Money leaves the company when a supplier charges more than you agreed. Procure-to-Pay finds it. Every supplier invoice checked against what you agreed to pay, with the money you are overpaying shown in dollars.
What it checks
- Price against the agreement. Every unit price on an invoice is checked against the price your agreement sets for that item on that date.
- Amendment applied. A signed change to your agreement, an amendment, is applied from its start date on every line it covers.
- Notice reaches the order. A supplier's notice of a new fee or price applies only to orders placed after it, where your agreement says so.
- Fee has a basis. Every extra line on an invoice, a fee or a surcharge, matches a fee your agreement or a valid notice allows.
- Quantity against the order. The quantity on an invoice is checked against what you ordered or what you received, whichever you go by.
- Arithmetic. Every line, subtotal, credit and total on an invoice is added up again, so the arithmetic is right.
- Prepayment chain. On a final invoice, the credits (money already paid and taken off) match the deposit and earlier invoices your agreement calls for.
- Duplicate. An invoice that repeats another, by supplier, number and amount or by its content, is flagged as a duplicate.
- Price drift. A supplier's price for the same item does not move between invoices without an amendment, notice or new agreement that moves it.
- Dispute window. You are shown how many days your agreement gives you to dispute an invoice, while that window is still open.
- Terminology mapping. When a supplier calls an item something different from your agreement, the match is proposed once, confirmed by you, and remembered.
A finding, in its own words
Invoice 17870 charges $14.14 a case for the 12-pack. Your agreement sets $13.88, and the amendment of 5 August takes it to $13.65. That is $0.49 a case over on 1,200 cases: $588.00. The kegs on the same invoice are at the amended price, so the amendment was applied to one item and not the others.
I cannot yet match the $8,311.80 credit on this invoice, the amount taken off what you owe. Your agreement expects a 25% deposit and a 25% initial invoice, and neither is in the Data Room. Add them and I will check again.
What it may ask you
- When you check what a supplier delivered, do you go by the order or by what was received? Unless you say otherwise: received.
- If an agreement doesn't say, how many days do you have to dispute a supplier's invoice? Unless you say otherwise: 30.
- How much can a supplier's price move before you want to hear about it? For example 2%. Unless you say otherwise: 2%.
- Any fees you pay that aren't in the agreement? Name the supplier and the fee, like 'Northwind Supply: fuel surcharge'.
- Does a supplier call an item something different from your agreement? Like 'sixer' for '6-pack case'.
What it draws on
- Purchase prices match the agreement. COSO Control Activities, principle 10; SOX: Purchase-to-pay: pricing accuracy.
- Accuracy of recorded amounts. COSO Information and Communication, principle 13; SOX: Accuracy of transaction processing.
- Amendments and price notices are applied from the right date. COSO Control Activities, principle 10; SOX: Contract change control.
- Authorisation of transactions and changes. COSO Control Activities, principle 10; SOX: Authorisation of transactions.
- Fees and surcharges have a basis. COSO Control Activities, principle 10; SOX: Authorisation of non-standard charges.
- Invoiced quantity matches what was ordered or received. COSO Control Activities, principle 10; SOX: Three-way match.
- Deposits and progress invoices reconcile to the final invoice. COSO Control Activities, principle 10; SOX: Prepayment and deposit accounting.
- No transaction is recorded or paid twice. COSO Control Activities, principle 10; SOX: Duplicate payment prevention.
- Prices do not move without a document. COSO Monitoring Activities, principle 16; SOX: Vendor pricing monitoring.
- Dispute deadlines are surfaced while open. COSO Information and Communication, principle 14; SOX: Contract compliance monitoring.
What it needs
- an agreement or price reference (an order form, a statement of work, a price list, even your lease)
- amendments and price notices, the documents that change a price after you signed
- orders and receiving records
- invoices
- credit notes, the supplier's notes that reduce what you owe
- Connections, optional and only after your first finding: QuickBooks, Xero, Ramp, Brex, Mercury or your bank. Nothing to connect to start.