Understanding the Invoicing Basics

Up until this point, we have focused on the guided buying user interface, which is designed for casual, non-procurement users or functional buyers.

For the next steps of invoicing we will be focusing on the SAP Ariba buying and invoicing user interface which is designed for procurement professionals.

• So far in this course, we have been using the guided buying capability of SAP Ariba Buying. Guided buying is a user interface for casual users and functional buyers, not procurement professionals.
• The next part of the process is performed by procurement professionals, so we will switch to the full Buying and Invoicing user interface.

In our guided buying process flow, Mary has approved Sandy's purchase requisition for keyboards. Once approved, the purchase requisition is used to generate a purchase order for the keyboards, which was sent over the Ariba network to the supplier for processing.

Veronica, the supplier receives the purchase order and uses the Ariba network to send an order confirmation.

Veronica then ships the keyboards and submits an invoice to request payment.

Using the Ariba Network, Veronica, the vendor, confirms the purchase order and ships the purchased keyboards. She then uses the Ariba Network to invoice Sandy.

SAP Ariba invoicing features a comprehensive set of functions built to streamline and simplify the process of invoice routing, matching and invoice reconciliation.

Invoice automation features tools for the automation of exception handling, approvals and the sending and importing of payment requests and remittance advice to and from Ariba and the ERP.

The invoicing process begins when an invoice is submitted from a supplier over the Ariba network or entered manually by the buyer into SAP Ariba invoicing.

Once invoices are submitted all invoices generate a corresponding invoice reconciliation document automatically.

The invoice gets matched against any related purchase orders, contracts or receipts, and the data is compared to check for any discrepancies known as invoice exceptions.

If for any reason the invoice cannot be matched to the appropriate purchase order or other documents, it can be manually matched against the correct documents.

The matching process is meant to identify any exceptions that may be present and determine if they meet the businesses pre-configured tolerances and settings.

If no exceptions are identified, the invoice reconciliation process requires no additional manual exception processing and the invoice reconciliation is forwarded to the next stage.

If exceptions are triggered, specific handlers are assigned to review the invoice and decide how to resolve the exception.

Once an invoice reconciliation has been resolved and approved, the IR generates a payment request in the form of the OK to pay file and sends this payment request to the ERP.

Buyers can submit payments using the ERP system or using Ariba Pay on the Ariba Network.

After the payment is made, the information referred to as remittance advice can be imported back into SAP Ariba buying and invoicing for visibility and status update.

Entry

• Invoices are sent through the Ariba Network or created manually in SAP Ariba Invoicing.
• Once an invoice is received, an invoice reconciliation document is created automatically.

Matching

• SAP Ariba tries to match the invoice reconciliation document to existing purchase orders, contracts, and receipts data, such as price, terms, quantity, etc., then validate them according to your configuration.
• If the invoice does not match automatically, it can later be manually matched to a document.

Reconciliation

• If no discrepancies are found, or if the discrepancies are within your company’s pre-configured tolerances, the invoice reconciliation document moves to approval or payment, depending on configuration.
• If discrepancies are found and outside tolerances, the invoice reconciliation is forwarded for manual processing.

Payment

• Reconciled invoices are exported on the "OK2Pay" file
• Payment can be performed by ERP system or using AribaPay on the Ariba Network
• Once a payment is made, the payment status can be updated through a remittance import for visibility in SAP Ariba Buying and Invoicing

In SAP Ariba there are three basic types of invoices including PO based invoices, contract-based invoices and non-PO based invoices.

PO based invoices are invoices against a fully approved purchase order or a release order.

A release order is a purchase order against a contract or blanket purchase order.

Release orders in SAP Ariba are handled using mostly the same process as purchase orders and follow the same receiving, invoicing, and reconciliation processes.

Contract based invoices are invoices associated with a no release order contract or a no release blanket purchase order.

Unlike PO based invoicing, contract invoices are submitted directly against the contract or blanket purchase order.

There are also non-PO invoices which are invoices that are not associated with any existing purchase order or contract.

Non-PO invoices are standalone invoices that are independent from any existing documents in the system.

The image in the slide shows the documents and approvals that are matched against the respective invoice types during the reconciliation process.

Invoicing - Invoice Types

There are three types of invoices in SAP Ariba:

1. Invoice against a Purchase Order or Release Order – these are called PO-based Invoices. PO-based invoices are invoices that are associated with either:
   1. A Purchase Order, which was created from a fully approved requisition, and is, essentially, a "standalone" order for goods or services.
   2. A Release Order, which was created from a fully approved requisition that was itself associated to a release-order contract or a blanket purchase order that requires releases. A Release Order is the mechanism by which funds are released from such a contract/BPO. In SAP Ariba, a Release Order is treated just like a Purchase Order in terms of receiving and invoice reconciliation, which is why invoices against Release Orders are considered to be PO-based Invoices, and not Contract-based Invoices.
2. Invoice directly against a Contract or Blanket Purchase Order – these are called Contract-based Invoices. Contract-based invoices are invoices that are associated with contracts that were set up to allow direct invoicing, which is typically done for purchases where demand does not need to be communicated to the supplier to prompt the delivery of goods and/or services, and instead the supplier just bills the customer for the goods or services they render.

   The contract can either be:

   1. A No-Release-Order Contract, which is a contract that was set up to not require releases and to allow invoicing.
   2. A No-Release Blanket Purchase Order (BPO). A BPO is a particular type of contract (not a type of Purchase Order) that is transmitted to the supplier via Ariba Network to facilitate invoicing from AN-enabled suppliers. The Contract Compliance course covers no-release-order contracts and no-release BPO’s in more detail.
3. Invoice that is not associated with a Purchase Order, Release Order or a Contract – these are called Non-PO Invoices. Non-PO invoices are standalone invoices that are not associated with any other document in SAP Ariba. The term Non-PO can be somewhat misleading, because it makes it sound like it is an invoice that is just not tied to a PO, implying that Contract-based invoices are a type of Non-PO invoice. This is not the case. Non-PO invoices are completely standalone and not tied to a PO/Release Order or a Contract/BPO.

All three of these invoice types will be reviewed in greater detail in subsequent modules.

Invoices can be submitted to the SAP Ariba buying and invoicing solution via the Ariba network or manually entered by the supplier.

Using the Ariba network, suppliers can create and submit invoices manually or by using the PO flip process.

Suppliers can also submit invoices over the Ariba network using integration with external systems or invoices can be loaded and submitted via invoice conversion services provider.

In most cases invoices will be submitted by suppliers on the Ariba network, but there may be some suppliers not yet on the network.

These suppliers often still utilize and submit paper invoices to request payment.

SAP Ariba allows buying users with the appropriate permissions to manually enter these invoices into buying and invoicing.

Invoices can reach an SAP Ariba Procurement system from several sources:

• Ariba Network
  • Created by suppliers using PO-Flip or manual entry
  • Sent by integrated supplier systems
  • Loaded through ICS providers
• Manual Entry
  • Keyed by a member of your organization, e.g. Accounts Payable
  • Requires permissions to create invoices through groups like Invoice Agent, Invoice Manager, or Invoice Entry User
  • These invoices typically come from suppliers that are not enabled on the Ariba Network yet because:
    • The suppliers have unique circumstances
    • Your organization is leveraging a multi-phased supplier enablement implementation approach

When a buying user manually enters a paper invoice, they can key in all of the details on the invoice entry screens and can optionally choose to upload one image of the paper invoice in PDF or other image format.

Uploading an image of the invoice allows it to be viewed side by side during the invoice entry screen, simplifying the process of entering the details for a paper invoice.

• Attach an image of the paper invoice on the Invoice Entry page
• View the uploaded image for a side-by-side reference
• Supported file formats: PDF, GIF, JPEG, JFIF, and PNG
• One image file of a paper invoice
• Combined maximum file size 100 MB (invoice image and other file attachments)
• For images of invoices uploaded in PDF file format, you can view only the first 15 pages of an invoice when you display the image

In our guided buying process flow, let's explore a scenario where Sandy receives a paper invoice from a supplier. This page shows a high level overview of the process and in the next few pages we will cover each of these steps in further detail.

After Sandy receives the items she's ordered and submits goods receipts in the system, Sandy receives the paper invoice and logs into the SAP Ariba buying and invoicing solution.

Step 1: Supplier Fulfills Purchase Order

Supplier provides ordered goods or services

The supplier fulfills the Purchase Order by delivering the goods or providing the ordered services to the buyer.

Step 2: Buyer Logs in to SAP Ariba Buying and Invoicing

Accessing Buying and Invoicing

Buyers login to access full SAP Ariba Buying and Invoicing user interface.

Step 3: Create Manual Invoice

Sandy uses the common actions create menu and clicks invoice to begin the invoice entry process.

Common Actions

• The Common Actions menu can be found at the top right of Ariba, or in the content area of the home dashboard.
• Use the Create option to begin the manual Invoice entry process.

Step 4: Enter Required Information

Sandy then begins by selecting the PO ID and copying in the required information from the paper invoice.

Select PO

In the Purchase Order field, use the search to find and select the PO associated with the invoice.

Required Information

Required fields are marked with an asterisk. Enter information as it appears on the invoice, including Supplier Invoice #, and Invoice Date

Step 5: Include additional information (if applicable)

Sandy can upload an image of the invoice and can enter additional information like taxes or shipping charges at either the header or line item level.

Sandy can also choose to add optional comments or attachments to the invoice.

Header level

Shipping, taxes, comments, and/or attachments can be entered at the header level, which will apply to the full PO. You can also upload the invoice PDF or image file.

Line level

Alternatively, shipping, taxes, comments, and/or attachments can be set at the line item level, which will apply to specific items. To adjust shipping, comments and/or attachments at the line level, select an item and click edit.

Step 6: Submit the Invoice

After filling out all of the information, Sandy clicks the submit button to submit the invoice for approvals and reconciliation.

The system will display a confirmation page with options to return to the home page, view the invoice just submitted, print a copy or to perform other tasks.

Submit

Review the summary for accuracy, and ensure all of the information is correct, then click Submit to send the invoice.

Confirmation

The system will confirm the invoice was submitted. From here you can return to the Ariba Home page, or conduct tasks such as viewing the Invoice, or printing a copy.

Suppliers can use the Ariba network to submit invoices through the user interface or by importing invoice files using cXML or EDI from their external invoicing system.

When a supplier opens a purchase order on the Ariba network, they can use the PO flip process to quickly convert it to an invoice using the details from the PO.

The PO flip process is designed to streamline compliance and validation by copying the data from the PO directly into the invoice.

Suppliers can also use the Ariba network to manually enter and submit contract based or non-PO invoices to the buyer.

Ariba Network User Interface

• Manual PO-flip
• Contract based invoicing
• Non PO-based

Suppliers using non-Ariba Network invoice systems

Send electronic cXML & EDI files to Ariba Network

Using our practical example, let's look at a scenario where the supplier Veronica chooses to submit an electronic invoice over the Ariba network using the PO flip process.

The steps in this slide detail a high-level overview of this process, which we will cover in depth in the next few slides.

Veronica has received an email notification regarding a purchase order for keyboards. Using the email Veronica can log into the Ariba network to submit an invoice, or she can log in by navigating in a web browser to supplier.ariba.com.

Step 1: Supplier SAP Ariba PO email notification received

Supplier receives PO email notification

The email contains the basic information about the PO. The supplier can use this email.

Step 2: Supplier logs into suppler.ariba.com

Accessing Ariba Network

Suppliers can access the Ariba Network by clicking a link in the email notification, or by navigating to supplier.ariba.com.

Step 3: Select the purchase order from Inbox

From the inbox, Veronica can access PO's or other documents that have come in and from this menu she selects the order number to open the purchase order for the keyboards.

Orders, Invoices, and Payments

The Ariba Network inbox contains different types of documents. You can use the tabs to navigate to New Purchase Orders to find the PO.

Accessing the Order

To access the PO, simply click the Order Number, and the link will direct you into the PO.

Step 4: Flip the PO to generate an invoice

At the top of the screen, Veronica opens the create menu and clicks standard invoice to begin the PO flip process.

The data from the PO is automatically copied over to an invoice following the buyers invoice validation rules.

Create Invoice

Use the Create Invoice button, and select Standard Invoice.

PO-Flip

The PO-Flip functionality will pull the PO information directly into the newly created invoice, automating the entry of much of the data.

Step 5: Include shipping and taxes (if applicable)

Veronica can add shipping or taxes at the header level, which would apply to the entire purchase order or on one or more specific line items.

Header level

Shipping and/or taxes can be entered at the header level, which will apply to the full PO.

Line level

Alternatively, shipping and/or taxes can be set at the line item level, which will apply to specific line items.

Step 6: Submit the Invoice to the buyer

After entering all required and any additional information, Veronica clicks next to go to the summary page.

On the summary page, Veronica verifies everything that was entered on the invoice for accuracy, then clicks submit to send the invoice to the buyer, Sandy.

Summary

After entering required and optional information, click next to move to the Create Invoice Summary.

Submit

Review the summary for accuracy and ensure all of the information is correct, then click Submit to send the Invoice to the buyer.

Suppliers on the Ariba network can also submit non-PO invoices which can be used to request payment from a buyer outside of the normal PO or contract processes.

Non PO invoices are often used to handle invoicing for unmanaged spend categories or other non-standard situations.

• Unmanaged spend category
• No control over price or quantity of goods or services

A Non-PO invoicing is a workable solution for some spend types. If your organization is able to negotiate these same categories of spend in advance, more control will be gained over pricing terms and provide the ability to forecast spend commitments and savings.

Because non-PO invoices are not associated with any purchase order, contract or other documents it's important to implement a strong approval process to ensure the accuracy and validity of the invoice data.

Since there are no POs or contracts by which to reference policies should be aligned to address who should verify the invoices legitimate, who should validate the dates in terms, who should set the accounting and who needs to approve.

Developing a strategy and a thorough change management plan is critical for success with non-PO invoices.

Filling-in the Non-PO Purchase Detail Gap

• If the invoice owner is unknown, who can determine whether the invoice is legitimate?
• Who can assess whether the invoice data submitted by the supplier is correct (date, payment terms, etc.)?
• Who needs to set the accounting?
• Who needs to approve the release of funds to pay the invoice?
• Other approval requirements?
• Develop a strategy for Non-PO policies and processes
• Develop a Change Management plan for end users to reduce confusion

In another practical example, Sandy receives a non PO invoice that is not connected to any PO or contract.

Sandy can use the manual invoice entry process we've previously discussed to create and submit the non PO invoice into SAP Ariba buying and invoicing.