2017 REPORT CARD + Strategies for Moving Rapidly to Best in Class

Transcription

1 DON T JUST OCR THE PROBLEM. SOLVE IT! ACCOUNTS PAYABLE 2017 REPORT CARD + Strategies for Moving Rapidly to Best in Class EXECUTIVE SUMMARY: 5 KEY TAKEAWAYS The Invocus 2017 AP Report Card study finds a normal distribution of As and Bs companies at top of the class in terms of industry benchmarks for AP performance and technology enablement and Cs and Ds for those falling behind the curve. For lagging AP organizations, this complete study report provides unique visibility into real-world performance benchmarks being attained by leaders plus key insights into the strategies, practices, and tools they have applied to reach best in class. Top 5 key takeaways are summarized below: 1 Accounts Payable pros no longer view Optical Character Recognition (OCR) as a game-changing technology. The study finds some 67% of companies still processing and maintaining invoice records in either paper or scanned/image formats, but only 7% using OCR to extract and structure invoice data in ways that can be used to drive strategic business analytics STUDY DEMOGRAPHICS 178 North America-based respondents participated in the January 2017 study. Key titles include: AP Manager, Supervisor, Accountant, Resolution Analyst, Coordinator, Director, Controller, CFO, AVP Finance, Financial Analyst, VP/Manager Shared Services. Company size varies, but more than 80% are large enterprises (>$100 million in annual revenue) and over two thirds are very large enterprises (>$500 million). Invoice volumes range widely, but the majority process 1-10K invoices per month, more than one-third exceed 10K invoices per month, and the weighted average is 18K/month. PAGE INVOCUS

2 and AP performance management. Where AP organizations do endeavor to capture and structure key invoice data, it appears they will focus future investment dollars on einvoice, epayment, and related touchless processing technologies. Indeed, einvoice adoption appears poised for exponential growth with one third of respondents having already deployed web-based portals to enable einvoicing and approximately 25% more planning to deploy the technology in the near future. 2 AP professionals need better, more efficient solutions such as Supplier Information Management or SIM with supplier selfservice portal for gathering and maintaining pristine master data. Some six in ten AP organizations have primary responsibility for creating and maintaining supplier master data records. Top pain points in this area include: gathering supplier information (cited by 62% of respondents), verifying it (33%), and making sure supplier data is kept up to date (24%). The culprit for all this pain is continued reliance on essentially manual ( , paper) means of obtaining supplier data. Not only does this raise risks of dataentry errors in master data records, it steals time that might otherwise be dedicated to information validation and data enrichment activities that support strategic supply risk and spend management objectives. For example, while most AP professionals say they typically check for duplication in supplier records and verify suppliers taxpayer identification numbers (TINs), far fewer find time to discover potential obsolescence or blacklisting of suppliers due to poor performance or to detect corporate parentchild relationships that, when known, can dramatically strengthen a company s procurement leverage and negotiating positions with suppliers. 3 AP professionals see big opportunities to increase their function s contributions to corporate performance and profitability. To succeed, however, they need faster, better analytics capabilities. Evidence for this can be found in AP professionals wish list for advanced analytics capabilities. This PAGE INVOCUS

3 includes solutions for easily tracking and managing core organizational performance metrics such as AP processing speeds and days payable outstanding (DPO), as well as compliance to a variety of commercial terms such as early payment and volume discounts that are typically negotiated by procurement and embedded in supply contracts. Asked about current capabilities, half of study participants say it is either somewhat or extremely difficult and/or time consuming to generate desired analytics versus only 8% with fast, easy access to key performance metrics at this time. 4 By not collaborating closely with functions such as procurement, many AP teams may be missing key opportunities to add business value. Due to typical corporate hierarchy and reporting structures, AP generally collaborates more closely with treasury than with procurement. However, collaborating more closely with procurement is where AP may have the most significant opportunities to contribute to corporate performance improvement. For example, AP might work with procurement to: Support strategic spend analysis and sourcing initiatives with cleaner supplier data/analytics. Fully leverage benefits, such as early payment discounts, written into supply contracts. Improve working capital performance by more actively managing payment terms/cycle times. Minimize non-po invoices, which are still nearly as common as PO-backed invoices. Support procurement s abilities to extract greater value from suppliers by being low-cost, preferred customers (paying consistently on-time and providing highly efficient ways for suppliers to communicate and conduct routine transactions). 5 AP still lags in terms of process automation and technological maturity, but there are signs this is about to change. There is a clear dichotomy between the haves and have nots in terms of AP technology enablement and process automation. Almost one third of AP organizations process 50% of invoices straightthrough while another third automate fewer than 10% of invoices. Though innovative technologies are available to address virtually all major pain points identified in the study, AP professionals remain dissatisfied with levels of technology enablement. In the invoice/payment area, for example, what passes for technology enablement is often a combination of and document scanning with few attempts to extract and structure data for strategic analysis. While 33% of study respondents say their organizations have identified einvoicing as the primary way they want to receive invoices, only 16% use einvoicing more than any other means. Likewise, while 33% have online supplier portals in place, only 13% actively use them. Nevertheless, AP s technology investment plans (shown on page 11 of this report) appear quite optimistic. PAGE INVOCUS

4 CONTENTS Key Invoicing Pain Points AP Process Benchmarks Supplier Management Process Benchmarks AP Automation & Technology Adoption AP Organization & Collaboration...12 PAGE INVOCUS

5 KEY INVOICING PAIN POINTS AP teams today report numerous and varied process challenges that make their jobs more difficult than they need to be. They are generally lessthan-satisfied with levels of process automation in place, and exceptions are often the rule in managing invoices. Whether resolving PO-invoice mismatches, chasing stakeholders to obtain necessary approvals, or reconstructing purchase processes after non-po invoices land on their desks (with little indication of what the purchases are for and who authorized them) AP professionals say they are still spending inordinate amounts of time resolving problem invoices. Expanding on the level of frustration that AP professionals currently experience, survey respondents cite specific instances where current systems either lack visibility required to manage AP processes efficiently, provide inadequate process governance, or fall short of expectations for achieving specific performance objectives. VISIBILITY Comments from survey respondents indicate that many AP teams continue to struggle with even the most fundamental visibility for tracking and monitoring their own processes and performance, let alone enabling suppliers to track and monitor invoice statuses and other information on their own. GOVERNANCE With respect to governance, many AP organizations suggest they are looking to implement more standardized and automated processes to generate controls that are simultaneously effective, time-, and cost-efficient. This might mean, for instance, that when a PO-backed invoice is processed for payment, AP never touches the transaction, as doing TOP 5 Invoice Processing Pain Points 1 Exception 2 Invoice 3 Non-PO 4 Inefficient 5 Supplier handling 30% approvals 28% invoices 23% scan & capture 11% inquiries 8% What AP says: We need a way to monitor and report how many invoices have been received and await payment. How can we determine where invoices sit in approvals process? How can we give suppliers visibility around open invoice statuses without forcing them to call AP? PAGE INVOCUS

6 so would not add any particular value or additional control over corporate spending. Alternatively, when invoice approvals are needed, standard and automated workflows can save both time and money by eliminating requirements for AP personnel to play detective in order to figure out who must be included in relevant approval chains. With state-of-the-art process automation technologies already available in the market, AP personnel can also be substantially relieved of having to constantly chase and prompt approvers to complete their steps in AP processes. GOALS & MEASURES Quite a number of survey respondents express desires to move beyond achieving fundamental process governance, visibility, and efficiencies in AP. They are also looking for ways to drive long-term, strategic business objectives, thereby making Accounts Payable a contributor to business value versus merely a cost of doing business. Examples of more strategic objectives cited by survey respondents include: Cleansing and rationalizing supplier master data. Monetizing invoice financing options to take greater advantage of supplier discounts. Leveraging rapidly emerging technologies to energize their efforts toward achieving corporate goals and key financial metrics. What AP says: We would like to implement better controls in our organization. How can we do so? How do we know where to send invoices for approval? How can we persuade individuals to review and approve invoices faster? Shouldn t processing of PO invoices be easier since POs already provide authorization? How can we reduce the number of suppliers in our master file? We need to find more ways to take advantage of supplier discounts. We are overwhelmed by all the accounts payable solutions available today. Where should we focus first? PAGE INVOCUS

7 AP PROCESS BENCHMARKS The biggest pain points for AP arise when things go wrong document/record mismatches, missing approvals, and invoices with no accompanying POs issued. It follows, then, that good process metrics for AP will focus on things going right. In this section, we explore three AP process performance benchmarks: straight-through processing, exception identification and handling, and PO vs. non-po invoices. STRAIGHT-THROUGH PROCESSING Sraight-through processing occurs when an invoice is approved for payment via automated two- or three-way document/records match without any manual intervention. Touchless invoice processing is considered to be a gold standard for achieving best-in-class efficiencies and productivity in Accounts Payable as it enables AP professionals to manage by exception, freeing up valuable time and resources for more strategic and impactful activities. The picture emerging from the study shows a clear dichotomy between the haves and have nots when it comes to automated two- and three-way records matching and straight-through processing. On one end of the spectrum, nearly one third of respondents say they process more than 50% of invoice volume straight through. At the other end, slightly more than a third report less than 10% of invoice volume flowing through automated matches. The remaining third falls in between, with 10-50% of invoices going straight through. The good news for those still managing most invoices through manual means is that plenty of AP organizations are clearly demonstrating success with much higher levels of automation, proving the ideal is attainable. Percent of Invoices Processed Straight Through 34% Receiving Now Targeted einvoice 16% 33% PDF via 11% 4% 12% 7% <10% 11-20% 21-30% 31-40% 41-50% 50%+ Primary Modes of Receiving Invoices from Suppliers 45% 51% Paper 39% 16% 32% Where they are pursuing changes, most companies appear to be moving straight from paper to digital means of receiving supplier invoices. PAGE INVOCUS

8 EXCEPTION DETECTION & HANDLING Handling exceptions that arise due to incorrect or mismatched invoice and PO data remains a significant challenge for many AP teams, dragging down productivity and efficiency. Key stats from the study: Some 65% of survey respondents say exception detection remains a largely manual process. Nearly 60% report exceptions on more than 10% of invoices with almost one-third reporting exception rates of 20% or greater. Again, the good news is that better than 40% of companies have pared down invoice exception rates to just 10% or lower. While eliminating 100% of invoice mismatches may never be attainable, the number of companies achieving the <10% benchmark is expected to rise dramatically, as increasing numbers of AP organizations invest and drive adoption of self-service portals that enable suppliers to flip POs directly over into invoices. AP organizations that minimize exceptions are better positioned to be more strategic and productive than their counterparts reporting exception rates nearly twice as high. PO VS NON-PO INVOICES Another key process bottleneck for AP teams is having to adjudicate Non-PO invoices. Study results reveal a nearly even split between PO (57%) and Non-PO (43%) invoices, on average. This points to PO vs. Non-PO Invoices % of Invoices Becoming Exceptions Less than 10% of invoices 42% 11-20% 26% 21-30% 18% 31-40% 8% 41-50% 5% 50% or more 1% Predominant Methods of Identifying Exceptions Manual examination 65% ERP-generated 30% Other 5% fundamental deficiencies in procurement processes, which often fall outside of AP s jurisdiction. However, as AP organizations continue to work with suppliers to implement PO-to-invoice flipping via supplier selfservice portals time-consuming tasks such as lineitem account coding become automated and error/ exception rates may be reduced dramatically. AP teams can use that free time to focus more actively on ensuring both budget and spend compliance as well as collaborating with stakeholders to link Non-PO spending to the correct cost centers and to accelerate approval cycle times. Non-PO 43% PAGE INVOCUS PO 57% OF NOTE! Capturing available discounts for early payment is one area where more AP teams appear to be winning than losing, according to the study. Success at capturing early payment discounts: Highly successful 28% Somewhat successful 41% Somewhat lagging 14% Very much lagging 16%

9 SUPPLIER MANAGEMENT PROCESS BENCHMARKS AP s responsibilities extend, of course, beyond paying supplier invoices. Indeed, the study finds that AP has primary responsibility for creating and maintaining supplier master files in 57% of reporting organizations. That is more than twice as often as procurement, which takes primary responsibility in just 26% of reporting companies. Function Responsible for Master Data Other 17% MANUAL INFO CHASE The most frequently cited supplier management challenge is gathering required information from suppliers (62%). This includes supplier contact and remittance data, W-9 s, certificates of insurance, and the like the bare minimum needed to set up suppliers in vendor masters, enabling their invoices to be paid. Yet, most AP teams are still using primarily manual means (72%) and paper (14%) for gathering supplier information. Just 13% have deployed selfservice portals that empower suppliers to create and maintain their own data, leaving most AP organizations with significant paper chase burdens for gathering even the most basic of supplier information. Current Formats for Capturing Supplier Info 72% Other 1% PAGE INVOCUS Paper/postal 14% Supplier portal 13% Procurement 26% TOP 4 Supplier Management Pain Points 1 Gathering 2 Verifying 3 Updating 4 Obtaining AP 57% required info 62% supplier info 33% supplier docs 24% stakeholder approvals 19%

10 Most common supplier validation actions Check for duplication Verify TIN# Search for relevant info Check if black listed Check for obsolescence 31% 38% 37% 66% 75% Nearly three quarters of supplier web portal users (74%) say they have onboarded fewer than 50% of suppliers and half have enabled fewer than 30% of suppliers. Early adopters of portal technology undoubtedly need to focus more on gaining much higher levels of supplier penetration and boosting e-invoice usage over time. The time and resources they free up can then be dedicated to information validation and data enrichment activities that support strategic supply risk and spend management objectives. For example, while most AP professionals say they typically check for duplication in supplier records and verify suppliers taxpayer identification numbers (TINs), far fewer find time to discover potential obsolescence or blacklisting of suppliers due to poor performance or to detect corporate parent-child relationships that, when known, can dramatically strengthen a company s procurement leverage and negotiating positions with suppliers. Check for parent-child linkage 27% 5% Other PAGE INVOCUS

11 AP AUTOMATION & TECHNOLOGY ADOPTION Most AP professionals believe they can gain greater efficiencies via process automation, and relatively few only 30% report high levels of satisfaction with current process automation capabilities. The reasons for this discontent emerge on closer examination of the technology capabilities most commonly in use. For example, the study finds AP organizations far more likely to be still using earlygeneration and inherently inefficient scan and capture methods of invoice processing compared to state-ofthe-art portal technology with true e-invoicing. DATED TECHNOLOGY While most AP pros participating in the study say they expect, at some point in the future, to be processing less than half as much paper as they currently do, paper is still far from being eradicated. Some 84% of companies still receive most invoices either by / PDF attachment or postal/paper. Those receipts must all be opened, scanned, and entered manually into companies AP/financial systems. While 45% use scanning technologies to create digital images of paper invoices, just 7% go the extra step of applying Optical Character Recognition (OCR) tools to intelligently capture and structure invoice data, enabling it to be used for strategic analytics and AP performance measurement and management. The lack of OCR adoption is, perhaps, a function Top complaints among companies using OCR: Poor quality of extracted data Limited document layouts supported Complex to use 70% 50% Somewhat to not at all satisfied with current level of automation Current analytics capabilities are somewhat to extremely slow/ difficult to use of dissatisfaction with poor performance, low ease of use, and poor value addition from OCR-centric applications. Only 15% of companies have adopted state-of-the-art e-invoicing capabilities. Among that group, adoption is still relatively low with just 16% of invoices overall being received and processed in pure digital fashion. E-INVOICE GROWTH AHEAD Study respondents do foresee gradual progress toward greater adoption of einvoicing technology. However, targets (detailed on page 6 of this report), suggest the focus will be more on transitioning from paper to e-invoicing, while invoices received by are expected to remain relatively steady at about half of invoice volume for the foreseeable future. Unlike Europe and Latin America, where government mandates have driven faster einvoicing adoption, the technology remains clearly nascent (albeit ascendant) in North America. Still, the study does find evidence PAGE INVOCUS

12 that more North American companies are laying the groundwork for e-invoicing by deploying enabling portal technology. One third of respondents say they have deployed web portal technologies that enable suppliers to submit e-invoices, although only half as many have actually started receiving significant percentages of e-invoices. Expect e-invoicng volume to grow exponentially, however, as increasing numbers of suppliers become enabled in self-service portals. While AP satisfaction with current automation levels remains low, most study participants report planned investment priorities along with a lengthy wish-list for faster, easier access to advanced AP analytics. Planned investments are fairly evenly divided between touchless processing, e-payments, and selfservice supplier portals. When asked to name types of analytics they would like to have easily at hand, AP professionals produce varied and ambitious list (as shown in the table below). Implemented Online Web Portal? 33% YES 67% NO % Supplier Adoption Among Those Who Have Implemented Supplier Online Portal 50% <30% adoption 24% 18% 8% 31-50% 51-70% 70%+ AP Analytics & Reporting Invoice processing cycle time Days payable outstanding Discount savings captured Percent wishing for faster, easier access 63% 47% 47% Where AP organizations will invest over next months: Touchless processing 32% epayment 27% Spend by supplier 43% Supplier portal 24% Payment terms compliance 41% Dynamic discounting 7% PAGE INVOCUS

13 AP ORGANIZATION & COLLABORATION Nearly 80% of AP professionals assess their corporate contributions as highly valuable and most believe their contributions on behalf of both internal stakeholders (employees) and suppliers are competitive relative to other companies. Less clear is the extent to which other corporate functions appreciate AP s value contributions. How AP Values its Own Function vs. Perceptions of How Others Do 78% Only 36% of AP pros believe their work is perceived as highly valuable, while 27% feel AP is still viewed mainly as a necessary, but not value-adding backoffice function. LOOK OUTSIDE Increasing collaboration with other functional stakeholders may be an effective strategy for improving external perceptions. For example, AP might work with procurement and/or treasury to: AP Pros Others 36% 37% 27% 18% 5% Highly valuable Somewhat valuable Back-Office Func. Support strategic spend analysis and sourcing initiatives with cleaner supplier data/analytics. Fully leverage benefits, such as early payment discounts, written into supply contracts. Improve working capital performance by more actively managing payment terms/cycle times. Perceived competitiveness in service to employees and suppliers Employees Suppliers Minimize non-po invoices, which are still nearly as common as PO-backed invoices. Support procurement s abilities to extract greater value from suppliers by being low-cost, preferred customers (i.e., paying consistently on-time and providing highly efficient ways for suppliers to communicate and conduct routine transactions). Very competitive Somewhat competitive Somewhat/ very weak 42% 35% 54% 56% 4% 9% Facilitate dynamic discounting by integrating AP cycles with cash optimization initiatives. Alternatively, AP might collaborate with suppliers PAGE INVOCUS

14 to reduce process costs in ways that are mutually beneficial. With that said, greater initiative may be needed on the part of AP to make greater collaboration a reality. AP High Collaboration with: 52% At present, just one-third of AP organizations report highly collaborative relationships with procurement, compared to 52% who say they are highly collaborative with treasury. 34% Treasury Procurement IN CONCLUSION While the Invocus 2017 AP Report Card finds plenty of remaining challenges and pain points for Accounts Payable teams, there is much in the study results to leave one feeling optimistic about the future. For one, there is the obvious motivation of AP professionals to: Work more strategically, competitively, effectively, and efficiently in their jobs Increase value delivery to the enterprise, and Keep pushing the envelope on process simplification, improvement, and automation. To realize these ambitions, the study finds increasing numbers of AP teams looking to push beyond the simple digitization (scanning) of documents and poorperforming OCR technology for key data extraction. The study finds clear evidence that AP is now moving rapidly toward resolving longstanding problems and pain points by investing in state-of-the-art solutions for automating invoice processing, account coding and spend classification, exceptions detection and handling, approvals workfows, self-service supplier information management (SIM), and fast/easy advanced analytics that support the kinds of strategic collaborations with procurement, treasury, and other functions that deliver competitive value to business enterprises. Don t just OCR the problem. Solve it! Engage with INVOCUS today. PAGE INVOCUS

15 ABOUT INVOCUS Invocus software solution empowers companies to make the transition from age-old paper and scanning based Accounts Payable processes to the new age electronic invoicing. Our SaaS based supplier einvoicing and information management network empowers your trading partners with selfservices, mobility and visibility, so that you get rid of paper complexity and unnecessary supplier calls. We also endow you with state-of-the-art matching and workflow configurator for touchless processing and easy exception handling. We are proud to have the trust of clients - across verticals such as Banking and Finance, Insurance, Electronics, Healthcare - enjoying early payment discounts and better supplier relationships! We are the einvoicing product division of Zycus, a leading global provider of complete Source-to-Pay suite of procurement solutions, the legacy of which goes back to two decades of customer happiness. PRINCETON: 103 CARNEGIE CENTER, SUITE 201, PRINCETON, NJ DON T JUST OCR THE PROBLEM. SOLVE IT!