The battle to keep costs down, and to keep bottom lines healthy, is waged every day by companies large and small, regardless of the verticals in which they operate.
But keeping track of and managing supplier contacts can be a challenge, resulting in lost productivity and negative impact to profits.
Capturing those discrepancies is especially urgent now, as every supply chain has been impacted by the coronavirus.
To that end, Ajay Agrawal, CEO and founder of SirionLabs, told PYMNTS, “invoice leakage” occurs when firms do not have the ability to review invoices from their suppliers on a “granular level,” which leads to missed opportunities to spot discrepancies.
Those discrepancies can span computational errors, incorrect application of pricing terms or deviations from the contract itself. The result is overpayment, which can cost companies as much as 10 percent to 12 percent of the total contract value.
“Globally, this translates into a massive $2 trillion to $3 trillion lost per year that could have gone straight to their bottom lines,” said Agrawal.
The problem stems from the fact that most firms rely on manual methods to analyze invoices. Legacy technologies, said Agrawal, do not support the functionality needed to audit invoices in complex ways – and which can move well beyond simply examining price times quantity.
Firms like SirionLabs that deploy advanced technologies including artificial intelligence (AI) can help to automate the invoice validation process. Agrawal said that AI can analyze information tied to contract, performance and consumption, which can save companies significant sums of money.
The growth of the subscription economy has added levels of complexity to invoice analysis. As Agrawal told PYMNTS, procurement has seen a significant shift through the past few decades.
The U.S. Bureau of Economic Analysis has estimated that as much as 58 percent of aggregated procurement spend is focused on buying services, where once enterprises primarily bought goods and commodities. The subscription economy runs on services, noted Agrawal, and “services engagements are more complicated to manage due to the intangible nature of outcomes.”
Services also require complex delivery models and variable pricing structures, he added, and contracts keep evolving through the duration of the relationship, which is typically three to five years.
“The leakage happens because the comparison of the raw performance data against the requirements in the contract must be done manually, and there is no automated way to validate the incoming invoices against the underlying performance and contract information,” said Agrawal. “So if there are any discrepancies in the invoice, it is very difficult to identify these errors, hence enterprises regularly end up overpaying the suppliers.”
Moving Beyond ‘Passive Elements’
Advanced technologies that use advanced algorithms and workflows, said Agrawal, can convert “passive elements” of key business data tied to contracts such as deliverables and pricing into measurable and actionable objects. Next, it takes these requirements captured from the contract along with the raw performance data received through integrations and compares it to other enterprise systems, such as procure-to-pay and ERP.
“Our technology computes its own invoice based on the pricing framework described in the contract, and the actual consumption and performance data, and compares this to the actual invoice received from the supplier highlighting any discrepancies,” Agrawal told PYMNTS.
SirionLabs recently said it raised $44 million from venture capital firms Tiger Global and Avatar Capital to invest in product and technology development, expand its sales and marketing staff and add new partners to its ecosystem.
Remarking on the current environment that is dominated by the pandemic, Agrawal said that “trust, certainty and accountability are more relevant today than ever in business relationships. There is a greater degree of diligence while putting together contracts to make sure they are strictly in line with the company’s approved terms and risk posture.”
artificial intelligence, B2B, B2B Payments, invoice payments, invoice validation, machine learning, News, overpayment, procurement, SirionLabs, supplier payments, Supply Chain