WHITE PAPER. The Evolution of Payables: How AP Invoice Automation Is Changing the Game

Transcription

1 WHITE PAPER The Evolution of Payables: How AP Invoice Automation Is Changing the Game Published by: Sponsored by:

2 Introduction As companies have wrestled the proverbial paper tiger within accounts payable (AP) over the years, many have cobbled together piecemeal solutions that ultimately added, rather than reduced operational complexity. Getting all of the applications to work well together can be a never-ending nightmare, requiring additional administration, knowledge, maintenance, hardware and upgrades. In this situation, some or all of the following challenges can be expected: Gaining expertise with each solution Having different administrators for each solution, which drives up total cost of ownership (TCO) and can create a situation where no one in the company really owns document processing Managing relationships with each of the solution vendors Building a warehouse for data from all of the different systems Modifying applications to meet specific requirements Layer in mobile devices and the cloud, and it quickly becomes apparent that it is time for a new model for AP invoice automation, designed with today s technology to meet the current and future payment demands of modern commerce. Advances in business process technology and growing familiarity with the strategic and tactical benefits of end-to-end integrated process automation have led to increased demand for holistic AP invoice automation solutions. This white paper, co-sponsored by the Institute of Financial Operations and Esker, examines some of the latest AP invoice automation trends and the effects on financial operations purchase-to-pay (P2P), order-to-cash (O2C) and beyond. Beyond OCR: First-Time Recognition, Auto-Learning and Teaching According to the Institute of Financial Operations 2014 AP Automation Survey, 70 percent of respondents said more than half of their invoices still arrive on paper. And while half of respondents said they scan invoices on arrival, less than one in four were using optical character recognition (OCR) or data extraction technology. This is significant because the conversion of paper documents into meaningful electronic data is the basic technology required for end-to-end AP invoice automation. A good end-to-end AP invoice automation solution begins with effective data extraction, with effective defined as the ability to quickly convert incoming correspondence into reliable electronic business data on the first pass with minimal human intervention. This has to be done on the front-end to achieve visibility, control and workflow efficiency the core benefits of AP invoice automation technology. The IFO study also found automating AP can reduce the time and cost of manually receiving and processing vendor invoices by more than half. The most effective solutions are those that can think that is, apply algorithms and advanced logic to increase first-pass accuracy by learning to read supplier invoices and correspondence, and by allowing users to teach the system to recognize invoices and correspondence from new vendors. It is common for organizations considering AP invoice automation to put prospective solutions through a first-pass accuracy test using a representative sample of actual paper correspondence. In such a scenario, the best solution would be the one that processes the highest percentage of documents fastest, and with the least amount of required human intervention including advance sorting and document preparation. That s the best solution for financial documents arriving on paper. A more holistic solution seeks to eliminate paper at the source, effectively automating and expediting the entire P2P process. Esker and The Institute of Financial Operations The Evolution of Payables: How AP Invoice Automation Is Changing the Game 2

3 e-purchasing: Visibility, Accountability, Control By automating the P2P process from purchase requisition to vendor invoice payment authorization organizations are finding that they can not only gain better control and visibility over spending, but can also streamline spend management and strengthen vendor relations by channeling more business to cooperative vendors. Initiating purchases by electronic requisition eliminates the need for a paper purchase order (PO) and automatically enters the purchase request into the approval workflow. Once a requisition is approved, the order is placed automatically, eliminating a second manual process. Product reception is confirmed through the system and vendor payments can be automatically initiated. Under such a system, the three-way match of PO, receipt and invoice are all accomplished electronically through the system with provision for discrepancies. This allows for prompt no-touch or low-touch payment, and enables buyers to capture early payment discounts or negotiate lower prices with vendors in exchange for preferred vendor status. Because the transaction was performed within the system, from requisition all the way to payment, the following advantages can be realized: workflow is completely visible and accountable with reduced risk of fraud; the possibility of manual data entry errors is largely eliminated; invoice data is integrated into the ERP system; and treasury can better manage cash flow because all transactions are on the record and monitored in real time. The Cloud Advantage With the rapid evolution of technology, IT departments have accomplished amazing things, McGyvering code patches to serve as the electronic equivalent of baling wire and duct tape, forcing systems to talk to each other. Or, failing that, to at least get maverick systems to produce outputs that can be manually exported into the central database. And the complexity keeps growing. Relying on IT to fix broken automation is hardly an ideal business plan especially with so many lowcost, low-maintenance service options available in the cloud. An ambiguous term to describe an amorphous concept, the cloud refers to any configuration of servers communicating over the Internet. Clouds can be public, private or hybrid, and can be made to be as secure as any traditional on-premises server, with the advantage of being accessible, on any device, from any place with Internet access. Applications typically run on a shared data center, although they can be customized to meet specific needs. Cloud computing is a way for everything from computing power and infrastructure to business processes and personal collaboration to be delivered as a service wherever and whenever users want or need it. With over 50 percent industry growth in the past five years, on-demand services continue to increase in popularity. Applications that run in the cloud are typically sold on a subscription basis and updated continuously by the developer at no additional cost to users in real time, rather than having to push updates out to individual license holders. In addition to reducing the burden on in-house IT staff, this so-called software as a service (SaaS) is typically more affordable, replacing a large up-front capital expenditure with a much smaller monthly fee or annual subscription. Vendor adoption is typically higher than with in-house systems because cloud-based services run on standard browsers (i.e., no special equipment or software is required). Not only can cloud-based solution providers respond to business changes quickly, services are available around the clock, without the need for an investment in expensive infrastructure. By lowering the upfront cost, cloud technology has put even the most sophisticated P2P solutions within the means of small and medium businesses. Esker and The Institute of Financial Operations The Evolution of Payables: How AP Invoice Automation Is Changing the Game 3

4 The greatest perceived challenge, or concern, associated with the cloud is security, although strict standards and regular audits make that more of a myth than a valid concern. In fact, some online security experts suggest cloud service providers are compelled by the market to hold themselves to an even higher security standard because data security is a key performance indicator (KPIs), and a breach could result in major reputational damage. Lastly, cloud-based solutions, with their any (device)-to-any-(device) access, are ideally suited to today s increasingly mobile marketplace. Mobile Momentum With the advent of smartphones, tablets and other mobile devices, users have become accustomed to conducting business by mobile application. Even credit card providers have evolved to allow credit card payments via smartphone. Mobile technology has evolved to expedite electronic invoice processing by allowing users to monitor workflows, view invoices, review supplier information, code expenses and resolve exceptions 24/7 from anywhere in the world via mobile device. Mobile analytics provide real-time reporting, allowing executives one-click access to key metrics, giving credibility and authority to the tradition of back-pocket or top-of-mind statistics. More than a convenience, such functionality is fast-becoming an expectation for workers accustomed to working odd hours and traveling frequently. In an increasingly connected society, the inconvenience of poor mobile access and interrupted processes is a growing frustration for workers and a competitive disadvantage for organizations as a whole. When buying a solution expected to last into the next decade and beyond, mobile capabilities are critical. Enhanced Analytics for Better Reporting Expectations are increasing, not only for data access, but also data depth, flexibility and accuracy. As AP invoice automation evolves from a primarily transactional efficiency tool to a more strategic cash management and business analysis tool, enhanced analytics are making data analysis easier than ever before. The latest reporting tools are completely configurable, with some solutions even abandoning traditional hierarchical database structures in favor of flat and infinitely configurable data files so that users can access the right information in any possible combination. Packaged reports, accessible through user-friendly dashboards, provide effortless access to metrics on key performance indicators, calibrated to best practices and user-specific industry standards. Dashboards also provide users with the information they need to perform daily tasks, monitor performance, and spot problems or opportunities, making every action smarter and more strategic. Intelligent dashboards take analytics a step further, providing executives visibility into working capital. This ability to use AP automation as a tool for smarter cash management is a critical element in the evolution of AP from transactional cost center to profit-enhancing information provider. With real-time visibility into spending, treasury can reduce the amount of cash on-hand required to meet day-to-day expenses. By using the savings to capitalize on early payment discounts, companies can increase the yield on their free cash by double-digits. In a nutshell, intelligent dashboards can: Help users throughout the organization make smarter decisions Engage users by providing them with the information they need, effortlessly Enable prompt action with real-time information presented in a usable format Esker and The Institute of Financial Operations The Evolution of Payables: How AP Invoice Automation Is Changing the Game 4

5 Taking Automation beyond AP Although automation is often focused on AP, the required technologies fax/ , IDoc EDI/XML, data capture, validation, formatting, archiving and delivery can be applied across all business document processes, from P2P and O2C, to create a truly unified and paperless environment. Replacing point-to-point solutions with a single automation platform frees up IT departments and customer service teams from tasks that burden their budget, and at the same time saves hours of work that can be redeployed to new projects. Applying automation technologies across the entire cash conversion cycle allows organizations to: Automate any document process in multiple formats and through multiple channels Eliminate the need for multiple process-specific solutions or product-specific components Unify customer and supplier communications Reduce IT burden Simplify training and adoption by providing a common interface adapted to multiple processes Conclusion Today s increasingly connected and global economy demands seamless and agile technology capable of growing and adapting to change while providing users with accurate and usable information whenever and wherever they need it. That agility should apply not only to the technology itself, but also to the methodology by which the technology is implemented and maintained. Cloud-based solutions promote agile product development cycles, by eliminating the need to constantly package, ship and implement product improvements and updates. Easy browser-based access enhances mobile connectivity, allowing users to approve invoices, process exceptions, and access key business metrics anytime, anywhere by smartphone or tablet. Unified data, visible to senior management in usable form, in real time, is helping AP departments evolve beyond their roots as transactional cost centers to become strategic profit centers, and valuable partners in the cash management process. Best of all, the technology required to automate AP can be applied across the organization. Core issues driving the need for automation are common to all document processes. With IT resources scarce and expensive, managing separate solutions for each process is not cost-effective. The ability to receive and deliver documents in multiple formats and through multiple channels from the devices or locations that match customer preferences, is essential to the success of document process automation projects. A single solution can automate and capture any inbound document (e.g., sales orders, confirmations, vendor invoices), deliver any outbound document (e.g., customer invoices, POs, receipt acknowledgements), and store the data inside of any ERP application. Having the option to implement the solution either as SaaS or on-premises offers flexibility for project execution. The ability to perform all of these critical financial operations within a single, affordable, scalable solution finally puts the decades-long dream of integrated business process automation within reach. This critical juncture has been reached even as the first generation of ERP systems and their various and diverse process applications are approaching the end of their useful lives. Organizations looking to replace their legacy systems have more options than ever before, and, thanks to decades of technological evolution, the functional reality of the marketplace aligns with the promotional promise. Esker and The Institute of Financial Operations The Evolution of Payables: How AP Invoice Automation Is Changing the Game 5

6 Esker is a recognized leader in helping organizations reduce the use of paper, eliminate manual processes and simplify IT landscapes. With its comprehensive platform, Esker delivers the benefits of automated document processing as on-demand services (SaaS) and on-premises solutions. Customers achieve significant operational efficiencies, cost savings and ROI in as little as three to six months while gaining visibility and control within order-to-cash and procure-to-pay business processes ranging from sales order management and accounts receivable to purchasing and accounts payable. Founded in 1985, Esker operates globally with more than 80,000 customers and millions of licensed users worldwide. Esker has global headquarters in Lyon, France and U.S. headquarters in Madison, Wisconsin. For more information, visit The Institute of Financial Operations is a membership-based professional association serving the entire financial operations ecosystem, with a particular focus on the accounts payable and accounts receivable disciplines and the related fields of information management and data capture. The Institute grew out of the merger of four associations: International Accounts Payable Professionals (IAPP), International Accounts Receivable Professionals (IARP), the National Association of Purchasing and Payables (NAPP), and The Association for Work Process Improvement (TAWPI). Based in Orlando, Fla., with affiliates in the U.S., Canada, and the UK, The Institute serves as a global voice, chief advocate, recognized authority, acknowledged leader, and principal educator for people in financial operations. The Institute has a community of nearly 70,000, which includes 9,000 members and customers, and an additional 61,000 financial operations professionals. Esker and The Institute of Financial Operations The Evolution of Payables: How AP Invoice Automation Is Changing the Game 6