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Southwest Airlines was in need of a new flight plan to overhaul their AP invoice process. Long, inefficient processing and duplicate invoices were the catalyst for a new program. Although they encountered some turbulence along the way, the impact on the AP department has been tremendous.
AP supervisors Michelle Price and Cicley Lopez recently presented their experiences at the 2010 PayStream ePayable Summit in Charlotte. They described their old “legacy process” and why it needed to be changed, adjustments that were made along the way, and the lessons they learned throughout the transition.
Southwest’s legacy process consisted of mainframe financials and three separate purchasing systems. Due to their paper-reliant system, they experienced a paper build-up through the creation of multiple copies of invoices by field offices. Invoices were sorted to one of 10 processing systems which slowed the entire process from entrance to AP to 14 days. Michelle Price explains the invoice process HERE >>>
Encouraged by CEO Gary Kelly, the department was challenged to create a world class design to tighten up the invoice approval and management process. The new plan took a three-tier approach and addressed invoice, payment, and cash management strategies.
The New Flight Plan
The invoice strategy was simple – streamline through automation. Cicley Lopez explains the decision to automate HERE >>> Managers sought to transition to paperless, reduce cycle time, move to electronic approvals, increase availability for the auditing department, and create a vendor portal. The payment strategy aimed to increase P-card usage, increase electronic fund transfers, and decrease the number of wires. In terms of cash management, they realized the need to increase their terms after conducting a benchmark study. They are currently implementing the Paylink program, which provides the ability to push a credit card payment to the vendor and extends payment terms.
Henry Ijams, PayStream’s lead architect, noted that Southwest’s world class design effectively cut the entire invoice process in half. Invoices are now prepared, scanned, and placed in to three specific queues (categorized by priority, PO, and preapproved). The pre-payment audit was eliminated and unapproved invoices are now electronically tracked. PayStream’s conference delegates were impressed with Southwest’s quick results.
Flight Changes
Southwest encountered several flight changes as the transition progressed. Some of the new software was not compatible with OCR, which had to be pushed back until summer 2011. Issues arose with response time in regards to automated approvals. Finally, the vendor portals were forced to be pushed back until next year because of commitments to multiple projects.
In order to keep impacted areas of the company in the loop, communications were sent out regularly so they could prepare and plan for changes. This was crucial for employees who had been using the old system for many years.
Once the initiative was cleared for take-off, there was a week of downtime between systems. A complete GL translation was necessary as well as preparation for scanning and reconfiguration of the scan room.
Frustration arose from the expectation that AP supervisors should have answers to all the questions. Fortunately, they had a hypercare team – a corporate level team to support SAP – on hand to offer expertise and answer questions regarding SAP.
Lessons Learned
Leadership learned a few lessons throughout the transition. The “Big Bang” theory – implementing different aspects simultaneously – was not the best option, especially when coupled with the 7,000 invoices that were backlogged from the week of downtime. They also ran into language differences between different vendors (i.e. ACH has different meanings for payments and airplane parts). They acknowledged that they would have provided more extensive training to account for changes and exceptions.
Despite the bumpy take-off, Southwest Airlines has successfully arrived in invoice automation that is now moving towards world class.
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.
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.
So you want to move to invoice automation – imaging, workflow, or even electronic invoicing. Problem is, your CFO, Controller, AP Manager, or IT staff hasn’t bought in. You’ve got a plan, but don’t have the buy-in to start.So what is the surefire way get your project approved?
PayStream has developed simple metric – PIQ (paper invoice quotient) – to analyze operations and simplify the way management thinks about AP. PIQ is a simple way to better communicate the opportunity to management. It is a score derived from a standardized survey to measure your organization’s level of dependency on paper in AP.
PIQ includes two different concepts: efficiency and effectiveness.For example, an efficiency metric would be determining that your cost is $6 per invoice to process. The effectiveness metric is how long it takes to process that invoice. Typically, AP will say that it takes 24 or 48 hours to process, or during rush times maybe a week. However, that’s only part of the story. You need to know how long the invoice takes from the viewpoint of the supplier or CFO.
PIQ tracking starts at the invoice date and ends on the day the corresponding voucher is approved in your accounting system. The PIQ is then calculated by taking the approval time divided into the percentage of electronic invoices. By weaving in these two concepts, PIQ makes it simple for you to demonstrate opportunity to your senior managers.
Metrics and Your PIQ
PayStream conducted an AP Benchmarking Survey in the Fall of 2009 and asked survey respondents questions that would serve as guideposts to help other AP departments benchmark their business. The number one response (65 percent) to the biggest opportunity inside of AP was process inefficiency. Everyone wants to provide AP services cheaper, better, and faster.
The second ranked opportunity (53 percent) was improved visibility, which is driven around discount management. In other words, there’s a frustration, especially among senior managers, about invoices floating around the organization and not being in the company’s ERP system.
We call this “invoice float” because the invoice is moving around the organization and may be sitting on someone’s desk, perhaps because the person is on vacation, investigating a discrepancy, or wants to post the invoice in Q4 rather than Q3.
Envisioning Your ROI
The first source of ROI is AP efficiency. Reducing processing costs and speeding up the process will account for anywhere from 25 to 35 percent of the opportunity. The remaining percentage comes from spend visibility; how money is being spent and the timing of that spend. The next piece is working capital authorization. Having better visibility to the spend can allow you to take advantage of paying some suppliers early in exchange for a discount.
Having a broad foundation to your business case means bringing in other business units and working with your counterparts—including Treasury, Procurement, and Finance.It’s vitally important to consider all of these elements together.One of our clients received approval for an AP project in the past, only to have the assistant controller reallocate the funds to another project. When we did an analysis, we found that the AP manager had only included about 24 percent of his business case. He missed a huge chunk of opportunity.
The one tip that we always like to suggest is that you should visualize your ROI model.The first thing you will notice is that there is some red, which means that it’s going to cost money before you start saving money. The first thing that the people reviewing your business case want to know is how much the project is going to cost. It’s important to show that you have a realistic plan and understand that it will go negative before positive.
The Four Truths
When it comes to AP automation, there are four truths you need to face and overcome to achieve success:
1. Phantom Pain. The people who make the decisions about AP automation don’t really understand the pain of suboptimal processes, because they aren’tinvolved in AP. That’s why you need to make it simple for the CFO, controller, or IT manager to understand your pain and business case.
2. The End of Meaningless Metrics. To convince the right people, you have to communicate in their language, not the language of AP. Present your facts, compare yourselves with others, and show the the dollar value of your proposal. Make them feel the pain of a competitor or other recognizable innovator that is meaningful to them. Everyone wants to be least as good as or better than the Joneses, including your managers.
3. Making the Case. When building a broad foundation, remember that it’s not just about AP efficiency. It’s also about servicing your suppliers and making it easier for them to do business with you.
4. Destination Blues. You need to paint a picture of your vision; where you’re trying to go with automation. The vision is not that you’re going to use OCR or set up an electronic invoice portal, but rather that you want to move to a touchless process in AP. Management can equate a touchless process with reduced costs and increased visibility into the number of invoices and accruals. The destination blues involves convincing the people who need to approve your efforts.They won’t necessarily understand the technology, so you need to simplify it for them.
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.
2009 proved that one thing is clear about accounts payable — the future of AP rests with technology. Why?
Companies are looking to their operating departments to cut costs, and they see that with the right automation tools, AP can dramatically lower invoice processing costs, reduce erroneous payments, and capture more discounts. In our conversations with literally hundreds of controllers and AP managers in 2009, one theme rose above the rest: how can technology help us improve our finance operation?
Despite widespread and clear desire for improvement, confusion about automation options continues to plague finance managers.PayStream’s analysts believe the trick is sorting out the AP automation landscape.
What technology is available and which tools are the most effective?
How can AP best use these tools?
How do we get started?
1. Start with the correct data. Keying everything that comes in off of invoices would be a great start, but what if you have the wrong information on the invoice, or if the information was captured incorrectly at the point of entry?
For example, an invoice that comes in from an electronic portal may be incorrect. That’s why it’s important to get the proper information off of the invoices. For OCR, (what we are now correctly calling “intelligent document recognition” or IDR) getting the exact data you need is not that easy. But it is absolutely critical, because the next step—workflow routing and matching—requires the proper information in order to work correctly.
One common trap:the difference between header capture and line-item capture can mean the difference between a high-touch process and a touchless one.
2. All workflow is not the same. Workflow is an amorphous cloud and many project overruns are the result of not properly estimating what it’s going to take to change the business process.
What we found working with Phillip Morris and the Visiting Nurse Services of NY was that you need to go through a design process and figure out what you want the workflow system to do before you make a vendor or solution decision.
You can train the technology to do pretty much anything you want, so how do you want it to work?
Invoice approval routing is not the same as automated processing. For example, if invoices are being received at field offices and locations today, how are you going to manage routing once receipt is centralized at a PO Box controlled by AP?
While your staff knows internally where to route a specific supplier invoice for approval, this is usually based on the wealth of organizational knowledge. We call this collective understanding “tribal knowledge” which encompasses the 7-10 years average years of experience that your team members possess.
Once you centralize receipt, you will have to train your suppliers to put the person’s name or department name on the invoice so it can automatically be routed to the correct person. This is a business change that a lot of people don’t think about when moving to automation.
In order to succeed, AP needs to stop doing manual rework. Your team has become expert at working with imperfect data, and ePayables automation is not as forgiving. Capture, matching, and business logic requires powerful software. In summary, you need to design your business process around using the technology and automation in a way that makes sense for future digital AP, not for the way you are doing it today. (Click here to download PayStream’s report on imaging and workflow automation.)
3. Solid foundations are built on a well-designed business case. According to PayStream’s study of innovation in AP, the most successful business cases that make it over the hurdle when competing with other initiatives are those that are built on a broad business case foundation.
AP efficiency is only a third of the story.This means you need to get other individuals and business units inside of your company to buy into what you want to do.
The problem that many of us face is that AP is just one small (and frequently overlooked) business unit.For instance, other business units, many of whom have customers, might have a little more leverage when it comes to getting IT resources to help with projects or management buy-in when it comes to funding. Admittedly, AP is not the first in line when there’s a fight in the CFO suite about which projects they are going to spend money on.
The Case of the Lost Opportunity:
One of our clients (a large hospital) received approval for an AP ePayables project only to find out a short time later that the assistant controller decided to reallocate the funds to another project. When we did an analysis of the business case model, we found that the AP manager had only included about 24 percent of the actual residual benefit to automation. He missed a huge chunk of opportunity related to cash management and purchasing savings.
The first source of ROI is easy: AP efficiency.For example, reducing staff and speeding up the process will account for anywhere from 25 to 35 percent of the opportunity.
The remaining percentage comes from spend visibility—how money is being spent and the timing of that spend—which will help Procurement rationalize overall spend.
The next piece is working capital authorization. Having better visibility to the spend can allow you, for instance, to take advantage of paying some suppliers early in exchange for a discount. It’s similar to using a p-card to get a rebate from your bank. Paying your suppliers early in exchange for a 1½ or 2 percent discount is a quick way to make fast money for your automation efforts.
Having a broad foundation to your business case means bringing in other business units, and working with your counterparts, including Treasury, Procurement, and Finance. Even better: more stakeholders to push for your project.
Summary
In order to succeed in 2010, you need to paint a picture of your vision for the future of AP.Start with a picture of where you’re trying to go with your automation.
The vision is not that you’re going to use OCR/IDR or set up an electronic invoice portal, but rather that you want to move to a touchless process in AP.
Management can equate a touchless process with reduced labor costs and increased visibility into the number of invoices and accruals. The biggest hurdle involves convincing the people who need to approve your efforts, and they won’t necessarily understand the technology, so you need to simplify the future vision for them with simple goals and a visual map.
While Twitter might be all the rage for personal electronic communications, another phenomenon is hitting a home run in the business world. Whether it’s called Electronic Invoice Presentment and Payment (EIPP), Electronic Invoicing (e-Invoicing), Supplier Electronic Payment (SEP), or yet another name, AP automation is on the rise. And one of the most intriguing features of these newer electronic AP solutions is their ability to link buyers, suppliers, banks, and other business partners in a virtual environment.
Supplier adoption has long been on the biggest barriers to the widespread use of electronic payment solutions. But as buying organizations become more aggressive in communicating the value of these applications, an increasing number of suppliers are signing on. And once they see networking features in action, the suppliers are quickly converted, as electronic advocates eager to spread the word.
By reducing the invoice-to-pay cycle time and facilitating communications among the participants, the networks are actually enhancing corporate relationships. Buyers and suppliers can negotiate early payment discounts, resolve disputed items, and even develop complementary and mutually rewarding goals. Both buyers and suppliers can appreciate an immediate ROI in the form of increased spend management visibility and improved cash flow, including the resulting reduction in costly but often- necessary financing.
Although it may not be setting the world atwitter, the new networking is indeed changing global commerce by eliminating inefficiencies and conquering cultural, geographic and linguistic barriers.
When it was originally invented in 105 AD, paper was a precious product. Today, we just cannot imagine a world without paper. From the contents of our mailboxes to the currency in our wallets, from the rolls we use to clean our kitchen counters to the card boxes in which we get our cereal, paper is never far from the picture. And neither are our efforts to protect the environment.
While we are consciously seeking ways to reduce the impact on the environment – recycling, using renewable sources of energy and reducing waste, we cannot ignore the number of paper invoices corporate America generates each year. Here is some food for thought:
The United States alone consumes more than 82 million tons of paper each year. Though the U.S. has only 5 percent of the world’s population, it consumes 33 percent of the global paper production.
Businesses within the U.S trade in excess of 13 billion invoices annually, which accounts for more than 25 billion pieces of paper that are floating around offices each year.
Invoices are responsible for 10 percent of all trees cut down worldwide and creating paper invoices uses as much electricity each year as the consumption of 20 million households.
A year’s worth of invoices take up as much landfill space as 10 football fields each stacked more than 100 feet deep with paper.
The case for electronic invoicing has already been made in terms of time and cost savings. But the environmental impact of e-invoicing is not insignificant either. Migrating even 50 percent of our current paper invoice volume over to electronic documents can deliver the following benefits:
Getting rid of 12 billion pieces of paper means saving almost one million trees and 240,000 tons of paper every year.
Slashing paper invoicing by half also translates to reducing our carbon dioxide (CO2) footprint by almost 250,000 tons.
It is clear that, in addition to the monetary savings that e-invoicing brings, there are a number of environmental benefits as well. So make your corporate mantra “Go Green, Save Green.”
Assumptions:
• 1 million invoices = 133 trees
• 1 million invoices = 36 tons of carbdon dioxide (CO2) footprint
• 1 tree = 9,000 pieces of paper
• 1 million invoices = 20 tons of paper
Lebhar-Friedman, Inc., is the leading information company for the retail, foodservice and healthcare industries with over 350 employees located in the United States, Europe & Asia. Lebhar-Friedman is a media company, made up of business units all dedicated to providing clients with the best B2B information online and in print.
While Lebhar-Friedman is headquartered in New York City, New York, the company’s accounts payable department is located in Tampa, Florida. The AP department is supported by three full time equivalents (FTE), who are responsible for processing 28,000 invoices and expense reports annually. Most of the invoices do not have a purchase order (PO) associated with them and have to be reviewed and approved; only the IT department uses POs, so PO-based invoices are a small component of the total invoice volume.
Struggling with People and Paper
Prior to 2007, when Lebhar-Friedman was not using any automation for invoice processing, suppliers sent invoices directly to the approvers. “Invoices would be sent to field approvers in varied locations, such as New York, Chicago and Los Angeles,” said Chris Bartley, Manager of Corporate Disbursements. Approvers would review the invoices, put the required general ledger (GL) codes and then forward the invoices to the AP department in Tampa. Ms. Bartley mentioned that it was usually a week or two weeks from the time the approver received the invoice to the time the invoice made its way into AP. Not surprisingly, Lebhar-Friedman was facing a number of challenges with invoice processing:
The average invoice receipt-to-approval cycle was long and AP had to deal with missing invoices and calls from vendors inquiring about invoice status.
Manual data entry from the paper invoice into the ERP system added more time to the process.
Check runs were performed once a month and direct deposits were made weekly. If this did not coincide with when invoices were approved, the company had to deal with late payments.
AP also had to deal with a lot of exceptions. Sometimes approvers would request short payments without properly providing a reason. AP had to deal with vendors who questioned this.
Looking for a Solution
Ms. Bartley has been a regular attendee at the International Accounts Payable Professionals (IAPP) annual conferences and at these events, she got introduced to the world of imaging and workflow automation (IWA) and its associated benefits. She has been pushing the concept of invoice imaging at her organization since 1996, but budget constraints and other initiatives led to this taking a back-seat.
In 2002, she considered at least using imaging on the back-end to streamline the archival and retrieval process and started gathering internal information as well as more details on the potential vendor pool. Ms. Bartley’s persistence and her efforts at gathering information and cost justifications to present to senior management finally paid off in 2004, when the company actively explored the idea of automation and solicited requests for proposals (RFPs) from vendors.
Lebhar-Friedman had specific criteria for vendor selection. The first condition was that the solution had to integrate seamlessly with the company’s back-end Lawson and AS400 applications. Other important factors were the cost of the solution, client references and the vendor team that would be working with Lebhar-Friedman. In July 2004, the company invited five vendors to demo their solutions, narrowed it down to two by August and finally chose Perceptive Software’s ImageNow solution. The fact that Perceptive Software is a Lawson partner and tightly integrates with Lawson was a major factor in Perceptive’s favor.
Though Perceptive Software was selected in 2004, the contract was not signed until 2006 when all the stars were aligned – the CFO finally blessed the project and stated that there was availability in the budget. The project was kicked off in July 2006, with a go live date of January 2007. Ms. Bartley mentioned, “we were very impressed with the Perceptive team that worked on our implementation. The entire group was very professional and made sure our requirements were met. Our IT Director mentioned that this was the most professional team he had ever worked with”
New and Improved Process
The first step that Lebhar-Friedman took along the automation route was centralizing invoice receipt. In October 2006, prior to implementation, the company sent letters to all vendors informing that invoices should no longer be sent to the field directly, but must be received at the AP department in Tampa.
Today, the company receives about 70 percent of its invoices via email. These are sent automatically to the ImageNow printer, without having to be printed and scanned. Paper invoices are scanned into the ImageNow system. The company does not use any data extraction technologies like optical character recognition (OCR), but keys the header information into ImageNow. Invoices that have entered into the system are automatically routed to the approvers, who review the invoice, add the appropriate GL coding information and approve the invoice. Approved invoices are then uploaded and posted into the Lawson accounting application.
Reaping the Benefits of Automation
Centralization of invoice receipt, front-end imaging and automated workflow have delivered tangible benefits to Lebhar-Friedman. “A big benefit is that we now have fewer lost and missing invoices. We also have a lot less paper; while we had nine filing cabinets prior to automation, we have none now. All our invoices are stored electronically and are easily accessible. The efficiency of having all the information available at our fingertips, without having to search through multiple file cabinets is a pleasure. Finally we have been able to save a lot on storage and postage costs. Originally, we had large packages that were exchanged between the various field locations and the Tampa office frequently, we don’t have any of that anymore,” stated Ms. Bartley.
Looking Ahead…
Lebhar-Friedman is definitely interested in expanding its relationship with Perceptive Software. The company recently upgraded its Lawson financial system and also upgraded the ImageNow solution. Going forward the company is considering expanding the use of ImageNow into its human resources and payroll department. Lebhar-Friedman is also exploring the idea of leveraging Perceptive Software’s data capture solution to extract data from invoice images automatically without having to go through the manual data entry process.
Overall, the Lebhar-Friedman team is extremely satisfied with its choice and is looking forward to a more satisfying relationship.
AP departments have finally jumped on the automation bandwagon and are using technologies like document imaging, data extraction, electronic invoicing and automated workflow to achieve both tactical benefits – cost containment and productivity enhancements – and strategic objectives – improved spend visibility, better vendor relations and enhanced discount capture.
But our research reveals that merely having the right technology in place is not enough to optimize the AP department performance. Learn from the innovators about best practices that go hand in hand with technological tools.
Centralize Invoice Receipt: If all invoices are sent to the AP department directly as a central location for receipt, organizations can drastically reduce problems such as lost/missing invoices and lack of visibility into invoice liabilities. In the 2008 IAPP Member Benchmarking Survey, members were asked to rank the importance of centralization, on a scale of 1 to 5, where 1 is low and 5 is high. More than two-thirds of the companies (67.4 percent) stated that centralization was of utmost importance to their AP operations, giving it a 5 on the scale.
Move Imaging to the Front-End: Used for front-end document and data capture, imaging solutions provide greater benefits imaging on the back-end for storage and retrieval. Scanning invoices at their point of receipt – either in the field or at a central location – removes paper from the process and ensures that critical transaction-related documents are committed to secure storage immediately. Performing document and data capture at the beginning of the invoice receipt-to-pay cycle also minimizes the time required to enter invoices into queues for processing and payment.
Use Advance Data Extraction Tools: Once invoices have been scanned and their images enhanced to optimize character recognition, AP automation solutions use technologies like optical character recognition (OCR) to locate, extract, and validate the desired information from the invoice image. Front-end OCR represents a leap from front-end imaging alone, because it sets up genuine improvements to the invoice receipt-to-pay cycle. OCR solutions perform the task of translating data from imaged invoices, reducing labor costs and cutting down on data entry errors. OCR solutions analyze the data extracted and convert it into useful information.
Key Performance Indicators: AP automation solutions offer a number of reporting capabilities that put information at the finger tips of savvy managers. Using the reporting engines’ capabilities, managers can analyze numerous key performance indicators, including the average time taken to approve an invoice, number of invoices processed per day, dollar value of discounts captured or missed and number of invoices processed per AP operator per day, to further improve their department performance.
Download PayStream Advisors‘ recent research paper on invoice automation titled Imaging and Workflow Benchmarking Survey ReportHERE >>
