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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.
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.
Electronic invoicing solutions are finally delivering – at least partially – on the promise of the long-touted, but rarely experienced, paperless office.
For a number of reasons, including data security fears and a lack of technology investment, the accounts payable function has been dragged into the electronic age kicking and screaming. And that has been unfortunate, since it’s an area that can benefit substantially from automating its many time-consuming manual tasks and processes.
With the budget crunch of recent years and the ever-increasing pressure to do more with less, however, AP managers have begun to see the light and realize electronic invoicing and payments can improve productivity, efficiency, and cash flow.
Newer applications that provide virtual venues for exchanges among buyers, suppliers, banks, and other partners can dramatically shorten the invoice-to-pay cycle. Many of these solutions offer online dispute resolution and automatic invoice routing for initial and backup approvals, thus eliminating delays caused when paper invoices are misplaced or signers are out of the office.
The bottom line is that electronic invoicing and payment applications give users the opportunity to manipulate cash flow in a very positive way, especially when they provide discounting capabilities. Sometimes known as Dynamic Payables Discounting (DPD) or Supply Chain Finance (SCF), this electronic payment trend can be a real boon to day-to-day liquidity. Need your money more quickly? Offer your buyers an incentive discount for earlier payment, with a percentage that decreases as the original due date approaches. (Not to be outdone, savvy buying organizations have also begun to take advantage of this capability and proactively propose their own discounts to suppliers.)
Given the benefits, we think it hardly surprising that 48 percent of the 300+ AP and procurement professionals we surveyed late last year identified increasing electronic invoicing as a top priority for 2009.
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
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 >>
As the dust begins to settle from PayStream’s first annual electronic invoicing summit, The Next Generation of E-Payables: Electronic Invoicing and Supply Chain Finance, and before I go back to work on our Spring Summit 2009, I thought I’d take a few minutes to reflect on the week’s events.
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.
Many organizations we work with have little difficulty identifying the pain points that exist throughout their current Procure-to-Pay processes. But when it comes time to enter the P2P solution market to research their options, few prospects have enough knowledge regarding what to prepare for and expect throughout the stages of their automation project. Typically, they are seeking input and best practices on plan elements like needs assessment, how to win executive support for their initiative, conducting vendor evaluations, preparing internal teams for the implementation, gaining user acceptance, and evaluating the program’s success. ÂTo 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. ÂDuring 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.
It’s sobering to think about the demise of Bear Stearns, the collapse of several regional banks, and the plummeting stock prices of larger financial institutions. Tech-savvy companies have discovered a relatively untapped revenue source – supplier electronic payments.
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 >>
Apply workflow to enhance approval process and communication
Specialize AP tasks and training
The benefits
Scalable AP department to accommodate explosive growth
Imaged documents only mouse-clicks away from all departments
Invoicing costs in line with industry average
Reduce exception handling commitment by 50%
Efficient approval process from workflow
Productivity gains from AP training and specialization
Improve financials from discounts and released working capital
A Picture is Worth a Thousand Words: Improving Approval Processes through Imaging, Workflow and Training
The Orange County Public School district, the 12th largest school district in the nation, is growing by leaps and bounds. The challenge was to accommodate the districts explosive growth while reengineering its existing, labor intensive, accounting processes.
A PayStream Advisors team visited the Orange County Public School (OCPS) headquarters to gather information and assess OCPS’s options. PayStream’s Payment Process AnalysisTM revealed promising opportunities for significant process savings and improvement. PayStream Advisors leveraged its own research, library of best practices, benchmarking data and proprietary assessment methodology before making recommendations in the form of an implementation road map.
To their credit, OCPS managers and support staff did not hide or sugarcoat their problems; quite the contrary. They recognized that parts of their process were broken, antiquated or missing, and were willing, even eager to “go to school†on PayStream’s advice. The positive elements OCPS had in place included a centralized receipt process and an efficient AP department with reasonable controls to prevent fraud.
The problems to address included poor communication between departments, a manual document management system, a lack of workflow automation and an overly active, time consuming exceptions handling process.
“If only we had access to the original invoice we could save a lot of time approving invoices.†- Bookkeeper
While a centralized receipt process has its merits, in the OCPS’s case, it also created the school districts biggest headache - lack of visibility throughout the AP invoice receipt, approval, and payment process. For example, approvers/end users could not see an invoice. In fact the AP department was forbidden to fax or otherwise send an invoice to other departments. End users reported frustration with the email reminder process in place as they frequently did not have all the information they needed. Lack of invoice visibility meant delays in posting of Goods Receipt (GR’s) and slowed the exception management process.
“I spend almost half my day on emails and phone calls trying to reconcile differences in the invoice without having access to the original invoice.†– Maintenance Dept. Manager
PayStream Advisors recognized the lack of imaging and workflow as the salient deficiencies and recommended these AP automations to facilitate the sharing of invoice images across the district and to accelerate the invoice processing and approval cycle.
Surprisingly, OCPS’s per invoice hard cost was actually $0.29 below the benchmark group average. However, this positive variance was due, at least in part, to well-below average labor costs and a work distribution that skewed the hard and soft cost.
The total cost to process an invoice was $7.80 each. PayStream determined 34 percent of the invoice costs were generated by the AP department. The remaining 66 percent was attributable to the lack of visibility experienced by end users in the various other departments. PayStream estimated invoice processing costs at OCPS were about 60 percent higher than peer group medium-sized AP organizations and demonstrated how total costs could be reduced to $5.33 per invoice.
Another money-saving measure AP automation could ameliorate was discounts, or in the case of OCPS, a lack thereof. AP was taking advantage of a few early payment discounts on large book orders but was missing out on numerous other small opportunities.
“Our suppliers are willing to take discounts, but the system doesn’t track terms.â€- Warehouse Dept.
PayStream concluded that scanned documents (individually or in large batches) that are indexed and archived will provide easy access to all parties concerned. Invoices will be found based on any number of elements: Vendor Name, PO Number, Invoice Number, Date, and SAP Document Number (i.e. Invoice Number). A properly designed and implemented imaging and workflow system will facilitate quick access to invoices and comprehensive discount strategies. An AP automation implementation will also dramatically reduce processing costs and accelerate the exception approval process. PayStream Advisors Payment Process AnalysisTM identified annual savings of over $545 thousand for OCPS and a ROI of 27 percent in two years.
Healthcare providers are under increasing pressure to improve patient satisfaction. However, allocating the necessary resources to achieve these goals means that hospital administrators must seek greater revenue cycle process efficiency through cost cutting strategies and technology investments. Healthcare Document Management (HCDM) solutions are uniquely positioned to deliver key benefits to administrators and clinicians alike.
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.