The Strange Case of Vanishing Invoices

Written By: David Hewitt

The Problem

Are you missing some of your vendors’ invoices?  Is your RNI balance growing month after month?

If you’re like most AP departments, you’re probably missing some percentage of your vendor invoices and this slow leak is creating enough Dark Data to lead to millions of dollars in unseen risk and liability that must be resolved.

Most of these items will make their way into your monthly RNI report, but not all of them. An RNI report represents all known transactions that are received by the facility but have no complementary supplier invoice to offset the receipt in your accounting system. Additional to these items, there will also be instances of unseen and unpaid invoices in your supplier’s records. They hold as much risk, and they are equally important to resolve.

Unseen and unpaid indicate risk, liability, and imperfect processes. There are multiple reasons for the occurrence of these balances beyond simply unmatched invoices, purchase orders, and receiving information.

Without corrective action, the problem steadily gets worse due to the ever-growing levels of complexity in your financial suite; your prioritized attention to other compliance matters; and a constant procession of changes facing your AP department.

The Cost of the Problem

The inability to address unpaid vendor invoices whether it is due to a lack of time, access, or visibility can cost you in many ways.

Non-payment of invoices can put you at odds with your suppliers.  This creates unnecessary supplier abrasion, which is both uncomfortable and will at some point, in some way, require your staff’s time and attention to address and resolve. It’s best to get ahead of the issue.

Unpaid suppliers make unproductive partners, and they may also choose to put you on credit hold and potentially shut down a critical supply line.  Just consider the impact of neglecting to pay your staffing provider and coming to work to find one of your facilities experiencing a shortage of qualified nurses, for example.

There is also a major bottom-line implication to this matter.  Failure to see all your invoices means you aren’t paying all your transaction on time.  As a result, you could be missing critical discounts, rebates, volume price breaks, and more.

Finally, without proper visibility into all missing invoices, your RNI report may not be completely accurate and could impact, and call into question, the accuracy of your monthly accruals.

Exploring the Different Ways to Address the Problem

You can dedicate resources to review problem vendors to get to the root cause.  You can also investigate why PO’s are not automatically matching to invoices and receipts, and you can correct those issues in an attempt to avoid them from happening in the future.

You can also perform a manual evaluation of your largest open purchase orders against unmatched receipts.  Assuming you find any connected items, you can associate them together and pay the invoice.

Unfortunately, these types of reviews are quite manual and time-consuming and you may find it is hard to draw associations between the mismatched line items with your internal resources because… remember it was your internal process that missed the match in the first place.

You may choose to go in another direction altogether and write off the RNI items which could provide a temporary solution, but the overall balance will continue to grow, and you won’t gain any root cause insights.  Add to that, your report balance will be inaccurate.

You could choose to bring in an accounting firm but given the typical rates, you will likely see the costs of the project scaling out of control because you are asking these groups to pour over large volumes of data across many different systems.

In our experience, we find that the best solution is to hire a Recovery Audit firm to review the RNI report.  Recovery Audit firms have experience, tools, and aptitude for reviewing enormous sets of data and they have comfort and familiarity with your vendors.  If you do choose to allow a Recovery Audit firm to review your RNI, insist that they are delivering deep root cause analysis as well and best practice suggestions for reducing the problem on an ongoing basis.