The inspiration for the Summit was PayStream’s consulting, research reports, and one specific study our research division has been conducting for the last several months regarding the state of AP automation in U. S. companies. The findings were unveiled at the Summit and the eInvoicing Adoption Survey Report released this week. LINK

Common themes emerged from the conference delegates. Many admitted that imaging and OCR were great first steps, but they found it was time to take their AP departments to the next level in automation and to begin exploring advanced options like electronic invoicing.

Organizations just getting started on the path to automation expressed relief when they discovered many of the options that technology providers offered could be tailored and implemented a la carte. You don’t have to automate the entire process all at once.

Of course, everyone wants to know how to make the implementation process a success, but making that happen depends on variables, often times out of your control. This was addressed in the morning panel discussions when panelists offered anecdotes for how to be successful.

The moral of the stories was: 1. Executive sponsorship and cross departmental collaboration is key. You need all departments on board and you need your executive leadership to fully understand and support the project to have any chance of automating your accounts payable, and 2. Take time prior to implementation to get an accurate estimate of the current state of your payables, even if this means stretching your timeline an additional 3-6 months.

And the question addressed most often; how do we get our suppliers on board? The answer was a unanimous recommendation to approach your vendor pool with an air of collaboration and be willing to work with individual vendors who may be on separate platforms. Often times, a solution provider will handle supplier on-boarding for you.

Now, getting back to the survey results from the PayStream eInvoicing Adoption Survey Report. Amid all the findings, we see most clearly that paper is on the way out and it’s on the way out fast. By 2010 we anticipate electronic invoices exceeding the number of paper invoices processed by Fortune 500 companies in the U. S.

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To address this need in the market, PurchasingNet, Inc. is conducting a Procure-to-Pay Best Practices One-Day Online Course  July 17th, 2008 that will explore the three most important ingredients in a successful Procure-to-Pay implementation: people, process, and preparation. Project management expert, Daniel Brogan, formerly of EarthLink, will conduct a session designed to help companies assess their needs, support their team, and learn cross-industry best practices that will ensure the success their P2P automation project.  

During an economic downturn, education and preparation can help your company mitigate the risks and dramatically improve the outcome of your high-profile software implementation. Our recommendation: Reserve your space in this valuable course now.

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AP Automation – including Invoice Automation and Discount Management (IADM) initiatives need a framework to ensure that programs are approached on a strategic basis which bridges both the Supply Chain and Finance organizations. PayStream’s analysts have introduced such a framework to help enterprises implement “integrated” IADM and maximize benefits.
 
To achieve the long-term value of Invoice Automation & Discount Management (IADM), organizations need to adopt a strategy involving both Procurement and Finance and therefore initiatives should be approached at an enterprise level. So far, only a limited number of enterprises have stepped up to this challenge and are implementing what PayStream Advisors calls “integrated” IADM optimization. This number is steadily rising, as corporate enterprises begin to achieve benefits in their first attempts at IADM and realize what really needs to be done. Our most recent research survey that many enterprises are still implementing electronic invoicing or stand alone Discount Management or Supply Chain Finance programs, not truly integrated projects.

When company’s focus on planning, as opposed to implementation, PayStream estimates that:

·         Nearly 30 percent of surveyed enterprises have plans that would fit the integrated IADM description.
·         Approximately 50 percent of those are planning a Level I approach (not integrated)
·         Less than 20 percent are planning an integrated approach which brings together buyer/supplier collaboration with electronic invoicing.
·         More than 15 percent are considering global initiatives to inject third party financing into their supply chains

Integrating Invoice Automation and Advanced Finance Tools such as Dynamic Discount Management or Supply Chain Finance is not easy. It requires a multi-disciplinary vision and leadership to drive a “focus on unleashing working capital from the trade Invoice and receivables,” otherwise it will remain fragmented. It involves difficult changes to processes, and external organization that can make implementation difficult. Organizational and cultural barriers exist between Supply Chain/Procurement and Finance managers making clear thinking on IADM difficult.The technology support seems easy — but it isn’t. Technology staff must grapple with the challenges of getting invoices approved faster, multichannel alignment, and systems integration. Even if the CFO accepts the need for enterprise-level IADM, the quarterly demands of procurement and working captital targets, especially in delicate economic conditions, make IADM one of the the most important challenge facing the finance organization, but not the most urgent for the CFO. This typically results in a focus on tactical “quick wins” until conditions are better.The main reason enterprises are not implementing integrated IADM is an inability to see the big picture and understand what is involved. Just as a map helps you understand the context of your journey (the roads you need to navigate and alternative routes), so the PayStream IADM framework helps enterprises make decisions about the best route and objectives for their situation.Following an analysis of several larger corporate enterprises, PayStream Advisors has created a IADM framework, or map, called “The Eight Building Blocks of Invoice Automation and Discount Management” (see Figure 1) to help enterprises see the big picture, make their business cases and plan their implementation. The framework can be used for internal education and debate in developing the IADM vision and IADM strategies. It can then be the basis of an assessment of the enterprise’s current and required IADM capabilities, to help understand its current position and future strategy. Using this framework, PayStream Advisors is currently profiling several enterprises that are great examples of IADM at work.

Core Topic
Supply Chain Financing: Optimizing Working Capital through the strategic use of financing and discounting in the supply chain

Key Issues
During the next five years, how will cash management strategies, processes and technologies evolve to enable enterprises to improve the use of working capital tied up in trade Invoice and receivables?
What is IADM, how will it evolve, and what drivers are emerging to force its adoption?
What is the senior finance executives in successful IADM initiatives?

Strategic Planning Assumptions
Through 2008, 90 percent of successful IADM initiatives will balance the needs of improved supplier relationships with working capital improvements Enterprises that have a wide differential between their and their suppliers cost of capital are twice as likely to achieve adopt IADM and Discount Management goals.PayStream’s Building Blocks research and report will be released at the September 10-12th PayStream Summit, in Orlando, FL. Those finance and supply chain managers whom desire the latest information, tools and techniques in Invoice Automation and Discount Management should reserve their delegate representation at the conference

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PayStream’s analysts note that labor accounts for the vast majority of all invoicing costs, because of time spent manually creating and mailing invoices, answering questions, managing payment disputes, and correcting errors. Although it often goes unrecognized, another significant cost in accounts receivables is payment lag time. In large companies with high volumes, the processing cycle can last three weeks or more. Those delays are costly, both in terms of lost trade discounts and unearned interest on money that could have been invested during that time.

Today’s virtual invoice and payment solutions not only process payments, they can create electronic invoices from accounts receivable systems, present invoices online, or send invoices directly to recipients’ systems. In addition to faster invoice processing with fewer errors, these solutions also offer savings in time, postage, and paper storage; improved capture of early payment discounts; and online dispute management – not to mention an improved bottom line. PayStream’s latest report, Supplier Electronic Payments:  Understanding Business to Business payment automation solutions reveals that companies can save up to $8.00 per payment by simply by moving from check to electronic payments Download a copy of the complementary report. DOWNLOAD NOW >>

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Those late and unmade payments, of course, put a crimp in business cash flow, and force companies to find a cost-effective way to increase revenues. As a result, many of them have discovered the benefits of virtual collections. Even those that may have previously shied away from full-scale debt collections, because of the cost and potential legal issues, are jumping on the bandwagon and quickly recouping their investments.

These highly customizable electronic collection solutions offer multiple payment channels (checks, PayPal, credit and debit cards) and contact methods (landlines, cell phones, e-mails, and text messages – as well as targeted combinations of these communications pathways).  

Some solutions provide debt settlement features, while others allow users to implement business rules that determine payment options. Nearly all provide some degree of reporting and analytics that can improve contact accuracy and increase settlement ratios. Top-of-the-line programs feature real-time credit reporting and best practice advice. With the wide array of prices and features available, there’s literally something for everyone. It’s a great way to get the income boost needed to ride out a tough economy.

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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 Automation”.

This new whitepaper is available free of charge to Paystream Voices readers by visiting Metafile’s MetaViewer website.

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Implementation: PayStream’s Payment Process Analysis™

Industry: Education

Company size: 12th largest of 16,000 school districts in the United States

“Exceptions like missing GR’s are killing our productivity.” — AP Department

The problem

• Explosive growth in student population
• Entirely manual document management system
• Approval process inconsistent with current leading practices
• Limited visibility with current ERP deployment
• Missing available discounts
• Invoicing process costs 60% above industry average
• Poor communication between departments
• Poorly trained AP staff

The solution

• Conduct an automation assessment of accounts payable process
• Document metrics with PayStream’s methodology and benchmarking data
• Introduce document imaging technology to the system
• Exploit PayStream’s library of best practices across the industries
• Expand electronic payment options (P-Card, EFT & EDI)
• 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.” - 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.

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Hospital administrators and Revenue Cycle Managers are turning to HCDM solutions for process improvements and direct cost savings. HCDM delivers results through the replacement of manual, paper-based processes with more efficient, automated, computer-based processes.

HCDM is comprised of core technologies including document scanning, centralized electronic storage, and workflow automation. Healthcare industry innovators are deploying HCDM systems as organization-wide enterprise solutions, while others choose an iterative, department-by-department, model.

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I have known Simon Fox of TBiConnect for well over a year, and I am delighted to hear the closing of the first round of £330,000 from regional venture capital fund, South West Ventures. According to GrowthBusinessUK, TBiConnect is an online payment specialist. As far as I know, TBiConnect does not handle payments, let alone on-line payments. Their expertise lies in the exchange of Purchase-to-Payment documents between the sender and the recipient (the buyer and the supplier), and provision of procurement solutions.

TBiConnect has a similar model to Accountis, i.e. enterprise licensed based product. Both companies claim to have the ability to offer a hub based solution. Given that Accountis has been trading for more than five years, and continue to offer licensed based solutions, my advice to TBiConnect is that think strategically when deciding on the license vs. hub based model. Whilst licenses might be financially rewarding today, it may be prudent to set-up a hub now rather than later. Perhaps it is better for me to cover hub vs. licensed model in another post.

According to the story, the fund has committed its maximum initial investment of £330,000. There is also the possibility of raising a further £330,000 from the same fund after six months. South West Ventures has invested £6.9 million in 24 companies (an average of £287,500 per company) with £18.1 million left to invest. The fund is managed by YFM Group, which over the years have become a VC powerhouse operating in many regions of the UK. Doug Stellman of YFM Private Equity recently spoke at the Northern StartUp 2.0 event organised by me at KPMG Manchester.

According to Nick Simmonds, investment manager at YFM Group:

“TBiConnect has developed a proven solution to address the business need problems faced by many organisations handling thousands of financial transactions. We have been particularly impressed with the excellent management team and are delighted to back this exciting solution”.

As part of the funding package, former Amstrad CEO David Rogers has become the Chairman of TBiConnect. According to David Rogers:

“TBiConnect’s customer proposition is compelling. It delivers immediate cost benefits and control to financial systems. We’ve had immediate positive reception and industry recommendations from early customers on the strength of the ease, simplicity and operational benefit they’ve experienced. Investment from the South West Ventures Fund enables TBiConnect to make a forceful entrance for a long-term future in this emerging market.”

According to Simon Fox, CEO of TBiConnect:

“We are delighted to have secured the investment from South West Ventures Fund to support our vigorous growth plans. The business rationale for our service grows ever more powerful as corporates struggle to increase performance in every department, while maintaining stability of operations and IT.”

Just like many other players in the market, TBiConnect is no stranger when targeting the large buyers. TBiConnect targets medium and large organisations that generate over 100,000 transactions a year.

Whilst technologies are available, no UK company has emerged to provide a compelling solution to the SME. Accountis clearly has the technology but lacks a substantial business model to take the market by storm. Version One has early stage of technology, but requires significant development, which somehow I do not see happening under the current ownership structure. If Accountis is serious about the SME, it needs to consider setting up an independent company and provide the software under license to target the SME customer. The current set-up will not work. Why? Their matrices will never allow direct targeting of smaller customers, e.g. revenue per customer will be so low for sales team to get too excited. What this means is that the market is wide open for an innovative startup to penetrate the SME sector by storm. Who will rise to this challenge is not clear. I cannot see OB10 taking a punt at this market, as it’s ambitions are more global. What about Causeway Technologies?

What a pity! A lost opportunity! Anyone interested in exploring this opportunity more closely?

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While clothes shopping, you have an option to return the item at the store. Luckily, merchants in the consumer world are very forgiving when it comes to our purchases. Unfortunately, the business world is not quite as flexible. We cannot imagine deploying a technology solution and then just “returning” because it did not deliver on the expected results.

PayStream has developed Seven Steps to help you supercharge your vendor evaluation process and help you select the right provider the first time around so you don’t have to deal with the “returns” conundrum:

Building a Business Case: Is there are return on investment and what is the payback period with each solution? The simplest way to compare multiple options – each of which has diverse cost components – is to use the cost per invoice or cost per payment as the least common denominator.

Documenting your Requirements: Before looking for the right technology provider, thoroughly document your requirements - what processes need to be automated and what functionality is needed for that.

Request for Proposals: Use your requirements document to develop a Request for Proposal (RFP), which typically includes three sections – an outline of requirements, a list of questions around the service providers’ capabilities and a section where they can detail their commercial terms based on the assumptions you have provided.

Customer Reference Interviews: Do not underestimate the value in talking to live clients of the vendors that you are considering. Remember that they were yesterday where you are today and can give good tips and pointers in selecting the vendor as well as making the transition process smoother during implementation.

Vendor Score Cards: Develop a set of quantitative and qualitative metrics on which you want to evaluate the vendors’ relative performance in the RFPs as well as onsite presentations and solution demos. Have a number of stake holders rank the providers and aggregate the results.

Contract Negotiation: There is always room for negotiation in the commercial terms submitted by the providers - fixed costs versus variable fees, gain sharing agreements, guarantees and penalties as well as contract termination costs.

Total Cost of Ownership (TCO): The TCO model takes into account three major costs (i) provider fees, (ii) internal IT resource costs and (iii) change management costs.

Finally, don’t forget to consider switching costs – most of which cannot be quite quantified – when evaluating each option.

Until technology buying becomes more like shopping at the mall, PayStream’s QuickStart Consulting program is here to help clients with the comparing and selection process. QuickStart is like your personal shopper for complex automation decisions.

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