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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.
Technological advances have shrunk our world into a single, global marketplace. Tools like the Internet, email, video conferencing etc. have made it easy for organizations to connect with their customers and suppliers, whether they are across the street or across the ocean. However, these same factors that are responsible for expanding a company’s geographic footprint have resulted in an increase in international travel and the costs associated with this. Over the last few years, increase in the amount of business travel combined with escalating travel costs have significantly increased spending on corporate travel and entertainment expenses, making the second largest cost pool for most organizations, just behind salaries and benefits.
However, with the economy in a recession, companies are taking a hard look at these costs and investigating ways to control them. It is no surprise therefore that more than a third of the companies (38 percent) that participated in PayStream’s “T&E Expense Management Adoption” survey stated that they have decreased their T&E spend over the last three years.
Manual T&E Processes are Fraught with Challenges
There are complexities inherent to managing any paper-based process and the survey revealed that travel & expense is no exception. The biggest challenge for almost half the organizations (45 percent) was manual data entry and inefficient processes. More than a third of the respondents (35 percent) mentioned that lack of visibility into spend was a problem they faced. An equal number found inability to enforce corporate travel policies to be a challenge. High cost of processing expense reports was a challenge for a little less than a quarter of the organizations surveyed.
Challenges With Manual T&E Processes
Time is Ripe for Automation
Our research reveals that, owing to the emphasis on decreasing travel-related spend and the existing challenges faced in the travel management process, organizations are actively seeking automation options to help them streamline the expense management process and reduce its associated costs.
Analyzing Processing Costs
Based on survey results, the average cost to process a single expense report, across all companies surveyed, was $14.63. What was interesting to note was the relation between processing costs and the extent of automation an organization had in place. It is obvious from Table 1 that automation drives down processing costs. On average, a company spent approximately $28.21 to process an expense report if the process was entirely manual. This was four times as much as the processing costs accrued by companies that have automation in place. Organizations that have some automation in place have been successful in driving down processing costs per transaction to $7.42, whereas companies that are fully automated and using an integrated system have costs a per transaction cost as low as $6.19.
The direct relation between lower processing costs and automation also bodes well for companies that are shying away from automation because they believe that current processes work or that there is no ROI to be achieved from automation. This should make such companies take a second look at the range of options available in the T&E automation space today.
PayStream T&E Expense Management Adoption Survey Report PayStream Advisors conducted its “T&E Expense Management Adoption Survey” in the third quarter of 2009 and developed a benchmarking report to highlight the overall trends that are shaping this rapidly evolving space. The complimentary report can be downloaded here.
This survey report is designed to:
Help accounting and finance practitioners familiarize themselves with the TEM landscape,
Enable them to better understand the extent of adoption of the various forms of TEM automation, and
Allow companies to benchmark their operations against similar businesses.
Of the two opening sessions on the first day of PayStream ePayables Summit ’09, I chose to attend “Implementing e-Invoicing to Drive Continuous Process Improvement” from Motorola by Michael Riggins. As a consultant, I had strong penchant to comprehend and improve business processes on the front end of P2P operations before I stretched my foot into to e-Payments.
As a perfect start for that morning, I had all the ingredients I wanted for my breakfast on the agenda. I was interested in understanding the compelling company dynamics to move and adapt to new technologies in the Shared Services Division. To my thought, Riggins explained that the historic stats revealed that managing age old processes involving manual interventions had potential drawbacks. May it be inefficiency in processing invoices, time delays in processing invoices, higher number of exceptions, visibility into cash, and delays in reporting structure (to name a few) – it all led to a distorted cash management. Motorola initially tried “centralizing their AP processes” and “outsourcing their manual processes in matching PO-Invoice to low cost countries thus taking advantage of salary arbitrage.” However for a company the size of Motorola, they guesstimated that the cost per transaction was distinctly higher to what it could be by implementing electronic invoicing.
During the course of the session, I learned that this is more than a technical change that any company has to undergo to gain potential long term efficiencies and profits. It involves changes in culture, process, and people and more importantly the long term vision and buy-in from the leadership team of Shared Services Division. I was impressed by how companies are motivated to work together with supplier networks to gain the profits and not just shift the responsibilities to the outsourced vendors. Motorola not only executed their best practices and realized quick benefits but also envisions extending their best practices globally. For companies concentrating on cost cutting measures, I believe re-engineering their business process in the P2P domain accelerates their business processes- especially in clearing payments, gain potential discounts and provides better visibility and control over the cash enabling timely decisions.
Sometimes an invoice arrives in very remote places. One of the best examples is remote oil rigs, where paper invoices come with the delivery of goods which represent a few documents per day, typically less than five. In order to be incorporated in the central AP office the document must be sent from these remote locations, but since the workers manning the rigs have for priority to find oil, the invoice processing is not a priority for the rig manager.
As a result, the invoices arrive by mail or courier to the central AP often with long delays and in poor condition or simply disappear all together. Although this is an extreme example, this traditional method has 3 major disadvantages: high time to process, inaccurate date and high cost to process.
How to Capture Invoices
The problem facing the company was how to capture the invoice and other business critical document images at the rig location with a minimum of distraction from the workers main job. They could not ask the rigger manager to work on a computer using some delicate and complicated software. They needed to find and implement a simple solution requiring little or no training. One of the first approaches was faxing the invoice but the quality of the images made it such that it was sometimes unreadable therefore causing more disruption to the men on the rig.
New Invoice Capture Software
The solution to this problem was a network scanning device made by Fujitsu, new interactive invoice capture software and the internet. This approach revolutionized the way the company handled paper invoices and data capture from these highly remote locations.
These remote rigs have a small mobile office that is linked to the rest of the world by phone and to the internet by modem. The solution is designed around a network scanner. These devices include both a high quality scanner and a full PC controller allowing applications to run directly from the scanner box. They are easy to install, require a single connection to the modem and you are ready to log on.
One of the must-haves for these remote sites, where no technical support exists, is the centralized management of the device. The Fujitsu fi6010N network scanner is centrally managed and requires no local configuration by the rig manager. They are really plug, logon and go devices.
Easy Interaction
Most interaction with the device is done through the touch screen. The screen clearly displays the virtual buttons that the user selects to control the process. Data is entered through the integrated key board, an important aspect if one wants to make the data entry fast and not frustrating. The screen is wide enough to clearly display the image of the document in full width for easy reading and full document view is good enough to perform the image quality control not available in other communication devices like fax machines or MFP.
Automatically Transfer Data
After logging on for security purposes the rig manager selects the invoice or other document applications and inserts the documents in the scanner. The device will scan the image and automatically perform a full page OCR.
To enter the associated Data the user can either key the data through the integrated keyboard or directly point in the image at the field, the corresponding OCR result is automatically transferred to the selected data field. If the invoice does not balance or if a business rules is not matched the system will highlight the suspected fields
Upon data capture completion and validation, simply pressing the send button will transfer the invoice image and capture data to the central AP office, where it can be merged directly in the authorization workflow.
The Future of Invoice Capture
This method of capturing invoices are not limited to remote oil rigs, but everywhere with decentralized receiving of invoices, especially where the managers primary task is non-finance related and the handling of invoices is a distraction.
In the near future, we will see more of the network appliances integrating with these devices and allowing the non-desk ridden professionals to perform quickly and accurately tasks that they would have a tendency to procrastinate.
The Children’s Place Retail Stores, Inc, ConAgra Foods, Motorola, and Pilot Travel Centers, were all honored for excellence in accounts payable automation by research and consulting firm, PayStream Advisors, last month at the annual PayStream ePayables Summit held in Charlotte, NC.
The Children’s Place Retail Stores
The Children’s Place Retail Stores award was presented to Vice President of Business Process Improvement at The Children’s Place Paul Santini. Children’s Place implemented ASPEN 360 Accounts Payable Edition from Archive Systems.
“We quickly recognized the need to automate the accounts payable process in order to increase efficiencies, reduce costs, and ensure timely payments,” said Santini.
ConAgra Foods
The ConAgra Foods award was presented to Jeff Janssen, Finance Manager at ConAgra. ConAgra chose 170 Systems to automate their processes.
According to Janssen the answer to their accounts payable dilemma centered in large part on enterprise-wide standardization, automation and improvement of underlying practices and systems.
Motorola
The Motorola award was presented to Motorola’s Senior Accounts Payable Manager Michael Riggins. Motorola conducted an extensive RFP process and chose OB10 as their e-invoicing partner.
Under Riggins’ leadership overseeing the initial technical interface, the electronic invoicing plan went live on schedule and with a nearly flawless rollover to production.
Pilot Travel Centers
The Pilot Travel Centers award was presented to Pilot’s Accounts Payable Manager, Estelle Bluhm. Electronic invoices are obtained through OB10’s supplier network and then captured within Concur Invoice for complete visibility to all invoice types.
Under Bluhm’s leadership, Pilot Travel Centers has moved from a decentralized model, where invoices were received at their more than 340 stores, to a centralized model.
PayStream Excellence Awards
PayStream Advisors’ annual excellence award honors companies for excellence and achievement in automation AP processes with electronic invoicing and imaging and workflow.
One topic that is sure to spark a lively debate in most circles is “outsourcing.”Accounts payable is no exception. Outsourcing, the practice of leveraging the experience and expertise of a third party firm to perform tasks that would normally be handled in-house, is still taboo in many areas. For a lot of people, outsourcing conjures up images of large-scale lay-offs and employees lining up in droves at the unemployment office.
However, our research shows that outsourcing could, in fact, be the result of a company’s growth, rather than a downsizing effort, even though that sounds like a contradiction in itself. To validate this point, here are some instances where outsourcing is an appealing option:
A company that is growing rapidly might investigate outsourcing to keep up with its growing transaction volume, instead of adding additional full-time employees to its in-house staff.
An organization might want to leverage the expertise of a third-party service provider to increase process efficiencies, while allocating its internal resources to more critical tasks or redeploying them to other functions.
Finally, another scenario where outsourcing makes perfect sense is when it is considered in lieu of large investments in the latest technology, if the company in question does not have the required technical and financial resources.
Whatever the reasons, an entire industry has evolved to meet the outsourcing needs of companies. Outsourcing has been gaining popularity over the last few years, especially in the finance and accounting space. Research from PayStream Advisors estimates that the Accounts Payable Outsourcing (APO) market generates in excess of $5 billion in revenues annually and is growing at over 25 percent each year.
Given this interest in outsourcing accounts payable tasks, PayStream has developed the Technical Insight Series report titled “Accounts Payable Outsourcing (APO): Breaking Accounts Payable Taboos” to provide an overview of APO options available in the market today and insights into the various players in the marketplace. This report gives an overview of the APO market, the benefits it delivers and profiles four leading providers of APO solutions and services – Archive Systems, BancTech, HOV Services and SourceNet Solutions.
In the current recessionary economic environment, organizations have intensified their focus on improving their bottom line by reducing costs and transforming their labor-intensive, paper-based procurement and accounts payable processes into automated ones. P-Cards are perhaps the only solution that effectively streamlines both ends of the procure-to-pay cycle (P2P), while significantly reducing costs and introducing greater levels of control and visibility into spend.
PayStream conducted its annual “Electronic Payments and P-Card Benchmark” research in the first half 2009, to collect data from over 500 enterprises. In current recessionary times, it was no surprise that the enterprises participating in our benchmark survey cited the need to reduce P2P transactions costs (65%) and need to maximize rebates and incentives from card-issuing bank as the main drivers to leverage P-Cards in their organization. Research found that P-Cards Deliver on their P2P Promise!
Figure 1: P-Cards Deliver on their P2P promise!
As displayed in Figure 1, P-Cards have sliced the cost of a single P2P transaction by nearly half. Additionally, P-Cards, on average, lower the P2P cycle times by one-third. In addition to streamlining the P2P cycle, P-Card provides the additional benefit of incentives or rewards (cash backs etc.) from the card-issuing bank. 46% of the organizations participating in PayStream’s research received an incentive varying from 0.5% to 2.0%.
PayStream research also found that even though P-Cards have been in existence for more than a decade, they capture, on average, only 9.3% of the enterprise indirect spend. Significant barriers to adoption of P-Cards exist! PayStream’s benchmark report titled, “Electronic Payments and P-Card Benchmark Survey Report: Bottom Line Savings from Procurement to Finance,” will cover different electronic payment methods, including ACH & P-Cards, focusing on how organizations can overcome their P-Card challenges to realize significant cost saving in their procurement and accounts payable departments. This report shall publish on September 01, 2009.
PayStream will further discuss the findings of the research in its annual summit in Charlotte from September 23rd-25th, 2009. More about PayStream Summit HERE.
“Doing more with less” has become the mantra of the day. In the current recessionary economic environment, organizations are constantly being challenged get more done with fewer resources. Accounts Payable (AP) is no exception. AP departments now have to process more invoices and pay them faster, all with a smaller staff. And the biggest stumbling block to accomplishing this has been our continued reliance on paper-based invoices and people-based processes. We have put men on the moon and we might even colonize Mars some day, but removing paper from the finance department appears to be out of reach in the near future. Until corporate America goes completely paperless, we need a better way to manage the tons of paper that we receive every day.
Imaging & Workflow Automation
A significant shift is beginning to shake traditional AP operations, starting with the search for automation options that help them address the hassles inherent to people and paper-based activities. Our research indicates that Imaging & Workflow Automation (IWA) solutions that streamline the invoice receipt-to-pay cycle have matured and become mainstream technology. While the adoption of IWA solutions had been limited to Fortune 1000 companies until recently, we are seeing this trend trickling down to small- and medium-sized businesses owing to the following reasons:
The evolution of hosted and Software-as-a-Service (SaaS) models has significantly lowered the upfront cost of implementing AP automation solutions and reduced the hassle of maintaining them;
The convergence of electronic invoicing and front-end invoice imaging presents organizations with a single, comprehensive solution that can manage both paper and electronic invoices through a common process; and
Value-added services delivered by AP automation solution providers around supplier recruitment have allowed buyer organizations to include suppliers in their automation initiatives and change supplier behavior more efficiently.
Given this interest in IWA solutions, PayStream Advisors is developing a report titled “Imaging & Workflow Automation (IWA): The Emerging Invoice Management Revolution” for accounts payable managers, controllers, treasurers, and finance managers who are interested in exploring IWA solutions. You can download a complimentary white paper at LINK. The full Technology Insight Series report will be released in September 2009.
Full Report Highlights
Why are organizations interested in IWA solutions?
What did PayStream surveys around AP automation reveal?
What functionality is available as part of IWA solutions?
What best practices are companies using to complement technology initiatives?
Who are the key players in this market and what solutions do they offer?
How can your organization go about selecting the solution that best fits your needs?
Vendors Covered in the Report
Ariba
Banctec
Basware
Concur
EMC/170
Esker
Hyland
Imagitek
Kofax
Metafile
OpenText
ReadSoft
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.
