An Introduction to Invoice Validation

Invoice validation is an amazing subject. But don’t be fooled. I am aware it sounds mind numbingly boring. It isn’t, far from it. That is what they want you to think, so that you stay away from it. I have found it to be immensely satisfying.

That is right you read correctly. I said immensely satisfying. Invoice validation is sexy. Orgasmic even. Nothing gives me greater pleasure than receiving significant sums of money from utility suppliers for pointing out the errors they have made. But what is invoice validation? And how did I get started?

Invoice validation is about ensuring your invoices are correct and have been produced correctly. It is also about understanding the methodology behind them and ensuring that they haven’t been set up in a way that penalises you, the customer. The lesson here is…….

You can’t start to strategize against your invoices until you understand how they work

As to how I got started the year was 2011 and I was receiving a lot of calls from Invoice validation companies asking me who was validating my invoices.

“What do you mean! Who is validating my invoices?, that’s a bit personal isn’t it”

It is a reasonable question, but the clue is in the inference. The question suggests there is a chance your invoices are not correct. WTF!!!! The invoices you have assumed to be all ship shape and Bristol fashion actually represent an opportunity for another company to secure income. Let that sink in.

Invoice validation was a buzzword within the utility’s industry at the time. I even remember Suzanna Reid referring to invoice validation as the forensic examination of your utility bills.

It is not forensic. At the time invoice validation companies would typically charge 50% of the retrospective savings they found and 25% of the savings they realised going forward for a period of 3 years.

It sounded like a good proposition as if they uncovered no errors there was no charge. If they did find errors, we still made a saving which we then had to share with them. Still sounds very reasonable?

However, this didn’t sit well with me. What if I could find the savings myself and keep 100% of the savings and the kudos? How difficult is invoice validation anyway? Is it something I can teach myself? Can I google it? How smart are invoice validation experts? Then I thought……….

“These people can’t be smarter than me, I can complete a rubix cube?”

Whilst I admit that sounds big headed. I had arrived at the realisation that it was more a question of knowledge and less a question of intelligence. Time to adopt a new strategy. The next time I spoke to an Invoice validation company fishing for business I asked them what checks they run. One even told me….

“We run over 1,000 checks on an Electric Invoice”

Can you believe that? A thousand checks on an electric invoice? With the scent of bullshit firmly in the air I pressed further, asking them for examples of what they look for. As you can imagine I drew a blank.

I started talking to all kinds of people. At one seminar I attended one of the speakers talked about having a dis aggregated invoice. It was during that talk that the penny really dropped for me.

But even more so once I started receiving dis aggregated invoices. I should explain that a dis aggregated invoice is the itemised phone bill of the electric invoice. I have known them to be 7 pages long. They itemise every charge code or charging mechanism within your invoice.

This quickly became a massive learning curve for me. But I fell back on the one thing I had going in my favour. Fortunately, I had built very good relationships with our suppliers. So much so that whenever I came across an item on an invoice that I didn’t understand or was unsure about I simply got on the old dog and bone.

In most cases the supplier could explain the methodology behind standing charges on water accounts for example. And if they couldn’t they would have someone they could speak to on my behalf.

Standing charges on water accounts are typically based on the pipe size of the incoming supply. You can request this info from your water supplier. For example, a supply with a 15mm pipe will incur a smaller standing charge than that with a 40mm pipe.

With invoice validation the best place to start is to do an inventory of the accounts you have. When I worked for a local authority I had 300 water accounts, 40 gas accounts and 180 electric accounts.

About 20 of the water accounts were what I called redundant accounts. They were old empty buildings or buildings that had been demolished but the water meter had been left in place and as such, still incurred standing charges on the meter. Speaking with my water account manager I learned that these accounts could be dead ended.

I am not sure if dead ending is something all water suppliers offer. Dead ending an account means the supplier will continue to read the meter (typically twice a year) and as long as there is no consumption, they will suspend all standing charges.

The combined standing charges of those 20 odd accounts totalled around £6,000 a year. A good saving which I didn’t have to share with anyone that only took a telephone conversation. Maybe I could do this myself.

I also found 30 electric accounts we were approving payment on were accounts the local authority no longer owned or operated out of. Some of the properties had changed occupancy some years ago. Once I had confirmed this with the supplier, we started to receive some quite significant credit notes. Again, I kept 100% of the savings

There was also a rogue electric meter that lived in a pill box by a crazy golf course. This electric meter shared the pill box with the electric meter for the crazy golf course. I just couldn’t understand what this rogue meter was supplying but as it was consuming a fair amount it was on my radar.

Acting without hesitation I switched it off.

The next day I received a phone call asking me if our crazy golf venue had suffered a loss of power. The caller was from a miniature train company that was a few hundred meters behind the crazy golf. But I hadn’t seen it due to fencing and a thick line of trees.

The miniature train facility used to be run by the local authority but had been sold to a leisure operator some years prior. We had been paying the electric bill for the miniature train company for some time. Again, some time later credit notes on that account arrived.

Often invoice validation really is this simple. Invoice validation is a significant subject and I have many experiences to share. But I shall save them for future blogs as this is just as the title suggests An Introduction to Invoice Validation.

Invoice validation is certainly something anyone can do as I have proved. It should be viewed as an opportunity to secure income which can provide significant benefit to any organisation.

To put that into context one of the first successes I had with invoice validation led to a credit note of £76,000. Would you really want to share that with anyone?