PayStream Advisors delivers unbiased, third-party market trend information, assessments of financial automation technology, and innovative ideas to business leaders in healthcare, consumer billing, finance and treasury, accounts receivable and accounts payable. | Read More
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.
We’ve all seen the credit card company ad that begins with customers dancing their way through the checkout line, only to be interrupted by the curmudgeon (or tennis geek) who insists on paying with outmoded paper payment. Everything screeches to a halt as the customers wait impatiently for a payment to process.
Similarly, companies are investing substantial resources in complex financial accounting software. Everything is going smoothly. International transactions occur at the rate of thousands per second. Companies interacting with each other in real-time across continents, and in board rooms across the country, companies talk passionately about their automated and improved efficiency.
But in the backroom, away from the view of the public, companies are mired in paper. Documents such as invoices, checks, credit applications, purchase orders, correspondence and even credit card numbers are sitting in file folder in desks, file cabinets or in storage.
In spite of rapid advancements in information technology, companies are relying on the old and familiar when it comes to documentation. How do you explain the paradox?
Jim Mandt, our Vice President of Technical Support at Metafile, has penned (not literally penned, of course) an article highlighting the problem.
Jim illustrates in the article that, while it may be simple to automate the purchase of a laptop computer, or process a credit card number, the sheer volume of functions performed by many major businesses make automation a daunting concept.
At Metafile, we’ve prided ourselves for years on being ahead in the paperless game, and are happy to be able to share what we’ve learned throughout our years in the workflow automation industry with Jim’s latest article, “Full Spectrum Documentation Management and Workflow Automationâ€.
I received NAPP’s (National Association of Purchasing & Payables) newsletter the other day. There are always one or two articles that catch my interest, but the one in the current issue really jumped out at me. It was titled “Culture Eats Strategy for Lunch” by Mark Trowbridge (and originally appeared in a different publication). What a fantastic headline!
The article was well done and very supply-chain focused, but it struck me that the topic can just as easily be applied to Accounts Payable — particularly with regard to invoice automation. Invoice automation strategies can be designed with the best of intentions, but if you have a culture resistant to change, your investment in invoice automation will not pay off.
But a resistant culture isn’t the end of the world. It just means you’ll need to put some extra thought and energy into ensuring adoption. I believe there are at least 4 main areas that need to be thoroughly covered when considering an invoice automation deployment:
Business strategy and system selection — does the invoice automation strategy support a higher-level corporate strategy (ie. cost containment) and is the chosen invoice automation system the right “fit” without significant customizations?
Change management — is there an internal marketing campaign to get stakeholders on board and a value proposition developed that speaks to the personal and organizational benefits of invoice automation? The campaign should start well before a system implementation even begins.
Policy and policy enforcement — does organizational policy support adoption of invoice automation (ie. are there approval thresholds based on dollar amounts for non-PO invoices?)? And perhaps more importantly, how is the policy enforced — does it have real “teeth” to deal with policy breaches? It should or it won’t be taken seriously.
Leadership — is there active endorsement from an executive who is willing to not only be a project cheerleader but who also can marshal support from other areas of the company, such as IT?Bon appetite, culture!
Here are some highlights from a press release we at Metafile recently put together to show that, although the advantages of document management, workflow and einvoicing are evident every day, if you are now dealing with paper-based year-end duties, your holidays are not near as jolly as they should be.
Metafile, a content management firm dedicated to providing streamlined financial innovations, is helping firms avoid the mad scramble of a year end spent locating and gathering all documents necessary to adequately close out their books.
The lack of workflow automation solutions, in most instances, will equate into a significant loss of Days Working Capital (DWC) for all too many firms(and a significant loss of holiday cheer for many AP Managers!).
“The mad dash stemming from closing out the books at year end is a symptom of something much greater,” states Jim Mandt, Metafile’s VP of Technical Support. “It connects directly back to how a firm manages its financial documents.”
Mandt has for decades helped to develop content management solutions, like Metafile’s MetaViewer, designed to alleviate every day concerns amplified by frantic time periods like year end.
Here are some tips for any firm looking to upgrade their workflow processes:
Automate
One of the first tasks we undertake when upgrading a new client is to automate all existing data flow or traffic, such as invoices, POs and expense reports, within one central database. By doing this, we are providing financial departments with accurate information via point and click, rather than dig and shuffle.
Ensure Easy Retrieval
Automation is vital, but if just one expense report is unable to be located, the accuracy of an entire year’s reporting can be put into question. Systems like MetaViewer ensure any information existing in a database can be queried from any office, anywhere in the world, using as little as one keyword of text.
Go Paperless
“Streamlining into a paperless process became a critical necessity, not just a pleasant convenience, especially when it came to closing out our year,” comments Karen Apps, Payable/Fixed Asset Manager from Gate Petroleum, a long standing client of Metafile.
According to the Aberdeen Group, paper invoices cost firms up to 78% more to process than e-invoices. At a frantic time like year end, corresponding costs can rise astronomically.
Quickly Connect The Right Stakeholders
Ensuring each stakeholder within a financial department is able to quickly connect with one another is important anytime of year, but absolutely critical at year end. A dispute over a misread invoice can be a minor problem in July, but can transform into a major dispute at year end when time is unavailable to spare.
MetaViewer’s structure facilitates a year end where rapid communication is vital. An ‘ad hoc workflow’, via text messages to and from departmental managers including all transaction documents, is built into its structure, ensuring all parties stay on the same page with access to vital information.
So remember, when you dream of a white Christmas, it doesn’t have to be due to an endless pile of paper invoices! Happy Holidays from all of us at Metafile.
When we started Transcepta, my co-founder Ray Parsons and I talked alot about the “name-space problem” and how much it has set back our attempts around the world to move to paperless B2B eCommerce. This problem goes something like this:
The accounting system of a buyer has a purchase order, ready to send to one of their suppliers. Unless they have pre-established EDI relationships with that supplier, they probably mail or fax the PO. Larger buyers almost always have the ability to send the PO to the supplier in electronic form (i.e. XML), but if they did, the supplier couldn’t read it. Why? You guessed it: the namespace problem. The buyer orders part number AD7823, but the supplier knows it as something else. Note that name-space problems aren’t just for part numbers; they also apply to simple fields like company name, address, PO number etc.
Now the supplier receives this PO, and types it into their system as a sales order, translating buyer information into information that they understand.
Once the good are shipped, we have all kinds of documents that are sent (advance shipping notifications, proofs of delivery, invoices, statements, credit memos); all of these are handled manually, because of the namespace problems. Note that even PO’d invoices still have the problem - because a supplier’s invoice often won’t have on it PO line item detail and other information required for the buyer to match.
The payment process completes this mess - once the invoice is approved by the buyer, the payment is made and remittance data is passed in a way that the supplier almost always has to do some manual handling.
Is there a solution? Possibly, but it is no where in sight. In the late 1990’s and early 2000’s, there were initiatives to form standards, but the bodies couldn’t even agree on a schema to describe company name/ID and address! We also had groups like RosettaNet who were trying to become universal translators for us all, but when’s the last time any of us were asked by a customer to map to a RosettaNet standard?
There is one possibility: those of us in the financial supply chain automation business could get together and create interoperabilty standard to pass transactions back and forth. Why shouldn’t a Transcepta generated invoice, that came from one of our lightweight print-driver installations, feed transactions into an American Express/Harbor Payments system? Why shouldn’t all the A/P workflow vendors like 170 Systems, BasWare, Dolphin, & ReadSoft be able to handle eInvoices from all the eInvoicing solution providers?
“If you can’t measure if, you can’t manage it.” This statement seems to have been around forever, but it still rings as true as ever. Six Sigma and other similar continuous-improvement methodologies have been applied successfully to process-oriented business functions, such as manufacturing. And that success has led to Six Sigma projects in other areas of business, including Purchasing and AP.
The foundation of Six Sigma, of course, is data. Data for measuring cycle times, defects (or in AP, discrepancies), and more. Even if your organization hasn’t embraced a formal methodology for continuous improvement, data remains the key to unlocking greater efficiency and lower costs in Purchasing and AP.
Do you have a consistent set of key metrics used to measure performance in Purchasing and AP? Do you compare these metrics against standard industry benchmarks? No? Don’t worry — outside of the Fortune 500, Purchasing & AP departments are highly inconsistent in their use of metrics. But the persistent trend is strongly toward a more metrics-driven approach to performance improvement in these important corporate functions.
If you want to learn more about developing key departmental metrics and benchmarking, Verian Technologies is hosting a best-practices webcast: “Measuring Purchasing & Payables Productivity.” Henry Ijams of PayStream Advisors will be a lead presenter, sharing his expertise in performance measurement and improvement. The webcast will be held November 27 at 2 p.m. EDT. Click here to register.
As you can imagine, I get to know quite a number of start up and early stage EIPP (and related) vendors, both here and across the pond. At the same time, I have also attracted a number of potential investors and acquirers seeking startup and early stage EIPP vendors.
While you may think that only start up and early stage companies require funding, I am aware of mature companies who have been in discussions with investment community in order to seek funding for growth. In these cases, funding is generally needed for geographical expansion. It is much easier for mature companies to raise funding than startups or early stage companies. While this is the general acceptance, courting potential investors for 8 to 12 months without closing the deal quickly, do put a significant strain on the business.
Given that EIPP is a growth market, almost every company continues to make losses year after year. Yes, I accept the cash flows are beginning to improve for companies such as OB10. Without further funding, their aggressive growth cannot be sustainable simply through cash flow generated. So how do they satisfy their funding needs? It then becomes a question of debt to equity ratio. Bank debt usually supports for short to medium term working capital needs and not geared for high growth requirements. As one expects, these companies are significantly shy to mention their funding needs, as they believe that the need for additional capital will be badly reflected in the market place.
At the same time, the world continues to become a smaller place, due to daily improving communications, both in terms of speed of communications and level of collaborative tools being launched. This environment makes competitors to meet each other and collaborate easily than ever before. Good examples are Facebook and LinkedIn. Whilst the LinkedIn functionality is somewhat limited and their Groups do not offer any functional support, innovative companies are using these on-line environments to seek potential partners and investors in addition to new customers.
In one occasion, while I was safeguarding a confidential discussion I had with one of the mature (simple rule of thumb: been around for more than 5 yrs) vendors, the market knew more or less of their funding needs. How is this possible? Do companies or advisers working on behalf of these companies leak limited information intentionally to test the market reaction? Surely, an adviser will not leak such information without the consent of their client, if they are breach confidentiality, they would not have clients for long. Damaged credibility is very hard to repair.
I would love to see EIPP market segment flourish with more vendors coming in to the market place. While we have seen some acquisitions, the market is not yet ready for mass consolidation. Believe me, while we speak about supply chain finance and dynamic discounting, across the pond, we are still addressing the same old pain - how to automate paper based manual processes?
Disclaimer: While I used the name of OB10, none of the content is written with OB10 in mind, except the sentence in which OB10 was mentioned. Slightly varied version of this article could be found here.
Buyers searching for a way to eliminate the hassle of inbound paper A/P invoices have a few options to choose from. EDI has existed for years. E-Invoicing networks grabbed the spotlight in the late 1990s. Finally a resurgence of OCR has taken place. The reality is all of these offerings continue to leave Buyers wanting. The main challenge – slow Vendor adoption. For those looking to compliment an existing solution that has only removed a portion of the inbound paper or for those looking at an electronic invoicing project for the first time, our upcoming Nov. 14th webcast should help you understand your options.
Have you noticed that the U.S. is a nation of contradictions? This country came up with electricity, the silicon chip, the personal computer, Amazon.com, the iPod, Google, and reality TV (OK, so that’s a bad example). We have very active capital markets. We launch businesses and have active venture capital to fund them. We have entrepreneurs everywhere.
And yet when it comes to financial transactions, we are in the dark ages. Take, for example, the use of debit cards. They are just starting to be prominent in the U.S. But I’ve spent a fair amount of time in Europe, and the dominance of debit cards and “smart cards” that keep account details on the card and ensure authentication - they’re everywhere! In fact, they were everywhere 5 years ago.
For B2B transactions, well, the situation is even worse than with B2C transactions. Depending on what numbers you believe, there are something like 70% to 80% of both the invoices and checks sent using paper through the postal mail in the U.S. today. Almost all of these invoices are being generated from a computer program and being sent to another business that re-types them into another computer program, which then leads accounts payables teams through a matching and approval process. From there, paper checks are generated, which again are manually entered into the vendor’s originating accounting system. Obviously, this cycle is ugly and expensive.
Let’s contrast this with Europe: in preparing for the launch of the Euro, the banks and the Enterprise Resource Planning (ERP) system vendors got together and said “let’s agree on some sample file formats to exchange invoices and payments.” Guess what - it works. Something like 70%+ of invoices in Europe go electronic - either as data or at least by email with a PDF attachment. Also, most invoices in Europe contain payment details, so the buyer can pay an invoice with the equivalent of an ACH payment. And unlike the U.S. banks, European banks can carry remittance data with the payment, to the vendor can apply the electronic cash.
There are many firms trying to fix this problem, including the company I co-founded, Transcepta (www.transcepta.com). Part of the burden is on companies like ours to help make it easier for U.S. businesses to come into the modern age with regard to A/R and A/P processes. But it’s also important that those businesses out there, most of which are both vendors and suppliers, get behind a go-electronic initiative. It makes business sense. It saves trees. And it’s the right thing to do!
Although I initially intended my first post to be a thought leading, insightful remark about electronic invoicing, the marketing guy in me couldn’t help but make a company announcement instead. I am pleased to report that last month the Transcepta Electronic Invoicing Community reached over 12,500 companies! Achieving this milestone in such a short time is further evidence that Transcepta is changing the landscape of electronic invocing. Customers finally can participate in sending and receiving invoices electronically without expensive, hassle ridden OCR, EDI, and eInvoicing networks. As the Community grows so does the value of the Community’s hosted, many to many architecture. For more information: Transcepta
You are not currently 
