Accounts Payable Complexities in China
As models for Global Process Ownership become more common, increasingly companies are looking for insights from peers to regional or country-specific processing requirements. When deviations from a global standard are required there is nothing more valuable than having the direct insight into the practices followed by peer companies.
Recently, a Peeriosity member used iPollingTM to inquire about how peer companies process invoices from suppliers in China. The local complexity happens because the Chinese tax authorities use a system called “fapiao” to collect business taxes; an invoice processing peculiarity that happens only in China. Traditionally, the fapiao process requires invoices to be received and coded by the user prior to processing. The question posed by this $25B+ global company was how peers were receiving invoices from suppliers in China, with a follow-up question to ask about the type of workflow system that was then used to gain the necessary approvals for processing and payment.
Results from the iPolling questions suggest that 50% of companies receive invoices from China-based suppliers by postal mail directly to the user, with 25% receiving invoices by postal mail directly to Accounts Payable and 17% receiving invoices by postal mail directly to a scanning center. Only 8% receive invoices electronically with originals sent by postal mail afterward.
For workflow systems, 33% are using their ERP and 59% use some other type of purchased workflow system. Here are the details:
Below are some of the comments members added to their responses:
- Invoices sent to the Shared Services Center are already pre-approved and do not require other approvals. If additional clarification is required, we use e-mail.
- Invoices are sent by postal mail to both users and Accounts Payable depending on the nature of the procurement. Mostly indirect purchase invoices go to the user, while direct purchase-related invoices go to Accounts Payable.
- There’s not a single process. In addition to sending invoices directly to Accounts Payable, some invoices are sent to supply management so that they can check purchase orders and schedule agreement data prior to forwarding to Accounts Payable for processing. The process is completely manual (emails, calls, confirmation/approvals on original or copy, etc.) with no automated workflow solution currently in place.
- Our scanning and invoice processing activities are outsourced to IBM who uses a workflow tool called RAPID.
- Our Hong Kong area office receives and processes invoices for China and other Asian countries. We are now experimenting with our first electronic routing of these invoices for approval and ERP voucher build.
- Vendors are still sending invoices to the site of the requester and not to the Accounts Payable Shared Services center. The invoice flow for approvals is mostly manual, after which the invoice is scanned into our system to be processed via OCR into SAP.
Because iPolling allows members to add comments, it’s possible to capture insights regarding how to creatively tackle a problem that wasn’t envisioned by the iPolling question. For example, below are the details of an innovative approach to this problem used by a member:
- What we found in China is that some invoices are for filing only while others need to be entered into Accounts Payable and ultimately paid. Only the end-users know which is which. For this reason, our model in China is as follows:
- End-users receive hard copy invoices directly from suppliers.
- End users then key the invoices that need to be booked using a self-service invoice entry portal.
- They then send the hard copies to a central scanning facility, along with a barcode coversheet that links the keyed invoice to the backup materials, and the scanning facility then scans the backup materials and archives the hard copies centrally.
It’s a novel approach that we use nowhere else besides China, but it is working VERY well there.
Does your company process invoices from suppliers who are based in China? If yes, where do invoices go first, and how are the invoices processed?
Who are your peers and how are you collaborating with them?
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