Processing Invoices for Services Rendered

Niek Dekker
4 Min

Purchasing services can represent a particular challenge for Accounts Payable. Unlike the purchase of goods, in which the Accounts Payable department can easily confirm that a Purchase Order for a physical item has been satisfactorily fulfilled, paying for services may throw up a range of issues in the Procure-to-Pay process that you need to address.

The issues you need to address when paying invoices for services rendered can slow down your Accounts Payable processes, resulting in increased costs, reduced efficiencies and a greater risk of erroneous payments.

In this blog we will examine how your Accounts Payable team should handle the payment of invoices for services rendered so you can ensure the right amount is paid to the right service provider at the right time.

What are Services Rendered?

Services rendered is when a service provider claims to have fulfilled their requirements under a Contract, Purchase or Work Order. The service provider then sends an invoice to your Accounts Payable department seeking payment.

Normally, a Contract, Purchase or Work Order should specify precisely what services are being purchased. Whilst the purchase of goods is pretty straightforward, purchasing services can result in a number of challenges for Accounts Payable departments. As an organisation, you may be seeking a particular outcome from a service provider, but the amount of work involved in delivering that outcome may be hard to quantify precisely in advance.

This is often the case with building contractors. They will usually provide an initial project scope with expected costings. However, during the course of construction, unforeseen issues often arise that require changes to both the timeframe and the costs. Once a building contractor completes their work, they will usually submit a claims report with their invoice summarising the full extent of services rendered and costs, which may have varied from their initial estimate.

As an Accounts Payable department, you need processes in place to ensure you are paying service providers the right amount for outcomes delivered. Ensuring you are not over-paying can be a challenge when a service provider’s invoice doesn’t match the original Contract, Purchase or Work Order.

Invoice Handling for Services Rendered

The challenge for any Accounts Payable team when it comes to handling invoices for services rendered is that every situation will be unique.

For example, you may be responsible for processing invoices on a large construction project. Some builders will operate on a Fixed Price Contract with monthly progress payments. These are usually stipulated at the outset of the project, making invoice processing straightforward for the Accounts Payable team.

However, other builders may operate on a Cost Plus Contract, requiring fortnightly payments. Each invoice will vary based on the costs of sub-contractors, whose claims will be incorporated into the builder’s invoice. Such arrangements require careful vetting to ensure you are paying the correct amounts for work that has been completed. With lots of invoices being submitted, there may also be a greater risk of duplicate payments.

Other service providers, such as architects, may calculate their fees as a percentage of the overall cost of the project. Whilst progress payments will align with various stages of the project, as outlined in the contract, changes to the scope of the project may lead to revisions of the architect’s fees.

Of course, any construction project will require a range of specialist service providers. For example, the developer may require a website to advertise the development to prospective buyers. Many freelance web designers will require a 50% prepayment, followed by 2 x 25% instalments during the latter stages of their work.

As you can see, each circumstance can vary wildly. It is absolutely essential that the Accounts Payable team maintains close coordination, regular communications and detailed record-keeping with the project managers to ensure the services you are paying for have been completed satisfactorily and that all outgoing payments are accurate. It is also vital that you have a high degree of confidence in the service providers you are working with due to the fact that you could be paying significant amounts before they fulfil the services you expect them to deliver.

How can Inspection Reports help?

In many cases, purchased goods are initially delivered to a receiving department that checks to ensure quantities align with the Purchase Order. The staff member that requisitioned the goods may also check the goods to ensure the correct items were delivered. A Receiving Report is then made available to the Accounts Payable team, so they can ensure a Purchase Order was correctly fulfilled prior to processing an invoice.

When it comes to processing invoices for services, Receiving Reports don’t exist. This increases the risk that incorrect or false invoices will end up being paid by the Accounts Payable department.

One option is to implement a system of Inspection Reports. These may be completed by a project manager who checks that any services rendered by a service provider meet the specifications outlined in a Contract, Purchase or Work Order.

Ensuring that an Inspection Report is prepared by the relevant project manager, and is made available to the Accounts Payable team, who files it under the correct supplier code number in the Vendor Master File, is a way to ensure only legitimate invoices are processed and duplicate payments are avoided.

How can eftsure help?

With eftsure integrated into your Accounts Payable processes, you will be able to maintain a high degree of visibility over outgoing payments. That visibility is essential given the complexity involved with processing invoices for many different types of services. Importantly, you will easily be able to identify and prevent duplicate payments for the same service.

For a full demonstration of eftsure’s capabilities in securing Accounts Payable processes, contact us today for a no-obligation demonstration.

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