One of the most challenging stages of the fuel management process for airlines is invoice verification. This is also a point of frustration for many fuel suppliers because payments can be delayed, causing cash flow issues.
But it need not be this way. Let’s look at the challenges and possible solutions to this longstanding problem for both airlines and fuel suppliers.
How fuel invoicing currently works
Fuel suppliers submit invoices to airlines either in paper or by using various electronic formats such as PDF, Excel, or XML. Before these can be paid, the airline’s Finance team needs to check that the invoice items match the operated flights, quantities of fuel uplifted or received into storage, and contract prices.
If there are any discrepancies, the relevant team in the airline (Operations, Procurement or Logistics) is alerted and must advise Finance whether to accept or reject the invoice item. Once the invoice is processed, payment can be approved for accepted invoice items and journal entries are generated for the financial system.
Why is fuel invoicing a headache for airlines?
The sheer number of invoices that airlines receive makes verification a serious challenge. For a large airline, this number could be hundreds of thousands of invoice lines a year; for smaller airlines, the figure is likely still to be tens of thousands.
Furthermore, for each of those invoice lines there could be many different price items listed, including:
- Product (jet fuel) price
- Supplier’s differential
- Into plane service fees
- Transport fees
- Hook-up fees
To check all of the price items for every single invoice line is too time-consuming so often Finance teams do one or more of the following:
- Approve invoices based on a historic average fuel volume for that flight
- Check only a sample of invoices
- Approve invoices based on quite high tolerances (e.g. “It’s within 5% of the fee we were expecting so we will approve it”)
This means that some airlines are without doubt, over-paying on fuel.
Furthermore, to conduct these checks, Finance need access to information from a range of teams, including Procurement, Flight Operations and if they are self-supplying, Logistics. Gathering this information can be time-consuming if it’s not stored centrally and the manual nature of this task means it’s prone to error.
Finally, details of why all of these invoices were accepted or rejected need to be documented to satisfy audit requirements.
Why is fuel invoicing a headache for suppliers?
Resolving discrepancies takes time and so fuel payments are often delayed. Sometimes, the airline’s accounting system won’t allow partial payment of invoices and if this is the case, an entire invoice could be held back because of a discrepancy with just one item. This can cause cash flow problems for the fuel supplier and damages airline/supplier relations.
In addition, resolving reported discrepancies and issuing credit notes is labor-intensive for the fuel supplier also.
How can we overcome these issues?
Many of these frustrations can now be prevented by using software with three key characteristics:
- Centralized data – This ensures one up-to-date source for all fuel-related information (contracts, fuel tickets, location fees, and so on) so that the data required for verification is easily accessible for authorized personnel.
- Automation – This speeds up the verification process, reduces errors and increases compliance.
- Workflows – These give the organization greater control over how key tasks (such as invoice verification) are undertaken and by whom.
FuelPlus has a number of products that have been structured around these main features.
Our product for airlines, Airline.One, can receive electronic invoices in different formats including IATA XML and EDI format. It then automatically processes invoices and performs the following checks:
- Is the invoice backed by an effective contract?
- Do invoice lines refer to actual flight events that haven’t been invoiced already?
- Is the invoiced price in line with the contract price?
- Do invoiced quantities match fuel ticket quantities?
- Does the invoiced VAT correspond with VAT rates applicable for delivery location and flight type?
It will then display detailed information on invoice lines that did not pass the invoice checks and can alert the relevant teams (according to the workflows) so that the discrepancies can be resolved. The system also allows partial payment so that entire invoices need not be delayed.
Once an invoice has been approved and released, Airline.One can automatically send financial documents to a system such as SAP, Oracle or JD Edwards.
The upcoming release of Airline.One will enable airlines to send rejected invoice lines, including reason codes, back to the supplier so that their system can automatically issue credit notes. This new version of Airline.One will also automatically update the fuel supplier on the status of open invoices.
The result is that:
- All invoices (not just a sample) can be checked by the airline, which greatly reduces the risk of over-paying.
- The whole process – on both the supplier and airline side – is quicker and at less risk of human error.
- An electronic paper trail is automatically created for audit purposes.
- Communication between the airline and the supplier is better, which improves relations.
Supplier.One is the world’s first unique, fully hosted fuel management software solution, designed to assist jet fuel suppliers and resellers by streamlining the process of supplying fuel to airlines.
Users benefit from daily price feeds, real-time customer credit reports, automated fuel management processing and improved contract management. These features can boost margins, reduce financial risk and improve service delivery and performance.
In terms of invoicing, Supplier.One makes it easier to create invoices by centralizing key information (price categories, contract information, fuel ticket data and so on.). When linked with a Portal.One account, Supplier.One users can also take advantage of the collaboration and automation features outlined above, including the fast, automated transmission of standardized invoices.
So in summary, the problems of fuel invoicing need no longer frustrate airlines and fuel suppliers. As an IATA Strategic Partner and a member of IATA’s Fuel Data Standards Group, we have been working with the industry to understand and overcome these challenges for many years, with the aim of improving business efficiency and saving airlines and fuel suppliers time and money.
Our expertise in this area has enabled us to design a suite of software that does just that. Our newest product, Portal.One, which is due to be released in October this year, is perhaps the most exciting, since it promises to automate fuel processes across all parties involved in aviation fuel.
To find out more about our products and how they could help your organization overcome its fuel invoicing headaches, contact us now.