendor performance reviews. If a vendor has consistent errors on their invoices, during the vendor review is the time to address this issue. Based on the resolution of the problem, you may also want to use that data gathered during the reconciliation process during contract negotiations to establish more favorable terms for your organization.

Eliminates over charges and payment for goods not received
  • Provides better tracking and allows avenues for automating the invoicing process
  • Creates an level of expectation and results
  • Controls budget
  • Eliminates duplicate payments

Within the IT Asset Management Program, double payments and payments made on incorrect invoices are two of the biggest areas of loss surrounding budgeted funds. A standard practice of invoice reconciliation can greatly reduce the number of invoices paid erroneously.

Examples of invoice errors can include:

  • Double Billing
  • Errors in quantity
  • Errors in cost
  • Items not received or back orders not noted

The examples shown are just a few of the errors that can occur. There are more listed throughout the IBPL volumes and I am sure you may have a few that you have encountered as well that could be added to the list.

The invoice reconciliation process can be the initial springboard in providing savings that traverse the entire ITAM program. Providing an initial and quick ROI for upper management through invoice reconciliation can create that added buy-in necessary for moving the ITAM program to the forefront of an organization’s current list of projects and help cement the image of an ITAM as one of benefit to the organization.

About the Author

Before founding IAITAM, Barbara held key positions in both the financial and consulting sectors. Barbara has implemented and supervised asset tracking projects, discovery tool implementations and has been brought in as an industry expert to consult major savings and loans, universities, manufacturers and high tech industries throughout the United States. Barbara has also, successfully represented corporations in negotiations with compliance agencies for software violations. Barbara has implemented and designed disaster recovery programs for professional software testing and storage facilities including, but not limited to, off-site storage facilities, and has helped over 200 companies before forming IAITAM and successfully implemented improved software and hardware acquisition programs. As President and Co-founder of IAITAM, Barbara brings over a quarter century of industry knowledge and experience to the management of IAITAM, and provides key guidance and the entrepreneurial spirit to its staff and members.