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Invoice automation has become a hot topic amongst finance circles. A significant shift is beginning to shake the traditional corporate invoice and payment management paradigm. Innovative organizations are seeing tremendous potential around invoice automation - not just cost containment and productivity enhancement, but also spend management and working capital improvements. Owing to these factors, we are seeing a dramatic interest in accounts payable (AP) automation solutions, especially around electronic invoicing, imaging and automated workflow.
While numerous AP automation options have been available for many years, many organizations, especially small and medium-sized ones, are just now starting to dip their toes in the automation waters. What factors are driving this renewed interest in automating AP operations? Why does it make sense to automate now?
Benefits of Automation Get Clear
Organizations that were initially skeptical about AP technologies are learning from the experiences of their peers that have already automated and now see the tremendous potential of automating AP operations.
Focus on the Donut, Not the Hole
An increasing interest in transforming the accounts payable department from merely being a cost center to a profit center is driving organizations to seek out innovative means to achieve this objective.
Spotlight on Processing Costs
A competitive business environment is prompting organizations, especially in industries with lower margins and tighter cash flows, to focus on reducing processing costs and increasing efficiencies associated with invoices and employee expenses.
Cash is King in a Tough Economy
Streamlining the AP process has become extremely important in a tough economy where adequate cash flow and greater control over payables are critical in maintaining liquidity and sustaining business operations.
Early Payment Discounts Deliver High APR
Given the extremely low interest rates today, an increased interest in early payment discount capture is driving small and large organizations alike to investigate tools and technologies that enable them to compress their invoice receipt-to-approval cycles.
Innovative Delivery Models Lead to Rapid ROI
The evolution of on-demand and Software-as-a-Service (SaaS) delivery models has significantly lowered the upfront cost of implementing AP solutions and reduced the hassle of maintaining them.
Cost-Effective Solutions are the Key
Software-as-a-Service (SaaS) solutions that defer solutions costs over a longer period of time are appealing to companies that find it easier to get budgetary approval for operating expenses over capital expenditures.
Common Process for Paper and Electronic Invoices
The convergence of electronic invoicing and front-end invoice imaging presents organizations with a single, comprehensive solution that can manage both paper and electronic invoices through a common process.
Integrating Expense and Invoice Management
Availability of invoice and expense management capabilities from a common platform delivers a unified view into all non-payroll spend for organizations and allows them to leverage the same solution for both processes.
Making Suppliers Partners in Automation
Value added-services delivered by solution providers around supplier recruitment are enabling buyer organizations to bring suppliers onboard more quickly and overcome the hassle they face around lack of supplier adoption.
PayStream’s recent survey of procurement professionals from over 350 U.S.-based businesses reveals a renewed interest in Web-enabled procurement solutions – especially applications that have been enhanced by purchasing cards, approval workflow technologies and integration with online vendor catalogs.
Benefits of Automation Become Clear
Automating the procurement process delivers a number of tangible benefits – depending on the breadth of the solution implemented and the extent of integration with other processes in the finance department. Our survey revealed that, on average, adopter organizations can expect to achieve the following benefits:
Lower transaction processing costs and the ability to significantly compress order cycle times.
Lower transaction processing costs and the ability to significantly compress order cycle times.
Increased compliance with corporate policies and reduction in maverick/ad hoc spending.
Visibility across the entire spend management process in real-time to authorized system users.
Ability to consolidate spend across the entire organization to negotiate bulk discounts/ preferential pricing with suppliers.
Ability to view spend as it happens and compare it against budgets, instead of looking at it after the fact.
Comprehensive audit trails, with date and time stamps, for every action taken by every user within the system.
Higher employee productivity and satisfaction with the availability of an easy-to-use, intuitive system.
Key Procurement Metrics to Track
“What gets measured gets done” is an old adage which is still very applicable to any business, or any task for that matter. The procurement process has a number of moving parts and people and unless certain metrics are identified and performance measured against these indicators, it is quite likely that something will fall through the cracks.
KPIs should be measured at least once every quarter or six months. These metrics or key performance indicators (KPIs) become all the more critical when a company is going through a merger or acquisition, new technology implementation or organization restructuring. Measuring and comparing KPIs before and after any of these are a good indication of the impact it had on the procurement process.Here are some key KPIs procurement departments should track on a periodic basis:
Percent of total spend under management of the procurement group
Cost to process/complete a single requisition-to-order cycle
Number of days to complete a requisition-to-order cycle
Percent of total spend that is maverick/ad hoc/off contract
Percent of suppliers accounting for 80 percent of spending
Cost savings as a percentage of total spend and managed spend
Keep watching this space for more information on electronic procurement based on our survey results – challenges, benefits, best practices and gaining supplier acceptance.
The Accounts Payable (AP) department has long suffered the stigma of being called a “cost center” or “black hole” from which money is constantly flowing out. Especially in recent times, with the spotlight turned on AP, the hole has become more noticeable. But just as every cloud has a silver lining, this added emphasis on the operations of the AP department has brought about a paradigm shift in the traditional invoice and payment management process. Increasingly, financially savvy managers understand that the AP department has tremendous potential to deliver strategic benefits around supplier relations and working capital improvements.
Traditionally, the enemy of radical improvements in the financial supply chain has been an over-reliance on people and paper-based processes, which result in lengthy processing cycles, slow and delayed payments, and unhappy suppliers. However, all of this is changing. On the one side, heightened visibility has led to a growing awareness among financial managers that things are changing, with or without their approval. On the other hand, robust and easy-to-use electronic payment (ePayment) options — such as ACH and purchasing cards — are widely available in the market today, and are opening the doors for innovative AP and finance departments to take control of supplier payments and shine in the limelight.
Payments are the final step in the invoice receipt-to-pay processing cycle. With significant effort spent on the initial stages of accounts payable processing that includes invoice receipt, workflow, and matching, organizations must not experience failure in exchanging payments in a timely and cost-effective manner. Electronic payment methods allow processing of payments in a faster, cheaper, and more convenient manner than paper-based checks. Given the tangible benefits electronic payments deliver over paper-based checks, it is not surprising that adoption of the various formats of electronic payments has significantly increased over the past five years, while check usage is on a decline.
Figure 1: Change in Usage of Payment Methods
PayStream has developed a Technology Insight Series report — Electronic Payments: Streamline Purchase-to-Pay, Reduce Costs — to provide an overview of the electronic payment landscape and address the following questions generally asked by finance managers:
What challenges are organizations facing when it comes to manual settlement processes? What factors are driving the migration from paper checks to electronic payments?
In spite of the widespread availability of ePayments and their tangible benefits, why are more than 75 percent of B2B payments settled via checks? What barriers are hindering further adoption of ePayments and how can they be overcome?
What are the different types of electronic payments? How do ACH payments, wire transfers, and purchasing card transactions differ from one another? What benefits does each ePayment tool deliver?
What related developments in the procure-to-pay space are impacting the growth of electronic payments? Where does ePayments fit in a broader P2P automation roadmap?
What are the functional components of an ePayment solution? Who are the key players in this space? What solution functionality is available from these technology vendors?
What are some of the best practices innovator companies are following in order to streamline their payment processes and increase the usage of electronic payments?
The report also features profiles of five leading providers in the electronic payments space – American Express, Bottomline Technologies, J.P. Morgan, TradeCard and Vendorin.
Payments Convergence Conference
PayStream has created the annual ePayments Convergence event to meet the needs of sophisticated finance professionals who are aggressively seeking to improve their penetration of ePayments, and who desire high-quality information to drive decision making. This two day event is held in June each year to showcase leading practices by corporate innovators.For more information, go to www.paystreamsummit.com.
Hype to hope to disappointment and finally acceptance and adoption – electronic procurement has experienced an extremely interesting lifecycle. During the early 2000s when it was fashionable to add the word “electronic” to every initiative, procurement automation appeared on a number of corporate agendas. A plethora of electronic procurement solutions cropped up in the marketplace and organizations were rushing to implement these in hopes of achieving tremendous cost savings, enhanced spend management capabilities and improved supplier relations.
Unfortunately, not every adopter of e-procurement saw the anticipated benefits materialize. Over the years, organizations have learned a big lesson; technology is not the be-all-and-end-all of an automation initiative; it is just an enabler. The key to a successful e-procurement program lies in the redesign of the procurement process and a strong strategy to leverage the available technology to meet each organization’s specific business requirements.
PayStream’s recent survey of procurement professionals from over 350 U.S.-based businesses reveals a renaissance of interest in Web-enabled procurement solutions – especially applications that have been enhanced by purchasing cards, approval workflow technologies and integration with online vendor catalogs.
Usage of Electronic Procurement Solutions
PayStream’s survey revealed that more than half (61%) of the companies that participated in the survey are currently using an electronic procurement solution. Almost half the adopters have been using their e-procurement solution for over five years.
Figure 1: Where does your organization stand when it comes to the usage of an electronic procurement solution?
Another 13 percent are evaluating e-procurement solutions for implementation over the next six months. What are the driving forces behind organizations’ need to implement or improve an electronic procurement solution? Almost a third (66%) of the companies surveyed stated that the biggest factor driving them down this route was the need to improve compliance – whether it was with contract terms, negotiated prices or regulatory requirements. This was followed by the need to lower costs, accelerate the requisition-to-order cycle and reduce maverick spend. In today’s economic climate, it is not surprising that every organization is looking for ways to drive costs out of the equation.
What is Holding Electronic Procurement Back?
Given that electronic procurement delivers tangible results, what is the reason more companies have not implemented a solution to automate their procurement process? According to our survey, the biggest barrier to the adoption of e-procurement is resistance to chance. Senior management’s belief that “current processes work” even though they may not be the most efficient is hampering e-procurement initiatives that more than a third (35%) of companies surveyed.
This was followed by a lack of understanding of solutions currently available, which was stated as a reason by 28 percent of organizations. In order to educate companies and help them overcome this hurdle, PayStream is developing a Technology Insights Series report titled “CFO’s View of Electronic Procurement” which will be released later this year.
Keep watching this space for more information on electronic procurement based on our survey results – challenges, benefits, best practices and gaining supplier acceptance.
One of the major barriers hindering electronic invoicing initiatives is gaining supplier adoption. Persuading suppliers to change their processes to align with buyer’s needs is a costly and time-consuming process, and success depends largely on the buyers’ ability to present a compelling value proposition to suppliers.
One option that organizations are pursuing to overcome this challenge is utilizing outsourcing services in conjunction with electronic invoicing initiatives. Under this scenario, suppliers that are reluctant to join an e-invoicing network, continue to send paper invoices. But instead of mailing them to the buyer’s AP department, suppliers send these invoices to a processing center managed by the e-invoice solution provider. At these processing centers, the documents are scanned and data is extracted from the paper invoices and converted into an electronic format. Data from both the paper and electronic invoices is then available for processing through a single unified platform.
Electronic invoicing solutions were explicitly designed to facilitate external buyer-supplier interactions, while front-end imaging applications evolved to meet organizations’ internal needs around invoice receipt and management. However, over the last few years, we have seen a convergence in invoice management landscape with both types of providers partnering or developing functionality to offer comprehensive solutions covering paper and electronic invoices and incorporating better options for invoice receipt, approval processing, and discrepancy resolution.
Benefits of Outsourcing Imaging and Data Capture
Buyer Side Benefits:
Organizations receive all their invoices in an electronic format, from day one, without having to wait to onboard a critical mass of suppliers on the e-invoicing network.
The AP department receives all invoices in a common format, irrespective of the channel of entry. The same robust validation rules that are applied to electronic invoices can be used to validate paper invoices as well.
Buyer organizations can see a reduction in FTE and processing costs that were originally associated with imaging and data entry from paper invoices.
Most third party outsourcing providers guarantee a 24 hour turnaround for invoice entry, which significantly compresses the invoice receipt-to-pay cycle, thereby allowing organizations to capture more early payment discounts.
Fewer supplier inquiries into invoice and payment status as suppliers have visibility into the entire process.
Supplier Side Benefits:
Requires minimal changes to the supplier-side process; Suppliers only have to change the address to which they mail in the paper invoices.
Suppliers have real-time visibility into invoice status - whether the invoice is being reviewed, is approved or is under dispute. Further, suppliers can speed up the process by submitting comments or supporting documents, if needed.
Electronic invoicing, combined with outsourced data capture, compresses the approval cycle, ensuring that suppliers are paid on time, or even early in some cases.
With so many sophisticated invoice and payment management solutions and services available in the marketplace today, why aren’t companies making headway in better managing their AP processes? Why aren’t more companies able to remove paper from their organizations, decrease processing costs and increase discount capture? PayStream Advisors conducted its “eInvoicing Adoption Survey” in the last quarter of 2009 and developed a benchmarking report to highlight the overall trends that are shaping the rapidly evolving AP automation space and to answer these questions.
The answer lies in execution. Our latest research indicates that the difference between a winning AP automation initiative and a dud comes down to the ability to execute such programs. Based on survey results, we have identified the secrets of successful invoice and payment management with a look into the best practices of the innovators. What techniques have they employed to streamline their processes? How do they monitor their programs? In short, what are they doing that you could be doing.
Increasing transactions processed on purchasing cards translates to a reduction in invoice volume - paper or otherwise - and the paperwork that is associated with invoices. Increased p-card volume also results in higher rebates for the buying organization.
Centralization of the receipt invoice process ensures that the AP department and senior management have instant visibility into the company’s outstanding liabilities. A formal policy mandating that all invoices should be sent to the AP department is the first step in streamlining invoice management processes.
Front-end imaging ensures that invoices enter the system quickly and are available to all the parties immediately, irrespective of where they are located. Combining imaging with automated data capture adds further benefits in terms of quicker entry of data and fewer errors.
An electronic invoicing solution goes a step further by applying a set of pre-defined validation rules to ensure that all the required information and only accurate information is submitted on the invoices, ensuring that only clean invoices enter the AP processing queues.
Leveraging an automated workflow solution ensures that once invoices enter the solution, they will be routed to the required approver automatically, based on pre-defined business rules. The business logic is typically configured at the time of solution implementation and can be updated as needed.
Organizations that do not have the in-house resources and capital required to bring a critical mass of suppliers onboard an automation solution are leveraging the expertise and value-added services provided by their technology vendors to achieve this.
Further, not all suppliers have the same technical savvy and propensity to adopt an e-invoicing solution. Providing multiple options for electronic invoicing - EDI integration, PO flip, Web templates etc. - goes a long way in ensuring that there is something for every supplier.
Dynamic discounting and supply chain finance have become hot topics in electronic invoicing circles. Organizations that are on the innovative end of the automation cycle are adopting these sophisticated technologies to increase their potential for discount capture.
Technological advances have shrunk our world into a single, global marketplace. Tools like the Internet, email, video conferencing etc. have made it easy for organizations to connect with their customers and suppliers, whether they are across the street or across the ocean. However, these same factors that are responsible for expanding a company’s geographic footprint have resulted in an increase in international travel and the costs associated with this. Over the last few years, increase in the amount of business travel combined with escalating travel costs have significantly increased spending on corporate travel and entertainment expenses, making the second largest cost pool for most organizations, just behind salaries and benefits.
However, with the economy in a recession, companies are taking a hard look at these costs and investigating ways to control them. It is no surprise therefore that more than a third of the companies (38 percent) that participated in PayStream’s “T&E Expense Management Adoption” survey stated that they have decreased their T&E spend over the last three years.
Manual T&E Processes are Fraught with Challenges
There are complexities inherent to managing any paper-based process and the survey revealed that travel & expense is no exception. The biggest challenge for almost half the organizations (45 percent) was manual data entry and inefficient processes. More than a third of the respondents (35 percent) mentioned that lack of visibility into spend was a problem they faced. An equal number found inability to enforce corporate travel policies to be a challenge. High cost of processing expense reports was a challenge for a little less than a quarter of the organizations surveyed.
Challenges With Manual T&E Processes
Time is Ripe for Automation
Our research reveals that, owing to the emphasis on decreasing travel-related spend and the existing challenges faced in the travel management process, organizations are actively seeking automation options to help them streamline the expense management process and reduce its associated costs.
Analyzing Processing Costs
Based on survey results, the average cost to process a single expense report, across all companies surveyed, was $14.63. What was interesting to note was the relation between processing costs and the extent of automation an organization had in place. It is obvious from Table 1 that automation drives down processing costs. On average, a company spent approximately $28.21 to process an expense report if the process was entirely manual. This was four times as much as the processing costs accrued by companies that have automation in place. Organizations that have some automation in place have been successful in driving down processing costs per transaction to $7.42, whereas companies that are fully automated and using an integrated system have costs a per transaction cost as low as $6.19.
The direct relation between lower processing costs and automation also bodes well for companies that are shying away from automation because they believe that current processes work or that there is no ROI to be achieved from automation. This should make such companies take a second look at the range of options available in the T&E automation space today.
PayStream T&E Expense Management Adoption Survey Report PayStream Advisors conducted its “T&E Expense Management Adoption Survey” in the third quarter of 2009 and developed a benchmarking report to highlight the overall trends that are shaping this rapidly evolving space. The complimentary report can be downloaded here.
This survey report is designed to:
Help accounting and finance practitioners familiarize themselves with the TEM landscape,
Enable them to better understand the extent of adoption of the various forms of TEM automation, and
Allow companies to benchmark their operations against similar businesses.
One topic that is sure to spark a lively debate in most circles is “outsourcing.”Accounts payable is no exception. Outsourcing, the practice of leveraging the experience and expertise of a third party firm to perform tasks that would normally be handled in-house, is still taboo in many areas. For a lot of people, outsourcing conjures up images of large-scale lay-offs and employees lining up in droves at the unemployment office.
However, our research shows that outsourcing could, in fact, be the result of a company’s growth, rather than a downsizing effort, even though that sounds like a contradiction in itself. To validate this point, here are some instances where outsourcing is an appealing option:
A company that is growing rapidly might investigate outsourcing to keep up with its growing transaction volume, instead of adding additional full-time employees to its in-house staff.
An organization might want to leverage the expertise of a third-party service provider to increase process efficiencies, while allocating its internal resources to more critical tasks or redeploying them to other functions.
Finally, another scenario where outsourcing makes perfect sense is when it is considered in lieu of large investments in the latest technology, if the company in question does not have the required technical and financial resources.
Whatever the reasons, an entire industry has evolved to meet the outsourcing needs of companies. Outsourcing has been gaining popularity over the last few years, especially in the finance and accounting space. Research from PayStream Advisors estimates that the Accounts Payable Outsourcing (APO) market generates in excess of $5 billion in revenues annually and is growing at over 25 percent each year.
Given this interest in outsourcing accounts payable tasks, PayStream has developed the Technical Insight Series report titled “Accounts Payable Outsourcing (APO): Breaking Accounts Payable Taboos” to provide an overview of APO options available in the market today and insights into the various players in the marketplace. This report gives an overview of the APO market, the benefits it delivers and profiles four leading providers of APO solutions and services – Archive Systems, BancTech, HOV Services and SourceNet Solutions.
“Doing more with less” has become the mantra of the day. In the current recessionary economic environment, organizations are constantly being challenged get more done with fewer resources. Accounts Payable (AP) is no exception. AP departments now have to process more invoices and pay them faster, all with a smaller staff. And the biggest stumbling block to accomplishing this has been our continued reliance on paper-based invoices and people-based processes. We have put men on the moon and we might even colonize Mars some day, but removing paper from the finance department appears to be out of reach in the near future. Until corporate America goes completely paperless, we need a better way to manage the tons of paper that we receive every day.
Imaging & Workflow Automation
A significant shift is beginning to shake traditional AP operations, starting with the search for automation options that help them address the hassles inherent to people and paper-based activities. Our research indicates that Imaging & Workflow Automation (IWA) solutions that streamline the invoice receipt-to-pay cycle have matured and become mainstream technology. While the adoption of IWA solutions had been limited to Fortune 1000 companies until recently, we are seeing this trend trickling down to small- and medium-sized businesses owing to the following reasons:
The evolution of hosted and Software-as-a-Service (SaaS) models has significantly lowered the upfront cost of implementing AP automation solutions and reduced the hassle of maintaining them;
The convergence of electronic invoicing and front-end invoice imaging presents organizations with a single, comprehensive solution that can manage both paper and electronic invoices through a common process; and
Value-added services delivered by AP automation solution providers around supplier recruitment have allowed buyer organizations to include suppliers in their automation initiatives and change supplier behavior more efficiently.
Given this interest in IWA solutions, PayStream Advisors is developing a report titled “Imaging & Workflow Automation (IWA): The Emerging Invoice Management Revolution” for accounts payable managers, controllers, treasurers, and finance managers who are interested in exploring IWA solutions. You can download a complimentary white paper at LINK. The full Technology Insight Series report will be released in September 2009.
Full Report Highlights
Why are organizations interested in IWA solutions?
What did PayStream surveys around AP automation reveal?
What functionality is available as part of IWA solutions?
What best practices are companies using to complement technology initiatives?
Who are the key players in this market and what solutions do they offer?
How can your organization go about selecting the solution that best fits your needs?
Vendors Covered in the Report
Ariba
Banctec
Basware
Concur
EMC/170
Esker
Hyland
Imagitek
Kofax
Metafile
OpenText
ReadSoft
The buyer side of electronic invoicing and its associated benefits have been covered in-depth in this and other reports. However, a lot of education is still required in understanding the value proposition to suppliers from adopting electronic invoice management solutions. Given that one of the biggest barriers to e-invoicing and payments is supplier adoption, rather the lack thereof, it is critical to look at e-invoicing from the supplier perspective. Suppliers who have jumped onboard the electronic bandwagon have reaped a number of tangible benefits from automating the invoice presentment and payment process.
While they vary with the type of solution implemented and functionality being used, here are some common benefits of e-invoicing to suppliers:
Increased Efficiencies: Significant time is saved when employees do not have to print paper invoices and mail them to their customers, freeing up accounts receivable staff to focus on more value-added activities like collections and customer relations.
Lower Costs: Reduction in labor, material and postage costs are common with all e-invoicing solutions. Our research reveals that suppliers who adopt electronic invoicing can slash their invoice management costs by more than 50 percent.
Error Reduction: Validation rules configured into e-invoices solutions flag errors at the time of submission itself and prompt suppliers to correct them, reducing the number of exception invoices downstream.
Faster Settlement: Electronic invoicing compresses the invoice processing and approval cycle on the buyer side. This, combined with electronic payments, will ensure that suppliers are paid on time, or even early in some cases.
Improved Visibility: Suppliers have real-time access to invoices and payment status from a standard Web browser, reducing the number of calls and emails to AP Help Desks.
Better Cashflow Forecasting: Automating invoice processing and payments reduces the uncertainties around payments. Consistency around payment timing means that suppliers have enhanced ability to perform cashflow forecasting.
No More Reprint Requests: Electronic invoicing solutions drastically reduce the number of lost and missing invoices, which means that reprint requests from buyers will virtually be zero.
Quicker Dispute Resolution: Suppliers now have the ability to view disputed invoices at any given time and provide supporting/backup documentation, as needed, making dispute resolution a collaborative process as well as accelerating resolution.
Decrease Days Sales Outstanding: Dynamic discounting and supply chain finance capabilities available as part of e-invoicing solutions allow suppliers to decrease days sales outstanding (DSO) without adversely affecting customer relations.
Access to Cheaper Capital: Dynamic discounting delivers financing at more attractive rates to suppliers than factoring or asset based lending.
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