Automatic commercial verification of e-invoices
The implementation of e-Invoicing across the European Union accelerates data entry into accounting systems, as these systems benefit from their implicit connection through the central authorities of the respective countries. But the automatic recording of e-invoices creates, at the same time, a prominent challenge: the e-invoices already recorded must be rerouted within the company to be validated from a commercial standpoint.
Automating the commercial verification process
Profluo has responded to this challenge by implementing an automated commercial verification process (invoice verification) for procurement flows, using two main scenarios:
- 2-way-matching: Validating the prices (and discounts) of billed items against contractual conditions;
- 3-way-matching: Comparing the prices and quantities billed with the purchase order and the quantities received.
2-Way-Matching
In the first scenario, the prices of invoiced items are compared with the contractual conditions previously established for those items. This verification method is called 2-Way-Matching and is useful for service invoices that contain references to contracts or ongoing orders.
Because Profluo is trained through Machine Learning to extract such references from the e-Invoice (no matter where they are placed in the UBL 2.1 XML syntax), the commercial conditions (preloaded in Profluo) are consulted in real-time for each invoice line, considering eventual preferred tolerances by the Customer.
Profluo does not just interpret unit prices, but also discounts on e-invoices, comparing them with those negotiated at the level of each commercial agreement and monitoring their validity over time.
3-Way-Matching
In another scenario, the prices of billed items are compared with those in the purchase order, and the billed quantities are compared with those received, as recorded in Goods Received Notes (GRNs). This verification method is known as 3-Way-Matching because it also includes information about the receipts. It is particularly valuable for invoices of goods that refer to ongoing orders and the deliveries made based on them.
In addition to extracting commercial references from XML, Profluo can even identify erroneous references by comparing, through Machine Learning, the structure of the invoices with the structure of the Purchase Orders.
Furthermore, Profluo exhaustively classifies all disputes (i.e., commercial anomalies) for subsequent root cause analysis, but it also allows for verifiers’ comments and corrections regarding the reconciliation status, ensuring an excellent audit trail until the final resolution of the differences.
The perks of adopting Profluo
The contributions of the Profluo platform to the commercial verification process of invoices offer multiple benefits:
- Significant time savings – typically, the manual verification of prices and quantities, even with the aid of an integrated ERP system, is very time-consuming. For example, in cases where erroneous commercial references appear on invoices, the verification process can take up to 30 minutes for a single document!
- Increased accuracy of the verification process – an automated system that meticulously compares prices and quantities within established tolerances offers much greater precision compared to manual intervention by an operator.
- Protection against duplicate or potentially fraudulent transactions – Profluo automatically and periodically detects anomalies by analyzing the entire database of transactions, a process that is impractical for a human operator in the context of large volumes of data.
- Strengthening relationships with suppliers – a smooth verification process eliminates payment bottlenecks, facilitates commercial cooperation, and allows access to more favorable commercial conditions in the long term.
- Detailed price trend analysis – Profluo enables detailed analysis of supplier price trends, which are essential for improving procurement strategies.
- Complete audit trail – Profluo provides a complete audit trail, facilitating the decision-making process for approving payments of disputed orders, a critical aspect for ensuring internal contractual compliance.
The commercial verification process in Profluo
1. Manual or automatic loading of commercial conditions
Commercial conditions are loaded into Profluo either manually, through Excel upload, or automatically, by integrating Profluo with the client’s order system. This includes capturing orders and Goods Received Notes (GRNs) directly from the ERP, using the endpoints provided by Profluo within its own API (an automatic interface for data exchange with external systems).
2. Dispute detection and transaction analysis through Machine Learning
The system detects newly created or modified transactions and automatically initiates a Machine Learning analysis process, which then classifies disputes based on the identified root cause (e.g., price differences, quantity discrepancies, etc.). Human operators filter by root causes and discuss with suppliers how to resolve commercial disputes to unlock payment for the invoices in scope to these filters.
During reconciliations, operators can correct erroneous references on invoices and rerun the system’s automatic analysis. Depending on the root causes, resolutions can affect different accounts (GR/IR, expense, inventories, etc.). The export of resolutions to the ERP considers these accounting nuances.
3. Invoice reconciliation through direct collaboration with suppliers and correction of erroneous references
Operators enter recommendations within the orders with disputes and monitor the resolutions, after which they can mark the disputes as reconciled, thus unlocking payment for the related invoices. Profluo excludes reconciled orders in the future to maintain the efficiency of the analysis algorithms.
Through Machine Learning, Profluo provides an innovative and efficient solution for the commercial verification of e-invoices, contributing to the optimization of financial processes and improving the operational performance of companies.
To see how you can benefit from a customized commercial validation process within your company, we invite you to request a free demo with one of Profluo’s consultants!
