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Maximize payment term discounts with swift blocked invoice resolution and accelerated invoice approvals

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Maximize payment term discounts with swift blocked invoice resolution and accelerated invoice approvals

An invoice is generally sent to a buyer, specifying the amount  of the products or services that have been provided by a seller. However, at times a vendor can offer an early payment discount as some sort of an incentive for some companies to motivate them to pay sooner. For example, let’s take a company that sells on credit terms such as 3/15, net 60. This implies that a customer is allowed to deduct 3% of the amount owed on an invoice in case the payment is made in 15 days, instead of paying the full amount in 60 days, simply stated, the customer can save 3% of the amount owed by paying 45 days early.

That means if an organization has procured goods worth Rs. 1,00,000/- from a vendor and if the company has surplus funds and is in a position to pay within a shorter period of time, say 15 days, it can process such invoices and pay the vendor accordingly. Applying the above example, the company needs to process a discounted payment on the invoice that can be Rs. 97,000. This way it is a win-win situation for both the vendor and the company.

However, at times, there might be some discrepancies in the invoice pertaining to the mismatch in the ordered quantity or the amount that has been agreed upon versus the amount that is actually appearing in the invoice. In such cases, an organization can block a vendor’s invoice from further payment processing. When an invoice gets blocked, it impedes the approval process, thereby impacting the accrual of payment term discounts on such invoices.

But, before we understand how a blocked invoice can be resolved, let’s first understand under what circumstances can an invoice be blocked in a company. Invoices can be blocked either automatically or manually.

Blocked invoices scenario

When you enter an invoice, the system prompts the value that it expects an invoice to consist on account of the purchase order or goods receipt. If there is a discrepancy with the invoice item from the default values, you must mention the reason for such discrepancy (variance) by contacting the purchasing or goods receiving department or the vendor.

SAP demonstrates the following reasons when an invoice is blocked from further payment processing:

  •  Variance or discrepancy in an invoice item
  • Amount reflected in the invoice item
  • Stochastic
  • Manual

Variance or discrepancy in an invoice item

Some of the following blocking reasons that exist for variances in invoice items are:

Quantity Variance: The invoiced quantity is higher than the difference between the quantity delivered and the quantity that has been invoiced.

Price Variance: Mismatch between the invoice price and the net order price.

Schedule Variance: The day of invoice entry is before the delivery date as agreed in the purchase order.

Variance in Order Price Quantity: If the ratio between the order price quantity and the order quantity in the invoice varies from the ratio at goods receipt (alternatively, if it differs from the ratio in the purchase order, if no goods receipt has been entered till date).

Quality Inspection: If a material is defined as being necessary for quality management, goods receipt for this material are posted to stock in quality inspection. In such scenarios, invoices for the material are blocked, until the inspection has been successfully accomplished.

Amount of an Invoice Item

If an invoice item consisting of a large amount is entered, it is better to initially block this invoice to verify the amount, particularly in cases of invoices that do not refer to a purchase order.

Stochastic Block  

This is an option where you can block a series of invoices initially to help you check these invoices later. If the stochastic block is active and you post an invoice that is not subject to any other blocking reason, you can randomly select such invoices for blocking. A stochastic block is not set at the item level, but for the whole invoice.

 Manual Block

 You can also block an invoice manually when none of the above reasons hold good.

Innovapptive’s mobile approval system for quick resolution of blocked invoices 

Innovapptive Solutions, a new age technology company has partnered with SAP to deliver cutting edge mobile solutions, including a robust and a comprehensive mobile approval system – mWorklist solution that tightly integrates with users’ SAP systems.  mWorklist solution is designed to support the existing SAP users, they could be executives, managers or departmental heads, engaged in process approvals as per their departmental hierarchy.

Using  mWorklist, you can process a series of transactions involving timely approvals related to purchase orders, expense reports, time sheets, contracts, shopping carts and much more from the comfort of your mobile, anywhere, anytime. mWorklist lets you access the master and transactional data of the various modules (Inventory, HR, etc.) of the SAP server and pulls the transactions that needs approval to enable you to subsequently process such requests.

mWorklist  consist of a series of modules including shopping carts, purchase orders, contracts, service entry sheets, sales quotations, sales orders and blocked invoices. However, of particular interest is the blocked invoices module, which is relevant to our present discussion here.

mWorklistmWorklist_tab view

Blocked Invoices module and how it helps in resolving such invoices                                                   

As outlined earlier, if there are any discrepancies (as listed out under blocked invoice reasons), an invoice can be blocked from further payment processing. This module lets you confirm such blocked invoices that you receive from your department, consisting of details such as invoice number, vendor name, amount, payment terms, reason for block and so on.

Whenever an invoice is blocked using this module, a push notification is immediately sent to the approver’s (manager who is authorized to approve the invoice) Inbox, thereby prompting the line manager to swiftly resolve the issue in minutes. He can immediately contact the purchasing department or the vendor directly and get it resolved instantly. Once the issue in the invoice is fixed, the invoice can be reverted to the normal state and payment can be processed instantly. This way it helps in quick resolution of blocked invoices by enabling your organization to pay in advance, thereby maximising payment term discounts.

If you would like a demo of Innovapptive's portfolio of Native or Web based mobile solutions, please click on the link. Alternatively, if you would like to discuss with an Innovapptive solution expert, you can reach out to us by emailing us at sales@innovapptive.com or you can reach a sales representative at (713) 275-1804.Request a Demo

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