Vendor invoices in the financial services industry are complicated, with some listing over 500 line items. Further, annually auditing these invoices is a time-consuming task and, in the face of that kind of resource drain, many financial institutions tend to compare one month’s invoice to the last. If the amounts are similar, the invoice is approved.
This may sound rather casual, but even when banks and credit unions commit the time required to manually review vendor invoices, human error compromises the value of that effort. Further, human errors made during the manual review process can become self-perpetuating, compounding over time without the institution’s knowledge.
The impact of this and other weaknesses inherent in manual processes are non-trivial in terms of time and money. A survey of practices by Ardent Partners found that 62% of respondents identified “exceptions” as the primary contributor to lengthy invoice review cycles. An International Association of Commercial and Contract Management survey found that poor practices such as these are costing organizations 9.2% of their bottom line.
In banking, the number of invoices and their complexity are only going to increase as banks and credit unions find themselves doing business with a growing number of suppliers – all in the pursuit of giving customers and members what they want. Many other industries are experiencing the same phenomenon as well.
The return on such an investment in resource efficiency alone typically hits in a matter of months, not years. According to a Concur study, organizations using automation to audit invoices recorded a 44% reduction in cost. This number does not even include the value a bank or credit union can realize when it finds anomalies and errors that result in resolution of some in monetary form. Such errors and anomalies are not infrequent. Our firm’s own study indicates that more than 10% of all invoices contain errors.
Financial services in general – and payments in particular – are specialty areas with their own language, approaches to pricing, and long list of offered services. To even understand a single invoice requires a working knowledge of the infrastructure in which that vendor operates. SRM’s knowledge of both vendor contract structures and invoice templates within the financial services industry is built on decades of experience.
We have embedded and automated this expertise in our cloud-based software platform, TAB (Tracking, Auditing and Benchmarking). TAB uses its intelligent workflow and AI-powered processes to track contracts and audit invoices without the need for human effort. We utilize TAB in the 80-100 engagements we conduct annually for clients of all sizes, from hundreds of millions in assets to multibillion-dollar entities.
Our clients also license TAB in their operations to continue using the automation built into the product to track major contracts, audit invoices, and continuously know where they stand against industry benchmarks related to their vendors. For the purpose of risk assessing critical vendors, some also use TAB to house their contracts and gather data for vendor due diligence. TAB offers automation in both these areas that lowers the error rate, saves time, and presents information that allows an institution to react at the right time.
The Bottom Line: Automating the invoice audit process enables financial institutions to improve efficiencies, increase productivity and protect their bottom line from erosion. As a tool for contract management, automation:
- Allows personnel more time to invest in activities that can only be accomplished by human beings;
- Enables banks and credit unions to materially shorten the time required to detect and repair exceptions hidden in vendor invoices; and
- Provides a defense against human error that may create compounding inaccuracies and negatively impact an organization’s bottom line.
Each year, businesses that utilize manual back office processes lose billions to missed savings and elevated risk. To any financial institution decision maker: it may appear that all is well in the back office, even if 95% of the processes are manual. Unfortunately, looks are deceptive and what you don’t know will hurt you.