"Invoice is summary of purchase to pay process"

Potential problems in customer-supplier collaboration often only become apparent at the invoice level. As soon as the invoice cannot be matched automatically, alarm bells start ringing. But nine times out of ten, the actual problem is located earlier in the process. For optimal cooperation, it is important that the entire purchase to pay process runs as efficiently and error-free as possible. Christian Willemsen, senior business consultant at ICreative and Ton Smeele, eBusiness Product Owner System-to-System at Technische Unie, discussed this p2p process in the construction industry,the role of standards such as DICO and the importance of data management with each other and the attendees during the Chain Standard Congress 2023 . 

The entire purchase-to-pay process under the microscope

The alarm is often raised only when invoice after invoice cannot be matched automatically. "There's a problem at invoice processing," one then thinks. But that's not true. After all, an invoice is nothing more and nothing less than a summary of all communication between customer and supplier that has taken place before. So if an invoice is incorrect, it is a sign that things are going wrong somewhere earlier in the process.

But where? "To look for the real reason for that low match rate, it is important to look at the whole purchase to pay process," Christian explains. "You can't think about a solution if you don't yet fully understand the problem."

Not for nothing is "define" the first stage of the renowned Lean Six Sigma methodology, in which Christian has since passed his black belt. "Start by drawing out your entire process. Is there an understanding of how orders are placed? What is done with the order confirmation or packing slip? Is it checked that that matches what was actually delivered? If all those steps are controlled, then that invoice eventually runs smoothly. Because again: the invoice is a summary of everything that happened before that."

"You can't think about a solution
if you don't understand the problem."

The important thing is to avoid getting bogged down in assumptions and f solutions. Christian: "A real killer is the thought of 'we've always done it this way,' but unfortunately I still encounter it regularly. My rule of thumb is to ask 'why?' five times. Why do you do it this way? And then keep asking until you get to the heart of the matter. It often turns out that people have no idea why they do things the way they do. And therefore they have no idea where the real problem is."

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Extract all desired information with the order

Ton also notices in Technische Unie's daily practice that many customer questions are about the invoice. "But if you don't discover an error until that invoice, you're actually too late. The process is then not central. Why don't we do it first time right: get everything right from the moment the order is recorded." 

He starts over an example where an invoice was rejected. "Then we looked at the order number on that invoice, and it turned out to be the 06 number of the technician who had placed that order at the counter in a sales office. "I don't know an order number, so just write down my phone number and they'll call me," they were then told. That doesn't work. My colleagues at the counter are no longer allowed to just give me stuff. An order or reference number must always be noted, for the purpose of the entire process that follows. If the customer can't give that, it means they don't have their own processes in order. We cannot jettison our own processes to solve this for them. Then chaos ensues."

Another important document in the purchase-to-pay process, is the order confirmation. Ton sees, much to his surprise, that many customers do nothing with it. "We, as a supplier, communicate in the order confirmation exactly what we are going to do for the customer. It is crucial for the planner or work planner to know which materials, where and when will be delivered. This information is described exactly in the order confirmation, yet they do nothing with it. Then we all get phone calls asking when something is going to be delivered. That order confirmation is worth its weight in gold," he stresses.

Added value of DICO standard

In the construction and installation industry, the DICO standard has been established for the electronic exchange of documents such as the order confirmation and invoice. Why is a standard like DICO important for smooth collaboration in the supply chain?

"By agreeing on standards ,
you know what to expect."

Ton: "With that, you make sure that every chain partner talks in the same language. It becomes difficult if you speak German, while I expect you to speak French. By agreeing on standards, you know what to expect. Just like a Dutch power outlet: if you put a plug in there, it just works. You can rely on that. Thanks to standards. The same goes for calling. Whether you have Vodafone or T-mobile: we can reach each other. Thanks to standards."

In addition, standards force you to think carefully at the beginning of the process about what the rest of the process will look like. "Standardization helps ensure that you have everything in order at the beginning, so that things will go well later in the chain," Ton said. "That means, for example, that when you place an order you already ask for the details of the contact person at the construction site. That may not be of interest to the person placing the order, but the driver who has to deliver the goods the next day must have that information. With standardization, you ensure that the right information, at the right time, reaches the right person."

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Data management must be central

But, Christian cautions, standards don't solve everything. "DICO is mainly about the form of the message. How is an XML message structured? But it says nothing about its content. If the information is wrong, you still have a problem. That's why data management has to be central to this whole thing."

For example, item data is very important. These have to be in order. Christian: "The customer has to know exactly what he or she is ordering. I recently looked up a product using the GTIN code. But out of 31 suppliers, 24 had described a different unit of measurement. For the exact same product. So how do I know what we're talking about? Don't make it a puzzle!"

Ton summarizes, "If you want to collaborate and communicate digitally with each other, you have to think about three things. First, the data: what information are we exchanging and how reliable is it? Second, the form: in what language do we talk to each other? This is where standards like DICO come in. And third, the medium: how do we exchange messages? For example, via e-mail or already via a system-to-system link.

Stronger together

In short, you can think of the invoice as a voltage detector: if it sounds an alarm, it means that something is going wrong somewhere in your purchase-to-pay process. Before you can start working on a solution, you must first have a good understanding of where the actual problem actually lies. "Focus on your process and prioritize data management," Christian strongly advises. "But most importantly, remember that we are all part of the chain. Let's not point at each other, but work together. Together we are stronger." 

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