epayables Solution Spotlight

Transcription

1 epayables Solution Spotlight On Vishal Patel Research Director Ardent Partners October, 2012

2 1 The epayables Solution Spotlight builds upon Ardent Partners recent epayables SMARTSet series by combining Ardent s perspective on the accounts payables automation marketplace, recent epayables market research, and a comprehensive solution provider profile of U.S. Bank. This report focuses on the end-to-end category of epayables solutions and provides fresh insights on this segment from the epayables 2012: State of the AP Market report. Ardent Partners epayables Framework Ardent Partners defines epayables as the solutions and services that automate all or part of the accounts payable (AP) process. As shown in the epayables Framework below (Figure1), the AP process, at a high level, starts with the receipt of an invoice from a supplier, continues through a processing phase, and ends with the payment of the invoice. This Solution Spotlight report focuses on all three phases of the AP process - Receive, Process and Pay - and features a provider that offers solutions to automate these phases: U.S. Bank. The Ardent Partners epayables Framework helps AP departments evaluate their various processes by dividing invoice processing into smaller, more manageable segments. AP departments can then establish a clear view into the current state of operations what is happening today and then take the opportunity to clearly define new AP processes what should happen tomorrow. By developing a clear view into the scope of activities that occurs within each phase, what resources and systems are utilized, and what processes are followed, AP departments will be better able to set standard practices and work to develop best practices. The framework organizes the AP process into three major phases: Receive how the enterprise receives invoices Process how the enterprise reviews, validates and approves the invoices Pay how the enterprise schedules and makes payments Figure 1: Ardent Partners epayables Framework Ardent Partners

3 By breaking the process into smaller, more manageable segments, Ardent s epayables Framework will help AP departments implement greater operational efficiency, enact stronger financial controls, and improve transactional visibility and flexibility. 2 Solution Landscape Ardent Partners uses its epayables Framework to explain the different AP automation (or epayables) solution types and the various providers in the market. Depending on their specific capabilities, solution providers are then categorized based upon the processes that they automate which fall within or across the three phases (Figure 2). This report focuses on the End-to-End epayables category which covers the entire AP process. Figure 2: Ardent Partners epayables Solution Framework Receive & Process Phases Ardent Partners The first phase refers to the manner in which an AP department receives invoices from suppliers. Manual methods of submitting invoices include mail (paper), fax and PDF; whereas more automated methods include using solutions or services like scan and capture, einvoicing or EDI/XML. Since this is the first step in the process, the format in which the invoice data is received impacts the speed and ease with which it goes through the system for further processing and payment, the aim being to maximize efficiency and minimize cost. The second phase of the framework is where invoices are processed. This typically includes: Validation Confirms that there are no invoice errors or discrepancies and that the correct supplier, amount, price, address, etc. are included on the invoice.

4 3 Matching Ensures that the items were ordered, that the invoice pricing is correct, and that the items were actually received. The invoice is typically matched against a PO, GRN (good received note) and/or a contract. Non PO-based invoices typically skip this step. Approval If there are no errors or disputes that need to be resolved with the supplier, the invoice is made available to the appropriate person (based on its amount, account code cost center, the location and type of goods or services delivered, and other factors) to be reviewed and approved. Pay Phase The final step once an invoice is validated, matched and approved is the payment. Traditionally, payments have largely been made by paper checks, however enterprises are increasingly migrating away from this manual and costly method of payment towards electronic forms of payment. This includes commercial cards (e.g., purchasing cards), ACH/EFT payments and wire transfers. This part of the process is also where the more sophisticated cash management strategies can be implemented (e.g., supply chain finance or trade financing). The State of the AP Market In June of 2012, Ardent Partners published a report based on a survey of approximately 220 accounts payable and other finance professionals regarding the state of their AP operations and the usage AP automation solutions. This research showed that on average 45% of all invoice payments are manual (Figure 3). The reduction in manual payments has been a growing trend over the past few years and represents a steady improvement. Although they are significantly more costly to process and offer a lower level of security and control to the payer, paper checks remain a dominant method of payment today. Checks involve various hard costs (e.g., printing and mailing) as well as hidden costs (e.g., lost or returned checks, wrong addresses, cancellation charges, etc.). On the other hand, Figure 3: Payment Methods % 55% Electronic (P-Card, ACH, Wire) Manual (checks) Ardent Partners ACH/EFT payments can be executed at a low standard rate (between $ $0.50 per payment, on average) and purchasing cards ( P-cards ) offer lower processing costs and greater spend visibility than paper checks and have the literal extra bonus of paying buyers a percentage of card volume via a rebate program. The average enterprise expects to shift more payments towards electronic forms of payment over the next two years due in large part to the lower processing costs and increased control and

5 4 visibility that they provide. In fact, according to the Ardent Partners report, 65% expect the usage of ACH/EFT payments to increase over the next two years while 53% said the same of P-Cards and other commercial cards. Notably only 2% of all enterprises expect to increase their usage of checks. Regarding paper invoices, 71% of all invoices (Figure 4) received by AP departments in the market today are in paper format. High paper volumes remain a key indication of the manual, fragmented, and inefficient processes that cause processing delays, trigger payment errors and make it all but impossible to gain timely and accurate visibility into invoice and payment data. High paper volumes constrain an AP department s ability to positively impact the management of an enterprise s cash as well as the overall effectiveness of its financial operations. High paper volumes, in a word, are a major part of the overall AP problem. The good news is that a vast majority (86%) of AP groups in the market today understands the paper problem and plans to focus on it in the short-term and increase the percentage of electronic invoices received over the next two years. Figure 4: Paper vs. Electronic Invoices Invoices in 2012 Electronic Invoice % 86% 71% 10% 4% Manual (paper, PDF, , fax) Electronically (einvoice, EDI/XML) Increase Stay the Same Decrease Ardent Partners

6 Solution Spotlight - U.S. Bank 5 U.S. Bank: Company Overview U.S. Bank is a subsidiary of U.S Bancorp (NYSE Ticker: USB), the fifth largest bank in the US with headquarters in Minneapolis, MN and offices globally. The company provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services to consumers, businesses and institutions. U.S. Bank has significant experience and history in the AP automation market having founded its Corporate Payment Systems division in Most notably, U.S. Bank launched Syncada, the multi-bank business to business (B2B) payment network in 2009 as part of a joint venture with Visa. U.S. Bank s contribution to the venture included its online payment platform (formerly known as PowerTrack) which serves as the current backbone to the Syncada platform and network as well as an experienced staff and a collection of AP best practices that had been developed over many years. The current epayables offering from U.S. Bank is managed by its Corporate Payment Systems group and includes a robust electronic invoice presentment and payment (EIPP) solution that utilizes the Syncada platform and provides Founded U.S. Bancorp 1863 Corporate Payment Systems division 1986 additional value-added services. The U.S. Bank EIPP solution helps organizations automate the Receive, Process and Pay phases of the AP process thereby providing an end-to-end solution. U.S. Bank believes that its primary goals are to help its customers reduce their dependency on paper, better manage their costs, and gain greater visibility and control over their payment activity. HQ Employees Geographic Presence 2011 Payment Volume Solution Delivery Total Customers Total epayables Customers 2011 Transactions Processed Industry Segments AP Related Partners Minneapolis, MN U.S. Bank 61,000 Corporate Payment Systems 630 Global, offices located in North America, Europe and Asia $21 Billion Software-as-a-Service (SaaS) Corporate Payment Systems: 6,300 2, million invoices and more than 78 million supporting documents Public sector, real estate, education & nonprofit, energy, healthcare & pharmaceutical, insurance, manufacturing, oil & gas, retail, telecom & utilities, transportation, etc. Syncada from Visa

7 Products & Services 6 Cloud- Based Scan & Capture einvoicing Approval Workflow Supplier Network Payment Processing Trade Finance U.S. Bank EIPP As noted above, U.S. Bank offers a complete end-to-end AP solution that provides clients with various options to automate the entire AP process or a part of it. The complete U.S. Bank offering blends technology and a host of services and includes comprehensive customer support and dedicated account management services. The pricing structure is typically based on its customer s invoice volume; fees are charged on a per invoice basis and follow a tiered-pricing structure. Technology Solution U.S. Bank EIPP Cloud-based Entire solution is cloud-based, requiring no software installation einvoicing Manages the creation and submission of einvoices or Purchase Order (PO) flips Supplier network Approximately 12,000 active, connected suppliers in the U.S. Bank network Self-service supplier portal Web-based site that enables suppliers to review invoice and payment status, send communications, and resolve disputes Automated routing & approval workflow Provides configurable role-based and cloudbased workflow tools Payment processing & execution Facilitates a wide range of payment including check, ACH/EFT, wire transfer and cardless payment accounts (i.e., single-use accounts) through U.S. Bank U.S. Bank Services Inbound mail-room processing Receives and opens invoices (and other documents) Invoice scanning Leverages high-speed scanners to create images of invoices Data capture Performs data entry from the scanned image Supplier enrollment Works with or on behalf of the buying organization to efficiently and effectively enroll suppliers onto the system Check printing and mailing Issues check payments to suppliers with U.S. Bank printing services Trade Finance Supports buyers and suppliers with real-time, invoice-level financing

8 Solution/Service Offering 7 Receive Depending on the method in which invoices are submitted by suppliers, U.S. Bank offers a variety of options that introduce automation to the AP process and seek to reduce the burden on the client and enhance overall visibility and accuracy. Suppliers may submit PO-based (purchase order based) and non-po-based invoices in multiple formats including paper, , PDF, einvoices and PO flips (both through an online web portal), and/or via file upload (EDI, XML, flat file). The online web portal (also referred to as a self-service supplier portal) is accessible to suppliers that are enrolled onto U.S. Bank EIPP. The portal provides access to important invoice information like invoice and payment statuses and allows suppliers to complete key accounts receivable tasks (e.g., create and submit einvoices, resolve disputes). In cases where suppliers continue to send paper invoices, the customer has the option to direct them to a mail box operated by U.S. Bank. Bank employees will then scan the invoice and perform the data entry tasks needed to transform the manual data into a searchable electronic format. This data entry task is conducted by U.S. Bank personnel to ensure that invoice details are captured accurately, enabling more efficient invoice processing. Additionally, the scanned image of the invoice can be accessed by users at any time within the cloud-based system. Clients also have the option to manually enter invoices into the U.S. Bank solution. Process Once the data is captured and sits within the U.S. Bank EIPP solution, invoices are automatically validated against the vendor master data and can be processed by a two-way or three-way match to the relevant documents (i.e., purchase orders or goods received note). The routing of the invoice and the validation process are based upon client requirements and business rules (i.e., account coding and payment approval management) that can be configured in U.S. Bank EIPP. Furthermore, matching to POs can take place at a header level or a line-item level, where the item numbers and amounts are matched. einvoices that meet a client s pre-defined thresholds can be processed straight-through to payment without any human intervention. Approval and Workflow Tool In order to automate and improve the second step in the AP process, U.S. Bank EIPP includes an approval and workflow tool. During the deployment of the solution, the client has the opportunity to work with U.S. Bank s team to configure each step of the workflow and establish user profiles as well as access and role privileges. For example, the user s profile determines the level of authority and accessibility that they have. With an established set of business rules, the routing and workflow that an invoice follows is based on certain information within that invoice. For instance, a client may want invoice routing to be determined by the category of spend, the supplier, or even the total dollar amount of the invoice.

9 The workflow elements contained in the U.S. Bank solution enable users to achieve the following objectives: 8 Streamline the management of invoice exception and dispute resolution processes by note and action archives Automate invoice allocation and coding via system rules Streamline reconciliation with automated accounts payable paid and accrued files Increase buyer (and supplier) visibility to approval and payment status via web-based reporting and analytics (and the self-service supplier portal) Improve supplier remittance accuracy by providing suppliers with accurate, current, and consistent data To provide a better understanding of the broad and robust capabilities of the approval and workflow tool, the example provided below will walk through the functionality that is available to an AP staff member, a buyer, and a supplier to process an invoice that has an audit exception. 1. An einvoice is received for printed products from an advertising firm. Based on the business rules established in the system, all marketing-related invoices are routed to all members of the Marketing Group which includes AP staff members and the marketing personnel that have the authority to approve purchases in the system. 2. In this example, an audit exception is triggered because the invoice pricing detail does not match the pricing information on the purchase order ( PO ) and it is routed directly to AP. AP then routes the invoice to the marketing buyer who created the original PO for comment and review. 3. The marketing staffer receives an notification saying that a printed products invoice that was based upon a PO created by this buyer has triggered an exception and now requires review. Upon logging into the system, the buyer sees all of the invoices that are currently in their system inbox (i.e., those invoices that that require the buyer to perform an action) including the invoice that triggered the audit exception. During the review, the staffer identifies the price discrepancy and sends the supplier a message directly from the U.S. Bank EIPP page that displays the invoice. 4. The supplier logs in to the supplier portal and sees all the items that need action including the note regarding the specific printed products invoice. During the review, the supplier sees that the pricing on the invoice is incorrect and makes the appropriate adjustment to the invoice in U.S. Bank EIPP. Had the supplier not joined the network, a new invoice would need to be submitted. However, U.S. Bank EIPP offers an alternative for nonparticipating suppliers, the buyer can create an ebill (credit memo), a supplemental transaction correction document that would offset for the difference. 5. The marketing buyer receives the updated invoice and approves it; after which, it is scheduled for payment along with several other invoices from the same supplier. The above example shows some of the key features and functionality of the U.S. Bank EIPP workflow tool as well as the supplier portal, much of which is configurable by a system

10 9 administrator. The administrator can change user levels, add or remove users and assign and manage the group members. The system users typically have the ability to make changes to their own information or their view of the system. From a system audit perspective, U.S. Bank EIPP records and maintains a complete history of all user actions and events. Pay One of the significant benefits of utilizing U.S. Bank EIPP is that it allows clients to manage, process, and execute multiple methods of payment in an automated and efficient manner. The solution supports various payment options that may be initiated from a single system, which centralizes payment activity and significantly increases the visibility and accuracy of payments, allowing customers to develop more proactive payment strategies while saving time and money. Clients have a full complement of payment options available including ACH/EFT, wire transfer and cardless payment accounts, as well as conventional paper checks. ACH/EFT, wire transfer and check payments are made as verified fund transactions, which require the buyer to fund an account prior to making a payment or multiple payments. In this scenario, the buyer makes a single payment into the U.S. Bank account and once the funds are verified, U.S. Bank pays the appropriate suppliers. Finance A common result from the increased automation achieved through U.S. Bank EIPP is faster invoice cycle times. These improvements in processing efficiency help customers take advantage of early payment discounts and improve overall cash management. As the fifth largest bank in the United States, U.S. Bank provides a host of financing options and services for its customers, which allow them to better manage and optimize their working capital. Depending on the requirements, customers may be able to extend their payment terms and conserve cash when required, earn commercial card rebates, and at the same time, ensure that their suppliers get paid on-time or faster. More specifically, U.S. Bank s integrated Trade Finance capabilities provide buyers and suppliers with real-time, invoice-level term financing as shown below. Supplier Financing: U.S. Bank can provide liquidity to suppliers for those buyers who do not wish to utilize their own cash to fund early payment discounts. Once an invoice is approved, U.S. Bank pays the supplier early, minus a financing discount (which is a rate that is lower than standard buyer-funded discount terms). The buyer then pays U.S. Bank the full invoice amount on an agreed upon billing cycle (e.g., bi-monthly or monthly). By leveraging U.S. Bank s supplier financing program, the buyer can extend days payable outstanding and maintain a more consistent cash flow. Buyer Financing: In this model, U.S. Bank provides the buyer with a line of credit that is designed to extend payment terms. Financing under this model is based on the receipt of the buyer s approved invoices and the supplier s offer to sell the invoice. U.S. Bank pays

11 the supplier on the net due date and the buyer then pays U.S. Bank the full invoice amount plus a financing fee on an agreed upon billing cycle (e.g., bi-monthly or monthly). Buyer financing may also be implemented in conjunction with supplier financing. 10 Deployment Process When it comes to implementing EIPP, U.S. Bank employs established and recognized project standards developed by the Project Management Institute. Their deployment process is designed to be collaborative while maintaining appropriate checks and balances to ensure that client expectations are met. While deployment timelines can vary based upon client resource availability, process and system complexity, and supplier connectivity among other factors, the standard U.S. Bank EIPP deployment takes 90 days. To ensure a smooth launch and transition to steady-state operations, U.S. Bank offers its clients a warranty period immediately after the project goes live, where the U.S. Bank project manager(s) stay directly involved with the customer team by supporting any needs and working to resolve any issues that may arise. The U.S. Bank implementation process utilizes a five stage approach (see Table 1) where each step fosters interaction and collaboration with the client s internal stakeholders. Table 1: U.S. Bank Implementation Stages Stage Discovery Workshop Building Execution Transition Key Activities Hold project kick-off meeting; define program objectives; develop the implementation framework and project standards; share best practices. Engage client stakeholders with U.S. Bank s EIPP consulting group; capture all client requirements and business rules; define project timeline and key milestones; establish risk management plan. Set up organization, hierarchy and business rules within system; perform testing, including transfer of client and supplier data; conduct user training. Go Live or launch system; process invoices and payments; resolve any issues that are identified; survey client users for input/ feedback on the process; confirm operational and workflow models. Transition from the project team to the customer and to the U.S. Bank account management team; review implementation metrics and success; identify and document special projects and support any outstanding items. Training U.S. Bank believes that training is an important part of the overall deployment process and delivers it to client users and suppliers at no cost. The general training course covers the core concepts and principles upon which the system is built. More specifically, roles and responsibilities are defined, users are taught how to navigate the system, how to identify and manage exceptions,

12 how to run and create reports, and more. Refresher and ongoing training courses for the client can be scheduled any time after the initial deployment. 11 Additional Notable Features Supplier Enrollment This service is included as part of the U.S. Bank EIPP offering. U.S. Bank s supplier enrollment team works with the customer to identify, prioritize, create and distribute communications and other on-boarding materials that inform suppliers that U.S. Bank EIPP will be utilized to receive, process and pay supplier invoices. Bank personnel actively support the enrollment process by working closely with suppliers to enable them for einvoicing, and certify and train them prior to going live on the network. Once enrolled, all suppliers are able to access and use the customer service support provided the Bank. Analytics and Reporting U.S. Bank EIPP includes a dashboard that enables users to keep track of key activities, tasks, and any AP-related operational and productivity metrics. The solution s reporting tool includes a pre-packaged set of standard reports that focus on areas such as payment details, supplier-focused reports, invoice cycle times, invoices processed per FTE, invoices coming due, among others. Users can create customized reports at both the enterprise level and at the transaction level. The solution also includes advanced search capabilities to help users find specific documents, transactions, and other data elements. Account Management Team Each customer is assigned an account management team within U.S. Bank that maintains a relationship with the client on an ongoing basis and acts as a technical and best practice resource. The team s responsibilities range from troubleshooting and issue resolution to continuously evaluating client processes and performance, and suggesting improvements where appropriate. Part of the team s responsibility is to create a dashboard that consists of the key charts and metrics that are important to the customer and provide a good understanding of the overall performance of the program. Customer Support Organization All customers and their suppliers have access (24/7) to customer support services that provide tactical, day-to-day support for all U.S. Bank EIPP end users via phone and . Summary U.S. Bank offers a comprehensive and modular solution that is cloud-based and offers extensive supporting services that allow its customers to automate all or part of the AP process. The bank s goal is to ensure that its customers leverage U.S. Bank EIPP and the supporting services to improve the effectiveness of their AP process, reduce processing costs, collaborate better with trading partners through the supplier network and generate a higher level of visibility into invoice and payment data. All of which will enable AP to become a more value adding and strategic component of an organization s financial operations.

13 REPORT SPONSORSHIP 12 The views and opinions in this report represent those of Ardent Partners at the time of publication. Sponsoring companies have had no measurable influence on the content and research in this report. The contents of this research report are the exclusive property of Ardent Partners. Please direct any comments or questions regarding our research sponsorship policy to Ardent s Chief Research Officer, Andrew Bartolini at abartolini@ardentpartners.com and/or Sponsor: U.S. Bank is uniquely positioned as a strategic partner as they view check, card and electronic payment spend holistically, and recommend solutions based on enhancing the entire, tiered payables process. U.S. Bank analyzes clients accounts payable data and supplier profiles to map a complete payment model to optimize cash flow, working capital and payables management. U.S. Bank s evaluation is based on the clients unique business needs, so their recommendations specifically address what changes organizations can make to achieve bottom line results. With the ongoing development of innovative and emerging technologies, U.S. Bank meets client needs today while anticipating what they might be tomorrow. Contact: Name: Gustav Khambatta Title: Senior Vice President, epayables Sales Phone: gustav.khambatta@usbank.com Link:

14 ABOUT ARDENT PARTNERS 13 Ardent Partners is a Boston-based research and advisory firm focused on defining, advancing, and promoting the accounts payable, procurement, and supply management strategies, processes, and technologies that drive business value and accelerate organizational transformation within the enterprise. Founded by Andrew Bartolini, Ardent also publishes the CPO Rising website and hosts an annual event supply management leaders. Register for access and discounts to Ardent Partners research at ardentpartners.com/newsletter-registration/. ABOUT THE AUTHOR Vishal Patel, Research Director and VP of Client Services at Ardent Partners Vishal Patel is a recognized expert in the world of supply management. He has worked closely with procurement and accounts payable groups for most of his career, researching their best practices and advising them on how to utilize technology to improve organizational performance. Vishal is the lead analyst for Ardent s epayables (Accounts Payable automation) coverage and is also responsible for the oversight of certain AP solution selection and benchmarking projects. Vishal joined Ardent from HH Associates, where, as Director of Business Development, he helped establish and grow the company s US business by helping corporations de-couple their marketing supply chains and drive significant savings. Earlier in his career, Vishal was a Research Director in the Global Supply Management research practice at Aberdeen Group where he led and supported the coverage of many key areas including contract management, commercial cards, epayables, and complex category management. Vishal has conducted primary research, benchmarking and interviewing hundreds of procurement and accounts payable organizations and authored dozens of reports that highlight the strategies and technologies that enable Best-in-Class performance. All of the above has allowed him to gain a deep understanding of the Source-to-Settle processes, and accounts payable, in particular, and their impact on the enterprise. Vishal has been named a Pro to Know by Supply and Demand Chain Executive and holds a B.S. in Finance and International Business from The Pennsylvania State University and an M.B.A from Babson College. He welcomes your comments at vpatel@ardentpartners.com or Industry Standard Fine Print: The information contained herein has been obtained from sources believed to be reliable. Ardent Partners, Ltd. disclaims all warranties as to the accuracy, completeness or adequacy of such information. Ardent Partners, Ltd. shall have no liability for errors, omissions, or inadequacies in the information contained herein or for interpretations thereof. The contents expressed herein represent Ardent Partners best analysis at the time and are subject to change without notice Ardent Partners, Ltd. All rights reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. Solution providers and consultancies should take special note that Ardent Partners reserves the right to seek legal remedies including injunctions, impoundment, destruction, damages, and fees for any copyright infringement (which includes but is not limited to usage of any Ardent Partners content in company collateral, presentations, and websites) in accordance with the laws of the Commonwealth of Massachusetts and the United States.