Creating a Paperless & Profitable AP Department using AP Automation

Transcription

1 Creating a Paperless & Profitable AP Department using AP Automation Kurt Wachtendorf, APSC, CDIA National Solution Consulting Manager Commerce Bank 1

2 What Drives Organizations To Want To Change? Going paperless Intensive, paper-based, manual processes Increasing volumes of paper from multiple sources Green initiatives High document processing and storage costs Lack of visibility of invoice and other documents in the process Impacting the bottom line Improving processes to be more efficient Employee reallocation to higher value activities Capturing payment discounts Cost savings for paper reduction (win-win) Revenue earning card programs 2

3 3 Can you go paperless?

4 4 WHAT IS AP AUTOMATION??

5 Defining AP Automation Automating the invoice payment process Invoice Capture: Receives paper or electronic invoices, captures important data, and inputs into a workflow or payment system Workflow/Approval: Routes invoice for approval Payment and Reconciliation: Processes vendor payments via a number of payment methods (AP Card, ACH, check, wire, Supply Chain Finance) Why the need? Companies looking to increase process efficiencies and reduce costs 5

6 Making The Case For Automation AVERAGE INVOICE PROCESSING COSTS Accounts Payable Account Receivable Manual invoice $30.00 per invoice $4.00 per invoice Fully automated invoice Cost Savings $3.50 per invoice $2.25 per invoice $26.50 per invoice=90% savings $1.75 per invoice=44% savings AVERAGE INVOICE STORAGE COSTS Paper invoice $3.90 per invoice $1.90 per invoice Electronic invoice $1.30 per invoice $1.30 per invoice Cost Savings $2.60 per invoice=67% savings $0.60 per invoice=32% savings ERROR REDUCTION Automated invoices 37% reduction 37% reduction 6

7 Creating A Paperless & Profitable AP Department Using AP Automation How do we get there? Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 7

8 Creating A Paperless & Profitable AP Department Using AP Automation Step 1: Understand the AP environment Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 8

9 What We re Hearing I want one throat to choke I have to reduce labor expenses associated with routing paper documents, manual faxing, manual scanning and ing of documents I don t want to do AP I want to manage it Too many touches can reach 20 times I may not know an invoice exists for days, weeks, or months Allow AP staff and others to focus on higher value and more strategic activities. The goal is to free up 50% of their current time for this I need to reduce my costs Everything is manual! Cost of manually processing, handling, approving and paying a paper invoice is $12.75 I can t control what I can t see! I want to gain new levels of efficiencies without adding personnel 9

10 Business Challenges Increasing overhead and processing costs Volumes increasing, unable to add to staff Cash flow management Little or no audit trail Unable to shift staff focus to analysis and strategy Industry/Government regulations 10

11 Manual AP Process Challenges Paper-intensive processes are slow and error prone Manual checks and ACH processing Multiple payment files for check, ACH, card Missed discounts and/or payment dates Need for increased security in accessing information Lack of visibility to invoices and their current status 11

12 Creating A Paperless & Profitable AP Department Using AP Automation Step 2: Identify your goals Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 12

13 Identify Goals And Requirements Process efficiencies Streamline invoice receipt, approval workflow, and exception handling Provide automated audit trail to meet regulations Reduce exception rates Cost savings/revenue improvement Eliminate costly paper-based processes Lower invoice processing and payment costs Take full advantage of AP discount opportunities Realize revenue opportunities from commercial card program Strategic impact Utilize immediate access to information for timely and accurate analysis Increase controls and enforce regulatory compliance 13

14 Becoming A Profit Center Develop a focused payment strategy Reduce costs to labor, paper, postage and check writing Capture early payment discounts Maximize revenue opportunity with commercial card program Leverage multiple payment options effectively Utilize Supply Chain Finance Control DPO with automated payment program Off-load escheatment process Utilize staff to higher analytical capacity Maximize ROI of AP department 14

15 Creating A Paperless & Profitable AP Department Using AP Automation Step 3: Map the process Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 15

16 Why? Map The Current Process Provides a clear understanding of where bottlenecks and slow downs occur, which can be targeted for efficiencies Identifies manual processes which can be automated and redirected to higher value tasks Shows all paper touch points which can be removed to reduce costs 16

17 17 AP Process

18 18 Payment Process

19 Creating A Paperless & Profitable AP Department Using AP Automation Step 4: Develop a payment strategy Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 19

20 Automated AP Solution Scenario Buyer 1: Order for goods or services INVOICE RECEIPT/ AUTOMATION Supplier WORKFLOW APPROVAL PAYMENTS 7: Payment and Detailed Remittance 20

21 How To Develop A Payment Strategy Identify which vendors fit best into which payment type Contact vendors to discuss payment terms and discounts Explore the use of Supply Chain Finance to free up available short term cash Utilize AP Automation to meet your invoice processing and payment goals 21

22 Earn Revenue For Paying Your Bills Revenue generating card programs Aka: AP Card, e-payables, Commercial Card Use it to pay your invoices with a credit card Earns revenue share, rebates, or rewards based on the spend volume Replaces paper checks Supply Chain Finance Buy Now / Pay Later Line of credit to pay vendors early to take advantage of discount terms Buyer maintains standard DPO; Supplier shortens DSO Automated processing based on established discount scale 22

23 What Is Supply Chain Finance? 3% Automated Approval Manual Approval % Discount 2% 1.5% 1% # of Invoices.5 % Days Why the need? Companies wanting to capture discounts for early payment terms (i.e. 2/10 Net 30) but don t have the short-term capital available 60 23

24 Supply Chain Payment Optimization Smallest Supplier Commercial Total AP Spend Supply Chain Total CardAP Spend Finance (Includes All Vendors) ACH & Check Largest Supplier Analyze entire supplier base Identify the most value in the supply chain Leverage different payment types with Automation 24

25 Creating A Paperless & Profitable AP Department Using AP Automation Step 5: Identify the solution Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 25

26 Benefits Of Automation & The Cloud 25% are currently using some form of automation* 46% are evaluating using an automated solution SaaS / the Cloud solutions continue to rise 26% in IT cost savings ** 62% of companies with cloud solutions improved bottom line ** 68% of savings re-invested to improve product line, services, offerings ** Cloud computing will TRIPLE by 2016 * No annual software maintenance No/or little hardware to purchase and support Lower cost and quicker to implement *Source: PayStream Advisors, Inc; * * 2013 Manchester Business School Study commissioned by Rackspace 26

27 27 AP Process - Redefined

28 Automated Invoice Processing Client resolves exception ed invoices are captured Mailed invoices are captured Invoices grouped for scanning Valid Invoice/ Vendor Confirmed NO Valid Y/N EDI Invoices Invoices Scanned and OCR capture, Key Verification PO Matching and Receiving validation Invoice enters workflow, routed to appropriate queue Invoice reviewed and/or approved YES Approve Y/N NO YES Denied Status Electronic Invoice Posted Invoice available on Network 28 What does this mean to me? Automated entry of invoice information Exception Invoices routed to proper workbasket for processing Electronically route invoices for review/approval Focus on exception and vendor analysis No manual filing or retrieval Complete audit trail

29 ControlPay Invoices staged in Payment Cycle Voucher File Transmitted to Client Invoice Report Approved By Client Client generates Payment to Commerce Bank Commerce Bank generates Payment based upon Vendor Preference ACH, Card, Wire, EDI Paper check

30 What To Look For In A Solution Complete purchase to reconciliation solution Four phases: Capture and Process Workflow and Approval Payment (ACH, Card, Wire & Check) Reconciliation Implementation/Activation Plan Security Self-directed and Rules-based workflow Integration with your ERP 30

31 Creating A Paperless & Profitable AP Department Using AP Automation Step 6: Calculate ROI Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 31

32 What Savings Are Available? Hard cost savings Invoice processing costs Check writing costs Increased cash flow Business operating costs Infrastructure costs Compliance Lost documents Revenue Share Soft cost savings Reallocation of personnel Increased productivity Improved vendor relationships Immediate access to information Faster internal communications Automated workflow Better decisions quicker Security & Disaster Recovery 32

33 What To Do With The Time Saved? Work with buyers and suppliers Pricing, terms negotiation, payment strategies, grow revenue share 5% reduction in COGS equates to a 22% increase in sales* Spend analysis Accruals, cash requirements over time Maximize discounts Value of 2/10 NET 30 term is equivalent to a 36% gross RoR Analyze cycle time Which vendors are slow to be paid and why? Where are discount opportunities being missed? Where does the process break down? Focus on exceptions Address and eliminate the root cause *Source: The Accounts Payable Network 33

34 ROI Overview Chosen solution $TBD Includes: implementation fees, solution design, invoice transaction fees, user license fees, and managed services $TBD per invoice Revenue Improvement $53,000 Includes: revenue share, pricing, terms $1.77 per invoice Internal Cost Savings $221,662 Includes: accounts payable labor reallocation savings, annual copy/paper savings, and annual intangible savings $7.39 per invoice Audit & Compliance Savings $9,668 Includes: post payment audits, escheatment/unclaimed property, and other miscellaneous post-audit fees Summary Return On Investment Cost of TBD automation solution $.32 per invoice $TBD Total Internal Savings $231,330 Total Revenue Improvement $53,000 Net Value to client Year 1 $TBD 34

35 35 ROI 5 Year Cumulative Projection

36 Creating A Paperless & Profitable AP Department Using AP Automation Step 7: Document & Activate Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 36

37 Documenting The Process Why? Helps solidify your challenges, ideas, goals in one place Use as a tool to gain executive commitment Makes sure everyone is literally on the same page Describes the requirements and expected results Avoid surprises How? An Accounts Payable Analysis Executive Summary Goals and Requirements Current Process Solution Overview Proposed Solution Benefits ROI Implementation Methodology 37

38 Implementing A Solution Initiate & Plan Control & Execute Stabilize & Close Strategic vision Current process review Statement of goals & objectives Executive Sponsor meeting AP Analysis Onsite workshop Revise AP Analysis Project plan Payment solution installation Integration & system conversion Status updates User training Project launch Project summation Ongoing support Post launch recommendations & next steps 38

39 Creating A Paperless & Profitable AP Department Using AP Automation How did we get there? Understand the current AP environment Identify goals and requirements Map the current process Develop a payment strategy Identify the right solution to match your needs Calculate ROI Document the process & Activate the solution 39

40 Things To Keep In Mind Involve key users along with management Understand how things are done today Create clear, definable goals Look at the full process, not just an activity Developing a payment strategy is a process, it doesn t happen all at once Identify the costs associated with current processes Accept change (change really can be good) Document your findings, your goals, requirements, etc. Plan, then review, then stick to the plan Take pride in what you accomplished! 40

41 Learn More Kurt Wachtendorf, APSC, CDIA+ National Solution Consulting Manager Richard Rosselot Account Executive office mobile office mobile commercevantage.com commercebank.com 41