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Of the two opening sessions on the first day of PayStream ePayables Summit ’09, I chose to attend “Implementing e-Invoicing to Drive Continuous Process Improvement” from Motorola by Michael Riggins. As a consultant, I had strong penchant to comprehend and improve business processes on the front end of P2P operations before I stretched my foot into to e-Payments.
As a perfect start for that morning, I had all the ingredients I wanted for my breakfast on the agenda. I was interested in understanding the compelling company dynamics to move and adapt to new technologies in the Shared Services Division. To my thought, Riggins explained that the historic stats revealed that managing age old processes involving manual interventions had potential drawbacks. May it be inefficiency in processing invoices, time delays in processing invoices, higher number of exceptions, visibility into cash, and delays in reporting structure (to name a few) – it all led to a distorted cash management. Motorola initially tried “centralizing their AP processes” and “outsourcing their manual processes in matching PO-Invoice to low cost countries thus taking advantage of salary arbitrage.” However for a company the size of Motorola, they guesstimated that the cost per transaction was distinctly higher to what it could be by implementing electronic invoicing.
During the course of the session, I learned that this is more than a technical change that any company has to undergo to gain potential long term efficiencies and profits. It involves changes in culture, process, and people and more importantly the long term vision and buy-in from the leadership team of Shared Services Division. I was impressed by how companies are motivated to work together with supplier networks to gain the profits and not just shift the responsibilities to the outsourced vendors. Motorola not only executed their best practices and realized quick benefits but also envisions extending their best practices globally. For companies concentrating on cost cutting measures, I believe re-engineering their business process in the P2P domain accelerates their business processes- especially in clearing payments, gain potential discounts and provides better visibility and control over the cash enabling timely decisions.
The Children’s Place Retail Stores, Inc, ConAgra Foods, Motorola, and Pilot Travel Centers, were all honored for excellence in accounts payable automation by research and consulting firm, PayStream Advisors, last month at the annual PayStream ePayables Summit held in Charlotte, NC.
The Children’s Place Retail Stores
The Children’s Place Retail Stores award was presented to Vice President of Business Process Improvement at The Children’s Place Paul Santini. Children’s Place implemented ASPEN 360 Accounts Payable Edition from Archive Systems.
“We quickly recognized the need to automate the accounts payable process in order to increase efficiencies, reduce costs, and ensure timely payments,” said Santini.
ConAgra Foods
The ConAgra Foods award was presented to Jeff Janssen, Finance Manager at ConAgra. ConAgra chose 170 Systems to automate their processes.
According to Janssen the answer to their accounts payable dilemma centered in large part on enterprise-wide standardization, automation and improvement of underlying practices and systems.
Motorola
The Motorola award was presented to Motorola’s Senior Accounts Payable Manager Michael Riggins. Motorola conducted an extensive RFP process and chose OB10 as their e-invoicing partner.
Under Riggins’ leadership overseeing the initial technical interface, the electronic invoicing plan went live on schedule and with a nearly flawless rollover to production.
Pilot Travel Centers
The Pilot Travel Centers award was presented to Pilot’s Accounts Payable Manager, Estelle Bluhm. Electronic invoices are obtained through OB10’s supplier network and then captured within Concur Invoice for complete visibility to all invoice types.
Under Bluhm’s leadership, Pilot Travel Centers has moved from a decentralized model, where invoices were received at their more than 340 stores, to a centralized model.
PayStream Excellence Awards
PayStream Advisors’ annual excellence award honors companies for excellence and achievement in automation AP processes with electronic invoicing and imaging and workflow.
Did you ever wonder why business-to-business transactions are typically settled in 30 days? Why not when goods or services are delivered? Ironically, the concept of trade terms were invented by the Greeks who needed a system to allow for transportation delays. In today’s economies, we have eliminated many of these delays — and drastically improved the information flows about trade. In fact, a new set of tools — Supply Chain Financing and Dynamic Discounting are rapidly changing the options around supplier payments.
Supply chain financing is demonstrating value in the weak economy as more organizations and suppliers learn how to use it, experts say. It’s most prevalent in retail and manufacturing, but ANY industry can take advantage of these tools due to the availability of new solutions. “Supply chain financing is still in the early stages”,” says Henry Ijams, managing director of PayStream Advisors research and consulting firm in Charlotte, N.C. “However, this intriguing concept is gaining lots of interest in 2009 due to the ability to extend early payments to suppliers based on the strength and credibility of the payer.”
Accelerated payments for a discount are not new. In fact, tools such as asset based lending and factoring have been in use for many years. In a factoring relationship, early payment is based largely on the credit of the vendor who’s trying to discount the receivable. With supply chain financing, whether the customer is Electrolux or Joe’s plumbing they get the same discount rate for accelerated payments. Moreover, a new internet based marketplace, called The Receivables Exchange, is now making it much easier for suppliers to access early payments from a variety of lenders.
The Receivables Exchange
This new twist to supply chain financing, Ijams says, is the concept of a non-bank third party lending the money for the supplier. For example, The Receivables Exchange www.receivablesxchange.com in New Orleans bills itself as “the world’s first electronic marketplace for trading accounts receivable.” Online, lenders that might include private individuals or hedge funds can compete to buy the invoice a major corporation has guaranteed to pay a vendor. Ijams describes the Receivables Exchange as a supplier friendly marketplace for selling receivables to investors and other lenders. “This is a brand new capital source that utilizes the Internet to facilitate transactional transparency fostered by buyer and seller ratings. Think eBay for receivables financing.”
“What we like about the Receivables Exchanges is its powerful ability to allow more people to participate in the financing of trade payables,” he says. “Our analysts think this has some powerful dynamics in 2009. While the credit markets have been disrupted, those who still have cash, like hedge funds, are looking for places to invest money.”
“Supply chain financing is becoming more significant as invoices are approved faster with automated matching and workflow,” he says. So far, the concept seems to be a win-win for everyone involved. “With SCF, once AP has approved a payable, and know they’re going to make payment, the buyers shouldn’t care if someone else is using a promise to pay to swap that for early payment. In fact, buyers should promote the use of SCF because it means someone else can potentially lend that supplier money at lower risk and zero cost to us, the payer.”
Future trends
Finance professionals need to stay up to date with the trends happening in supply chain financing – including its “cousin,” dynamic discount management, says Ijams. The concept involves paying suppliers early in exchange for an attractive discount, which lowers the cost to the organization. It goes against the old adage “Collect early and pay late.”
Staying ahead
The changes in trade payables present a major opportunity for AR, Billing Managers and AP departments to shine, Ijams says. “Innovative billing and treasury managers must continue to insert themselves into finance opportunities to help their companies find ways to speed up the invoice approval and cash receipt processes. Effective collection strategies will be based on a continued contraction of the invoice-to-approval time.”
Research by PayStream Advisors shows the average approval time for invoices (from Invoice Date to posting or approval date) for F1000 businesses is 20 days. That leaves only 10 days of potential early payment time for a supplier, minimizing the opportunity for early payment, he says.
Many organizations will not realize how supply chain financing can serve them until innovative finance professionals bring it to the forefront, Ijams says. “It’s a way for finance and treasury managers to heighten their credibility and improve their importance in the organization. … in order to be a value-added players, today’s finance managers have to be the eyes and ears of an organization by looking for new opportunities to focus billing and collections organizations on continuous improvement.
Did you know that Kellogg’s has more than 60 varieties of cereal? Or that each Starbucks store offers almost 70 different types of beverages? Most people might not know this kind of trivia, but anyone who has walked into a Wal-Mart cereal isle or a Starbucks is aware of the virtually limitless options they have when it comes to cereal or coffee.
Order a Blended Crème Frappuccino at any one of the 12,000 Starbucks locations worldwide and don’t be surprised if they ask if you want to make that a Double Chocolate Chip, a Tazo Green Tea, a Strawberries-and-Crème, or one of five other types of Blended Crème Frappuccino. It is all about choices, and where there is consumer demand, there are bound to be options.
Consumers today are bombarded with numerous choices whatever they might be shopping for, and we have to admit that it has become a way of life. It is not surprising, therefore, that consumers not only demand a range of products and services, but also a variety of options when it comes time to pay the bill.
They are also looking for convenient payment options, as well as control over the frequency and timing of the transactions.
These three aspects – choice, convenience and control – are driving the dramatic shift in consumer behavior from paper payment options to electronic mechanisms. This is especially true when it comes to making remittance payments. Remittance payments comprise of recurring bill payments to utility, telecom, credit card and mortgage service providers, but do not include point-of-sale transactions.
As consumers begin to realize that conventional paper checks cannot provide the level of flexibility and control they desire, they are turning to electronic payments.
Research from PayStream Advisors revealed that 2006 was a watershed year for this migration from paper-based to electronic payments. In 2006, for the first time in history, consumer remittance payments made via electronic methods overtook check and cash payments. Considering that electronic payments represented only eight percent of recurring bill payments in 1995, this is quite a sea change.
The year 2007 proved that this was not a one-time phenomenon, but rather a harbinger of the future of consumer to business payments. In 2007, electronic bill payments comprised 62 percent of all remittance payments, while cash and check accounted for only 32 percent.
READ MORE HERE in PayStream’s complimentary white paper: Consumer Payment Automation: Consumer Behavior and the Payments Landscape.
Apply workflow to enhance approval process and communication
Specialize AP tasks and training
The benefits
Scalable AP department to accommodate explosive growth
Imaged documents only mouse-clicks away from all departments
Invoicing costs in line with industry average
Reduce exception handling commitment by 50%
Efficient approval process from workflow
Productivity gains from AP training and specialization
Improve financials from discounts and released working capital
A Picture is Worth a Thousand Words: Improving Approval Processes through Imaging, Workflow and Training
The Orange County Public School district, the 12th largest school district in the nation, is growing by leaps and bounds. The challenge was to accommodate the districts explosive growth while reengineering its existing, labor intensive, accounting processes.
A PayStream Advisors team visited the Orange County Public School (OCPS) headquarters to gather information and assess OCPS’s options. PayStream’s Payment Process AnalysisTM revealed promising opportunities for significant process savings and improvement. PayStream Advisors leveraged its own research, library of best practices, benchmarking data and proprietary assessment methodology before making recommendations in the form of an implementation road map.
To their credit, OCPS managers and support staff did not hide or sugarcoat their problems; quite the contrary. They recognized that parts of their process were broken, antiquated or missing, and were willing, even eager to “go to school†on PayStream’s advice. The positive elements OCPS had in place included a centralized receipt process and an efficient AP department with reasonable controls to prevent fraud.
The problems to address included poor communication between departments, a manual document management system, a lack of workflow automation and an overly active, time consuming exceptions handling process.
“If only we had access to the original invoice we could save a lot of time approving invoices.†- Bookkeeper
While a centralized receipt process has its merits, in the OCPS’s case, it also created the school districts biggest headache - lack of visibility throughout the AP invoice receipt, approval, and payment process. For example, approvers/end users could not see an invoice. In fact the AP department was forbidden to fax or otherwise send an invoice to other departments. End users reported frustration with the email reminder process in place as they frequently did not have all the information they needed. Lack of invoice visibility meant delays in posting of Goods Receipt (GR’s) and slowed the exception management process.
“I spend almost half my day on emails and phone calls trying to reconcile differences in the invoice without having access to the original invoice.†– Maintenance Dept. Manager
PayStream Advisors recognized the lack of imaging and workflow as the salient deficiencies and recommended these AP automations to facilitate the sharing of invoice images across the district and to accelerate the invoice processing and approval cycle.
Surprisingly, OCPS’s per invoice hard cost was actually $0.29 below the benchmark group average. However, this positive variance was due, at least in part, to well-below average labor costs and a work distribution that skewed the hard and soft cost.
The total cost to process an invoice was $7.80 each. PayStream determined 34 percent of the invoice costs were generated by the AP department. The remaining 66 percent was attributable to the lack of visibility experienced by end users in the various other departments. PayStream estimated invoice processing costs at OCPS were about 60 percent higher than peer group medium-sized AP organizations and demonstrated how total costs could be reduced to $5.33 per invoice.
Another money-saving measure AP automation could ameliorate was discounts, or in the case of OCPS, a lack thereof. AP was taking advantage of a few early payment discounts on large book orders but was missing out on numerous other small opportunities.
“Our suppliers are willing to take discounts, but the system doesn’t track terms.â€- Warehouse Dept.
PayStream concluded that scanned documents (individually or in large batches) that are indexed and archived will provide easy access to all parties concerned. Invoices will be found based on any number of elements: Vendor Name, PO Number, Invoice Number, Date, and SAP Document Number (i.e. Invoice Number). A properly designed and implemented imaging and workflow system will facilitate quick access to invoices and comprehensive discount strategies. An AP automation implementation will also dramatically reduce processing costs and accelerate the exception approval process. PayStream Advisors Payment Process AnalysisTM identified annual savings of over $545 thousand for OCPS and a ROI of 27 percent in two years.
“Ubiquitous Hospital Management System” - That sort of sums it all up doesn’t it? Healthcare is probably the most paper-filled industry that shouldn’t be.
NetSol and its partner are working towards the research and development of a ubiquitous Hospital Management System that will serve as an automated, secure and integrated solution for any hospital’s clinical, financial and management needs. This collaboration enables each party to complement the unique capabilities of the other and will provide pros…
Travel Expense Management is definitely seeing a renewed interest due to government SoX standards, along with rising costs across the board and renewed urgency for business travel as electronic communication further underscores the importance of the face-to-face.
Concur says it’s bringing travel and expense management into the Web 2.0 era by connecting up online booking and expense claim settlement as an end-to-end process. But there’s more than one way to connect across those two components.
Really interesting article about SaaS’s influence on the financial automation software industry:
While speakers often referred to Salesforce.com as the ultimate example of a successful SaaS company, even they appeared surprised at the diversity of markets in which SaaS is gaining traction: procurement (Ariba), timesheets (Journyx), project management (BaseCamp) and now web design with SiteJourney.
Interesting article by Rick Lemieux at itSM Solutions on self-service automation
…when was the last time you dealt with a live person to perform a financial transaction, book a flight or schedule a service call – or even pay for your groceries at the supermarket? Automation of self-service has become pervasive and is even making inroads into IT Request Fulfillment and Access Management…
We talk a lot about Business and Financial Process Optimization at PayStream. To quote Austin Powers, “It’s our bag.” But these two terms are fuzzy and often used in the industry without really drilling down into what exactly they do and/or mean.
I personally believe the novelty and uniqueness of our approach lies in the methods and goals we advocate for. Specifically, we underscore the Payment Tsar and the Payment Quotient as the primary goals of process optimization, as they provide strategic visibility, risk mitigation, and encourage entire culture shifts towards financial automation and efficiency.
A Payment Tsar/Tsarina is unique as he or she holds a C-Level position and is personally in charge of maintaining strategic visibility over the entirety of the financial supply and payment chain. This individual, properly endowed with effective tools and authority, is capable of informing his or her entire company on strategic process efficiency initiatives, up to and including major automation solution implementation.
At the same time, when we encourage clients to advocate for the Tsar or Tsarina, we talk about the Payment Quotient, an extensive best-practice rubric tool that guides their initial decision making process and naturally leads to the sort of corporate practices that establish a Payment Tsar. The Payment Quotient demands high-level analysis of all the various vendor/supplier/customer/expense/spend channels, segmenting them to achieve maximum visibility into the financial process.
For example, in the world of Credit and Collections, the some questions that Payment Quotient analysis would ask are,
How many payment channels are there?
How many customer segments are there by payment channel?
How much does it cost for one or another customer to pay by a particular channel?
So the Payment Quotient is a tool that highlights the need for a dedicated C-Level employee that constantly collects and analyzes these types of questions. At the same time, the Payment Quotient, or a modified version unique to the enterprise, is exactly the collection and analysis that leads to strategic visibility.
The question must be asked then, which comes first? The answer is whichever will get both the Tsar/Tsarina and the strategic visibility the fastest. If Management is on board to bring on a Tsarina because it’s aware that only such a position is capable of establishing true strategic financial visibility, then she will proceed the analysis. If Management doesn’t see the benefit of her position until it’s proven that without her the company will lack strategic vision, then Payment Quotient analysis needs to happen first.
The second is obviously the more difficult scenario - The solution, we’ve found, is for a team-player with the vision to become the Payment Tsar to formulate a cross-functional team that promises to bring together the data necessary to make Payment Quotient analysis.
These sorts of best-practice financial management positions and decisions are only now becoming possible due to the extraordinary analytic power of next-generation financial automation solutions. Putting all the pieces into play is challenging, especially when Management lacks cohesive strategic vision. The first question that you need to ask is, which comes first, the chicken or the egg?
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