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1 TECHNOLOGY INSIGHT SERIES Automation : Touch-less Accounts Payable Featuring Insights on... ERP Systems versus Bolt-on The Universe AP Challenges and Automation Goals Components of Invoice Automation Electronic Invoice and Workflow Matching Best Practices for Touch-less AP Key Performance Indicators Underwritten in part by: Q2 2012

2 Table of Contents Table of Contents Executive Summary...1 The ERP Environment... 2 AP Challenges and Automation Goals... 5 The Case for AP Invoice Automation...6 Components of the Invoice Automation Universe...7 Benefits of Invoice Automation...9 Best Practices for Touch-less AP Key Performance Indicators...13 Direct Insite Profile...14 Direct Insite Case Study...17 Selecting a Solution...19 About PayStream Advisors, Inc...23 i

3 Executive Summary Executive Summary A significant shift is starting to shake traditional AP operations, especially for clients. While invoice imaging and workflow are now mature technologies, their adoption lags. PayStream s research indicates solutions streamlining the receiptto-pay cycle have only been adopted by 45 percent of Global 2000-sized North American companies. Consequently, a large portion of the user community still relies on paper-based invoice processes. Until recently, the biggest stumbling block to removing paper from the finance department was getting the project started. Today, however, finance managers struggle with a new problem: where to get started? Due to the explosion of options - from invoice imaging, automated data capture, approval workflow, eprocurement, electronic invoice portals, supplier collaboration, PO compliance, discounting and payment automation decisions are complex. To make matters worse, new technology companies and solutions continue to enter into the epayables automation arena. PayStream s research suggests that the explosion of options together with a lack of clarity about solution choices is slowing the adoption rate. The goal of every finance department is to provide information for managers to make investments and budget decisions. With limited or no visibility into accruals, companies often have delayed closes subject to inaccuracies caused by the understatement of expenses and overstatement of income. This report is aimed at finance and IT directors at organizations using who seek to understand the significant competitive advantage of improving their payables department. Individuals who require product information to identify appropriate solutions for their receipt-to-pay automation needs within an environment will find in this report appropriate solutions that can automate all payables functions. Automation : Touch-less Accounts Payable is a PayStream Advisors Technology Insight Series report focused on -specific e-payables solutions, including invoice automation and payments, which leverage capabilities and have seamless integration with. It will highlight the advantages of solutions that work within as well as those solutions that sit outside and discuss the relative merits of both approaches. PayStream Research Library This report is one of many resources available in our research library, including: Invoice Automation: Automating AP Processes through Imaging and Workflow Electronic Invoice Management: Getting Rid of Paper from the Source Electronic Invoicing: Best Practices and Operational Metrics to Streamline AP Invoice Automation for Small & Medium Enterprises (SME) 1

4 The ERP Environment The ERP Environment To understand the current state of invoice automation, it is useful to take a step back and briefly look at the evolution of business software. Today s enterprise resource planning (ERP) solutions grew out of manufacturing resource planning (MRP) software, which was essentially designed to match demand to the supply chain. MRP systems include inventory control, bill of material processing and production scheduling in order to help organizations plan manufacturing, purchasing and delivery. Accounting was handled in a different system. ERP systems where subsequently designed to wrap everything into one package. By integrating MRP and GL/Accounting with other core functions like maintenance and HR into a single software suite, organizations realized a much broader scope of process control. The two glaring problems with ERP systems is that workflow often requires a high level of customization that can be costly and take a long time to roll out. ERPs were not designed to handle unstructured content such as documents. As a consequence, additional software solutions were developed to plug these gaps, specifically electronic document management (EDM) and business process management (BPM). From these technologies evolved enterprise content management (ECM), which combines document management and workflow. Using these technologies, point solutions were created to address narrow, but significant process weaknesses such as invoice management as required by the AP function. Another issue that comes into play with ERP systems is their lifecycle, which can be fifteen years or longer. Because of the scope and impact an ERP installation has on an organization, they are somewhat like an aircraft carrier in that they are costly to replace and take time to steer in a new direction. They also require a lot of support. Carriers require a task force consisting of a variety of surface ships and submarines each with a specialized mission so that the carrier operations are not hindered in any way. Likewise, an ERP/Integrator Complex has evolved that seeks to perpetuate the ERP universe. In essence, the major ERP solutions have spawned a symbiotic support network that helps extend the usefulness and lifecycle of a corporation s ERP. ERP vs. Bolt-on While ERP systems can provide a scalable platform for activities like outsourcing or shared services, they are not as nimble as bolt-ons that provide point solutions addressing emerging business requirements. Organizations that have implemented ERP systems are therefore faced with a dilemma whenever they need to automate a new process. On the one hand they can adhere to the single source approach and work with their ERP vendor and/or an ERP integration partner to build out the new functionality. More often than not this is costly and time consuming. On the other hand, they can turn to external software vendors offering bolt-on point solutions compatible with their ERP system. These can be comparatively less expensive and faster to implement while offering best-in-breed functionality that addresses client needs. By nature, bolt-on solutions pose a threat to the ERP/Integrator Complex in terms of lost revenue opportunities. Having created a customer for their ERP product, ERP vendors and the major consulting firms that provide integration and implementation services for ERP products naturally have a vested interest in doing everything possible 2

5 The ERP Environment to continue selling the ERP client additional ERP functionality. The bolt-on alternative provides not just a single instance of departure, but the start of a new pattern of behavior that makes it more likely other bolt-on solutions addressing other business ecosystem needs are chosen instead of the solutions delivered by the ERP/Integrator Complex. To address this issue, the ERP/Integrator Complex has taken an if you can t beat them, then join them approach. By partnering with or acquiring ecosystem providers offering bolt-on point solutions, the complex is able to more quickly deploy tightly integrated, cost-efficient software automation tools. Relying on open platforms, they first attack the low hanging fruit to generate return on investment (ROI) and then go after the more complex and harder to address process issues. For existing ERP clients, the expanded scope of the AP ecosystem offerings from the ERP vendors makes it harder to differentiate between solution types and where best to invest in additional automation. For organizations shopping for an ERP system, a thorough understanding of the extended automation ecosystem, both internal products and those from external vendors offering bolt-on solutions, will help define the purchase decision. Integration will always be a key component in a purchasing decision and will be greatly affected by an organization s IT environment. To gain complete and clear visibility throughout the entire AP flow, organizations must minimize the paper and tightly integrate AP processes with their ERP. The Universe Like other ERP solutions, has a transactional heritage. consequently collects a lot of data related to the primary business processes it tracks. In respect to the purchase-to-pay process, data is collected with each purchase order created, which is then supplemented with additional data inputs related to receipt of goods, receipt of invoice and payment processing. When external data sources, unstructured data and processing exceptions to the transactional norm are involved, capturing and processing that data within the confines of the core system can pose a significant challenge. This is where other solutions that work within the broadly defined ecosystem may come into play. Within the universe, there are significant differences between an solution extension and other products offered by external solution providers. There are only a handful of solution extensions compared to hundreds of Partner Certified Solutions. Though products from certified partners go through extensive testing, they do not undergo the same testing regimen by as solution extensions. If support is offered through the support portal, the support is routed to the certified partner. Also, it is more likely a certified partner will have to bring in other partners to provide ancillary functionality such as OCR or archiving. None of this is to say that bolt-on solutions are inferior or second-tier in any way, just that they have not been adopted under the brand. They are certainly rigorously tested and supported by their developers. Furthermore, the bolt-on solutions have proven themselves in the market. Thousands of users are benefiting greatly from the advanced functionality and flexibility offered by these best-in-breed partners as well as their compelling ROI. solution extensions, the highest partner category, augment s core ERP/ financial solution. To become a Premium Qualified partner product they must pass s own testing standards. solution extensions are in essence an product, except that a partner that is a leading point solution has developed them. 3

6 Universe solution extensions are branded and marketed, meaning that they are on the price list, carry an warranty, and are supported by, not just the partner. From a user standpoint, the look and feel of an solution extension is that of. In fact, the user never really leaves. Other tightly integrated solutions from certified partners may also retain the look and feel of and be written in s ABAP programming language so that the user cannot tell whether they are working within or the bolt-on solution. For the user that is accustomed to working in an environment this can be a critical factor. In contrast, users who are new to or have multiple ERPs may be more inclined to look at an external best-in-breed bolt-on solution with its own look and feel. Established users of may also consider an external solution based on their processing, functionality, usability and cost requirements. These solutions will exchange data seamlessly with, but the user works in a best-of-breed point solution that delivers its own unified AP processing experience. It is not uncommon for a company to have different instances of or even have in one location and another ERP at a different location, often due to mergers and acquisitions. Companies on multiple ERP platforms looking for global visibility will need to look for a best-of-breed solution that works outside of. While some of these best-of-breed solutions may retain some of the look and feel of while providing global visibility across disparate ERPs, other external solutions provide their own unique user interface. 4

7 AP Challenges and Automation Goals AP Challenges and Automation Goals The biggest invoice management challenges are related to an overreliance on people and paper-based processes, and the high number of discrepancies and exceptions associated with such a system. While increasing electronic imaging remains a top goal, followed by automated workflow, implementation of invoice imaging and ERP application upgrades both show significant momentum. Although invoice automation remains predominantly accuracy and efficiency driven, momentum is building for broader application as a management information tool. Emerging concerns related to this are discount capture and spend visibility. Streamlining the AP process is vital in a tough economy where adequate cash flow and greater control over payables are critical to maintaining liquidity and sustaining business operations. 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 automated process. Once a formidable obstacle, the challenge of integrating new applications with ERP systems is becoming less daunting. Most invoice automation solutions on the market today integrate easily with systems on both the buyer and supplier sides, resulting in secure and seamless data transfer, as well as streamlined processes and more efficient workflows. 5

8 Case for Invoice Automation The Case for Invoice Automation We believe AP automation is emerging as one of the key components of financial supply chain strategy. This is in large part due to the operational efficiencies derived from automation that in turn drive cost savings. At an operational level, automating existing accounts payable processes can: Reduce processing costs for both paper and electronic invoices Increase full-time equivalent (FTE) efficiency Reduce processing errors and promote faster discrepancy resolution Minimize the payments risk of fraudulent and duplicate invoices Increase straight-through processing and achieve lowest cost routing to minimize bank charges On a more strategic level, AP automation can unlock significant value from the financial supply chain. This involves an understanding of the receipt-to-pay process in the context of trading partner relationships. Added value is created by: Accelerating the approval of invoices to capture early payment discounts Facilitating dynamic payment terms based on a sliding scale Optimizing spend management for working capital gains Enabling suppliers to improve their own cash flow through improved visibility into invoice status Strengthening vendor relationships This type of collaborative approach to financial supply chain management facilitated by AP automation also positions buyers to partner with innovative banks providing supply chain finance support. For suppliers, an integrated bank relationship can reduce their Days Sales Outstanding (DSO) without the need for high-cost financing options such as factoring and asset-based lending. At the same time, the financial institution can help buyers retain and potentially extend their Days Payables Outstanding (DPO). 6

9 Invoice Automation Universe Components of the Invoice Automation Universe The invoice automation universe is comprised of a number of different functional components. Some vendors deliver functionality in an integrated, end-to-end solution, while others focus on specific components. The AP automation solutions designed for an environment discussed in this report all fall into the former grouping. There are six primary components of the AP automation environment. A brief description of each follows: Paper Invoice Receipt Paper invoices, whether they are received in a centralized location or a distributed environment must be prepared for scanning and electronic access. This involves the hands-on sorting and batching of all relevant documents. Document and Data Capture The conversion of paper invoices and other transaction-related documents into digital images and index data requires scanning, image enhancement, indexing, validation and data extraction, most of which are handled automatically by the solution being used. Electronic Invoicing Most invoice automation solutions come bundled with a vendor portal or can be integrated with electronic data interchange (EDI) or with electronic invoicing network that suppliers may use to submit invoices electronically by entering the data manually, flipping purchase orders into invoices, or uploading documents from their accounting systems. Electronic invoices are automatically validated in accordance with buyer-defined tolerance levels and suppliers are immediately notified of the exceptions they need to correct before the invoice is forwarded for AP processing. 7

10 Invoice Automation Universe Content Management The delivery, storage, management and disposition of electronic documents and index data is central to invoice automation and must integrate closely with the client s ERP system in terms of access rights and the ability to provide seamless retrieval. Some solutions come bundled with a central repository, while others rely on third party providers, and still others simply integrate with the ArchiveLink data repository. Matching and Workflow The system must handle both the matching of PO-based invoices and related exception resolution as well as non-po-based invoice approval. The workflow engine, according to pre-defined business rules that administrators should be able to configure without IT support, routes tasks and invoices pending approval to the appropriate party based on pre-defined roles. Tasks not addressed within system parameters are then subject to automated escalation routines. Reporting and Analysis Being able to analyze invoice receipt-to-pay metrics and monitor user activities for quality control and load balancing is critical to automation efficiency. Typical reporting and analysis tools include standard and ad hoc reports detailing invoices pending approval, past due invoices and cycle times. The best solutions provide the ability to modify standard reports and to perform simple and advanced searches to generate output that provides visibility to both buyer and supplier transactions, and provides access rights to suppliers. Besides the ability to create custom reports on an ad hoc basis, the more advanced solutions also allow users to save those queries as templates for further reuse and provide the ability to integrate with external reporting tools. 8

11 Benefits of Automation Tangible Benefits of Invoice Automation Clearly the benefits of invoice automation are tangible and achievable. Depending on the type of solution implemented, organizations can achieve a wide range of benefits related to accuracy, processing times, discount capture, and labor costs. The biggest benefit of automating the invoice receipt process for a majority of organizations is fewer lost or missing invoices. Invoice automation facilitates immediate visibility and makes invoices actionable to all relevant parties, irrespective of where they are located geographically. Another significant benefit of invoice automation is quicker approval cycles. Our research shows that automating invoice receipt combined with automated matching and approval workflow can shrink approval cycle times from 23 days or more to as little as five days. Approval of non-po invoices can even be less. These performance gains are driven by meta data extraction with OCR / IDR, immediate invoice image visibility, automated matching, the elimination of manual data entry, and ensuring that invoices are reviewed and approved in a timely manner. The ability to accelerate approval times has allowed organizations to increase their on-time payments as well as capture more payment discounts. Elimination of manual data entry and paper-based routing of invoices along with the reduction in discrepancies and exceptions brings another benefit to the equation, the ability to reduce staff and processing costs. The ability to redeploy staff from low valueadding activities to more strategic tasks like vendor relations, spend management and incremental discount capture is an added bonus. 9

12 P2P Automation Purchase-to-Pay and the Role of Invoice Automation Invoice automation plays a key role within the optimization of the Purchase-to- Pay (P2P) process; in particular the advantages provided by an electronic invoice environment and automated workflow matching. The goal is to create end-to-end automated processes, also referred to as straight through processing (STP). The promise of STP is that by eliminating human intervention, or touches, efficiency will skyrocket and costs will drop precipitously. The key is to eliminate as much paper as possible. Converting paper invoices to electronic documents is primary, but also increasing the use of p-cards, driving suppliers to an invoice portal and automating contract management can reduce your reliance on manual processing. With the volume of paper processing reduced, it is then possible to build out the automation within your P2P process. Transitioning to a touch-less AP environment, however, is not something that is done all at once. Enterprises desiring to become touch-less need to take a staged approach that involves: Getting rid of paper Matching a clean document sent (usually the purchase order) with a clean document received (typically an invoice or delivery receipt) Then implementing e-procurement tools AP processing provides the initial, easy to realize benefits of P2P automation. Beginning with purchasing, the front-end of the P2P process, does not deliver the requisite benefits to sustain continuous improvement. Attacking the paper invoice problem does. Being successful with invoice automation provides the impetus for then extending your touch-less process outwards in order to span both ends of the P2P continuum. 10

13 Best Practices Best Practices for Touch-less AP Eliminating human touch points is a best practice in its own right. Once an invoice is captured electronically, the question to ask is: Does this invoice need to be approved? The ability to derive an automated answer by using business rules, which in turn trigger appropriate workflows, is the centerpiece of a touch-less AP environment. If the answer to the question is no, the system will move the invoice into the payment process. If the answer is yes, the system will route it to the approving party along with any necessary decision support documents and information. Business rules, flexible workflow and transactional transparency are essential. For global organizations, there is an added layer of complexity related to localization. This is because there are different legal requirements for invoice processing from country to country. The question you must first ask is: Are we capturing the correct data in every country? Once you understand your requirements, you will be able to determine if a standardized solution is sufficient for processing in each country in which you do business, or if service extensions are required from your solution provider to capture all the information you need. On a basic level, we have identified 15 areas that impact touch-less AP processing. They are offered here to provide you with a checklist for evaluating both your needs as well as the functional capabilities of any solutions you consider. They are: Invoice Submission The system should facilitate the exchange of invoices between buyers and suppliers by supporting several methods of supplier submitted invoicing including PO flips, blank e-forms, standard templates and direct integration (Electronic Data Interchange EDI) with a supplier s ERP system. Document Scanning Having all invoices sent to a single location for scanning is preferable, but not always practical. In decentralized organizations the best practice is to receive paper invoices in regional scanning centers and then scan to one central repository. Compliant and Secure Storage The ability to capture and then maintain both structured and unstructured data must be accomplished within a secure environment that is not only compliant with all relevant regulatory and industry standards, but also extends to the integrated process. Invoice Recognition It is very important to be able to capture line items and not just header data. Without line item details automated systems must forego the use of advanced matching and business rules to decipher apparent exceptions. The use of free form ICR or IDR can provide an added level of automation compared to a template driven OCR process. Invoice Validation The system must check every invoice for duplicity and mathematical integrity. In a portal environment, checking invoices against a set of buyer-defined criteria and notifying suppliers to correct any errors before the invoice is accepted and routed provides an additional layer of validation. Invoice Matching This involves matching invoices with purchases, goods receipt documents and/or contracts based on criteria configured in the system. The system should also route any match exceptions for review and resolution. 11

14 Best Practices Workflow Configuration Administrators need the ability to configure and change the business rules that determine how invoices will be routed to appropriate users for review and approval. Alerts and Notifications The system should notify approvers of invoices pending their review and escalating invoices to managers if no action is taken within a specified period of time. Payment Processing The steps that buyers take to initiate, post and execute payment, including preparation, processing, and submission of the payment file to the financial institution need to be seamless. ERP Integration Besides the exchange of transactional data between the invoice automation solution and the ERP, this stage also includes integration with and posting of the payments to buyers GL and accounting systems. Remittance Management Sending the remittance information to suppliers via the portal in a format of the suppliers choice is critical so that they can easily transfer the remittance advices into their receivables systems. Travel Receipts Paper receipt capture, either scanned or via a mail service, and matching those items to submitted expense reports or credit card downloads (in addition to providing confirmation to the employee), must be integrated with workflow providing approval, exception/discrepancy handling and delivery to AP. Contract Management Leading edge firms are implementing automated contract management capabilities (typically for handling non-po invoices related to leases, utilities and other recurring bills) to further reduce manual processing. Mobile Apps Delivering tasks and supporting documents to a mobile device facilitates approval by executives who travel regularly. Mobile apps are in the early stage of development and deployment but are expected to increase significantly in popularity. Business Intelligence There is a wealth of information gleaned from the P2P process, which can be used not only to comply with regulatory requirements but also to provide valuable business intelligence for strategic spend analysis. 12

15 Key Performance Indicators Key Performance Indicators The accounts payable process has a number of moving parts and unless key metrics are identified and performance measured against these indicators, it is quite likely that something will fall through the cracks. To ensure smooth functioning, key performance indicators (KPIs) should be measured periodically. KPIs become all the more critical when a company is going through a new technology implementation, so that measuring and comparing KPIs before and after an initiative provides a good indication of the impact it had on the AP process. Here are some key KPIs you should track periodically as well as before and after any invoice automation initiative aimed at increasing your touch-less AP quotient: Average Cost to Process an Invoice (by Invoice Type) Calculating processing costs can provide valuable insights into the factors driving the costs and ideas on reducing total costs. Include salaries and benefits, facilities and hardware, software and IT support and managerial overhead in cost calculations. Also calculate processing cost by different types of invoices (e.g., clean vs. exception) and by steps involved in each process (e.g. data entry vs. exception resolution) to address the expensive invoice types and processes. Exception Invoices as a Percentage of Total Invoices It is a well known fact that exception invoices cost much more to process than clean invoices and drive up the overall processing costs for AP. Track the number and dollar value of invoices that end up in an exception queue and log details such as expense type, vendor information and type of exception. Understanding the source of exceptions and addressing them is critical to reduce the occurrence of exceptions. Average Time to Approve an Invoice from Receipt to Payment Knowing how long it takes an invoice from the time it gets to the AP department to the time it is ready to pay can help AP managers identify bottlenecks data entry, approval or exception handling and take the appropriate steps to compress the invoice receipt-to-pay cycle. Accelerating the processing cycle can help reduce late payment penalties and increase capture of discounts offered by suppliers. Electronic Invoices as a Percentage of Total Invoices Electronic invoices take less time and are less expensive to process than paper invoices. Track the percentage of electronic invoices as well as the percentage of suppliers sending them. Increasing the percentage of invoices that come into the AP department in electronic format has a beneficial impact on the other two metrics you are tracking average processing times and costs. Suppliers Participating in einvoicing as Percentage of Total Suppliers The best electronic invoicing solution will not deliver a payback unless a critical mass of suppliers has been onboarded. Develop a supplier recruitment and enablement plan in conjunction with solution implementation and then periodically track the percentage of targeted suppliers that have been migrated from paper to electronic invoicing. If the percentages are too low, then it is time to change your activation campaigns and supplier communication methods. 13

16 Solution Profile Direct Insite Overview Direct Insite Corporation is a global provider of financial supply chain automation for procure-to-pay business processes. The company s solutions and services aim at delivering on-demand payment capabilities that are deployed fast, with minimal cost and operational impact, and provide guaranteed benefits across the financial supply chain. Direct Insite s service offering for automating both accounts payable and accounts receivable operations, Invoices On-Line (IOL), was introduced in Website Founded 1987 Table 1 DIRECT INSITE SOLUTION PROFILE Headquarters Sunrise, FL Other Locations Bohemia, NY; Santa Clara, CA; Denver, CO Number of Employees 60 Revenues Customers Annual Transaction Volume Industry Segments Key Accounts Awards/Recognitions Partners/Resellers $12 Million 50+ operating company or enterprise clients 35+ million Manufacturing, Communications, High Tech, Oil & Gas, Energy, Medical, Media & Advertising, Finance, Shipping & Transportation IBM, Hewlett Packard, General Motors, Siemens, Carlson, Shell, UK Department of Work and Pesions, Areva T&D, INTTRA, Osram Sylvania ISO 9000 Certification, PCI Service Provider Level 1 Certified, SAS 70 Type II Compliant Data Centers, Certified Technology Solution, Business Partner First Data Corp., Hewlett Packard, IBM,, Cognizant, INTTRA, Scan One, ScanTek Solution Functionality The Direct Insite IOL platform offers a comprehensive solution to manage purchase orders, invoices, and electronic payments. The IOL solution is primarily offered as a Cloud-based Software-as-a-Service, but is available for installation on client servers as required by some government contracts. This solution sits on top of (or any other ERP), using a collection of web-services to exchange data with in real-time. If everything matches, it provides an end-to-end AP solution. If there are exceptions, AP handles them in Direct Insite and in conjunction with the Direct Insite workflow protocols without ever having to touch. Thus, a seamless AP solution is provided while a user is still able to tell if they are working in or IOL. Invoices On-Line delivers comprehensive functionality on both the buyer and supplier sides. Buyers can issue and manage purchase orders, review and approve invoices, and create schedules and pay invoices online via flexible payment methods. 14

17 Solution Profile Suppliers can issue invoices and credit memos and respond to buyer inquiries with attachments. Strong audit controls and reporting ensure total visibility of transactions in real time. Pricing and Implementation Direct Insite uses a transaction-based pricing structure, with a minimal professional services fee up front and a declining fee per transaction as monthly transaction volumes increase. Only buyers are charged to use the solution, Suppliers get free access to the IOL platform. Many competitors charge both buyers and sellers an impediment to supplier adoption. A typical IOL implementation takes 30 to 90 days, depending on the client s business rules for workflow implementation and the availability of interface information related to the client s ERP systems. The on-demand delivery model can be deployed faster and with less up-front cost thereby delivering a measurable long-term return on investment. Invoice Receipt Functionality Supplier convenience is a key selling point, from the ability to electronically flip purchase orders into invoices for error-free matching, to line-item edit capabilities allowing suppliers to amend and append orders to both PO and non-po invoices. IOL offers a full complement of e-invoicing services, from full EDI to scanning of paper invoices. Automated document validation notifies suppliers of invoice errors at the point of submission via or web portal messages. Document and Data Capture Direct Insite has fully integrated scanning partners to scan invoices and other documents via either non-template reliant OCR. Invoices and other data can also be captured via double blind re-keying. The SLA for data capture is 99 per cent character accuracy. Invoices are mailed, ed, or faxed to the scanning/capture facility. Business rules can be customized for individual customers to provide the highest level of data validation. All invoices are assigned a vendor number and business unit, and any document that fails validation can be easily modified in the IOL application. Vendor Portal Functionality With more than 100,000 suppliers registered in 100 countries, using over 35 currencies and 17 languages, the IOL Global Supplier Network is a robust marketplace for e-invoicing. Direct Insite s Supplier On-boarding Team works with buyers to get all of their suppliers enrolled, touting the solution s fee-free seller services. The web-portal is self-service, aiming to give vendors the ability to find answers to their own inquiries while reducing inbound calls. There is also a line-item editing form that allows suppliers to adjust line items to PO or create non-po based invoices. Content Storage and Management Storage and archiving functionality for both electronic invoices and paper invoices is offered with IOL. Typically, historical invoice data and images up to 10 years old are accessible in real-time. A user can search for invoices by date, invoice number, amount, vendor name, vendor number, business unit, PO number, payment amount, 15

18 Solution Profile and most any other parameter. The scanned images are typically PDF or tiff files accessed via a web link and are also downloadable. Workflow Management IOL delivers integrated workflow functionality that allows invoices to flow through preparation, review, and approval life cycles quickly and efficiently with users assigned authority levels as invoice preparers, reviewers, approvers, and payers. Online collaboration between buyers and sellers allows fast resolution of discrepancies, with either party able to initiate line-item level notes and inquiries. Direct Insite s solution supports dynamic discounting, allowing buyers and suppliers to work out mutually beneficial early payment terms. Buyers may configure discount rates and submit proposals to suppliers against specific invoices. Suppliers may view the invoices that are available for discounting, compare the discount rate against alternative capital sources, and decide whether to accept the proposal or submit a counteroffer. Reporting and Analysis IOL provides a number of standard and configurable reports, as well as ad hoc query capabilities for custom reports that can be exported in ten different formats. As well as financial management reports, users can analyze early payments, dynamic discount and spend management. On the supplier side, users may check on the status of purchase orders, invoices and payments in real time. These reports can then be exported to a spreadsheet format for further review. 16

19 Case Study Direct Insite Case Study Siemens Global Shared Services Electronic Invoice & Supplier Self Service Management Challenge: Siemens Global Shared Services provides centralized Accounts Payable processing for 54 distinct operating companies servicing over 100,000 suppliers. Initially, Siemens processed 1.2 million paper invoices in 2007 for 26 business units on over 10 different systems. This volume increased to nearly 2.4 million invoices per year by the end of 2011 with the migration of an additional 28 business units. Concurrently, Siemens was dealing with approximately 50,000 supplier inquiries per month requiring a sizeable call center. Siemens challenge was to find an innovative web invoicing and self-service solution to increase the rate of electronic invoicing and decrease supplier inquiries and related call center costs. Solution: Siemens conducted an extensive vendor analysis and selected Direct Insite s Accounts Payable Supplier Self-Service and einvoice Automation Portal. Direct Insite provides a globally hosted suite of web-based Accounts Payable Automation and Procure-to-Pay service modules which are incrementally deployed in a phased strategy. A significant plus was Direct Insite s Supplier Self-Service Portal was already integrated with common ERP platforms such as Oracle and. is the Accounts Payable ERP environment of Siemens. Direct Insite s einvoice and AP Automation service is important for supplier invoice processing and self-service invoice/payment status lookup. With over 2 million invoices per year, we needed a solution provider who would work closely with our suppliers to adopt electronic invoicing and reduce paper invoice handling, said David Hester, Vice President of Accounting and Finance for Siemens Shared Services, LLC. Benefits: Following a rapid 90 day deployment by Direct Insite, Siemens suppliers aggressively adopted the supplier portal. Within six months from going live Siemens achieved a 40% decrease in supplier inquiry rate. Why? Suppliers gained self-service visibility into their invoice and payment remittance information 7x24x365 days per year. Suppliers are also able to download their invoice/payment data and submit electronic inquiries online. Direct Insite automatically transmits and updates online self-service inquiries to Siemens centralized CRM, Remedy. Following the Phase 1 rollout, Siemens set a Phase 2 goal of achieving 80% paperless invoicing through Direct Insite s electronic invoicing service. Direct Insite s supplier on-boarding and enablement services promoted awareness and training to Siemens 60,000 suppliers with the goal of converting manual paper invoices to one of many forms of electronic invoice submission. 17

20 Case Study Suppliers invoicing Siemens 50+ operating companies can submit electronic invoices through 1) web form entry, 2) copying a purchase order into an electronic invoice or 3) uploading invoice data from a spreadsheet. Suppliers can also submit electronic invoices directly from their billing system through EDI and XML industry standard formats. Direct Insite further provides rules-driven invoice validation ensuring invoices are 100% compliant with purchase orders prior to posting to the ERP. Best Practice Supplier Adoption Strategies: Siemens and Direct Insite implemented a multi-pronged best practice supplier e-invoice adoption strategy which included: Multiple webinar sessions to Suppliers as well as Siemens Procurement and Accounts Payable staff Targeted e-invoice submission messaging within Purchase Orders Electronic invoice submission within procurement contracts Phone, Fax and -based awareness campaigns to targeted suppliers Currently, Siemens processes more than 75% of invoices electronically and nearly 65% of all invoices process in a touch-less manner -- requiring no AP Department intervention. 18

21 Selecting a Solution Selecting a Solution While the benefits of e-payables are well documented, getting maximum benefit from your automation initiative requires selecting a vendor that is a good fit for your organization. A thorough, critical analysis of the various technology solutions and the functionality they offer in light of your organization s business needs is essential. To help you with your due diligence, this section outlines the questions you should ask. Questions to Ask a Solution Provider In addition to the features of the solutions offered, it is critical to gauge each vendor s level of expertise and product scope. Along those lines you will want to find out if payables automation is a core application or a peripheral product. You also need to understand the growth plans and vision for the future of the vendors you evaluate. Asking the following questions will help you make an informed decision: Company Overview How long has the vendor been in business? When did they begin offering payables automation solutions? How long have they been working in an environment? How tightly does their solution integrate with? How many customers does the company have and who are they? What is their experience in your industry? How is the vendor funded? If it is a public company, read their prospectus. How does the company intend to grow, and are there any mergers or acquisitions on the horizon? Solution Scope How does the solution integrate with? What is the level of certification for the solution? What features of does the solution use, and what features does it replace? How does the vendor handle integration with multiple instances of? What if they are not all the same version? Can the vendor also integrate with other ERP solutions in addition to? Does the solution provider partner with any other vendors to provide elements of their overall solution? How does the solution integrate with and other financial systems to post approved transactions? What security measures are incorporated in the solution? Is the solution provider including any additional features and functionality in forthcoming versions of the solution? How long is the average implementation? What are the main factors that define the length of your implementations? 19

22 Solution Overview What level of customer support is provided after implementation? Solution Overview How does the solution accept invoices and other transaction documents into the system? Does it provide for distributed capture? How are paper documents converted to digital formats? How is scanning performed? What invoice formats or data standards (EDIFACT, ANSI, XML) is the solution able to capture and process electronically? What OCR, ICR or IDR functionality is available? Is it template based or free form? What accuracy rates are attained? How is validation and indexing handled? Can the user configure the business rules for validation? How does the solution handle storage and archival functions for captured images and data? What search and retrieval capabilities are offered? What payables workflow features are available as part of the solution? Are automated escalation, reminder, alerts and back-up chain features included? How does it route tasks to internal approvers and reviewers? What options do administrators have to control individual user access rights? Does the solution have the flexibility to support the customer s existing organizational structure, role hierarchies, and business rules? Does the solution deliver a shared supplier network or portal where suppliers can submit invoices? If so, how many suppliers are currently enrolled and active on the network and is there any concentration of suppliers to your industry? How does the system notify suppliers of exceptions? Does it force them to correct any exceptions? How? How are paper receipts submitted for expense reporting? What control is there from mail receipt to delivery to AP? Are paper receipts matched to credit card downloads? Does the solution include a reporting module? How many standard reports are available? What reports are bundled with the solution? Can users generate custom reports and save the queries for later use? Can data from the solution be downloaded into third-party reporting tools for further analysis? What out-of-the-box payables-related metrics/kpi s does the solution provide? Does the system provide comprehensive audit trails? What tools/features are available to facilitate Sarbanes-Oxley compliance? 20

23 Final Thoughts Final Thoughts The AP automation landscape, particularly in regard to touch-less processing is constantly evolving. At the same time, this technology has reached maturity within the ERP environment. We believe the following factors will continue to shape this marketplace, and organizations contemplating an invoice automation solution within an environment will need to take them into account: The convergence of electronic invoicing and front-end imaging facilitates touch-less AP processing. Electronic invoicing solutions were explicitly designed to facilitate external buyer-supplier interactions, while imaging and workflow automation solutions evolved to meet organizations internal needs around invoice receipt and management. Over the last several years, we have seen a convergence in this market with both types of providers partnering or developing functionality to offer comprehensive solutions covering both paper and electronic invoices and incorporating better options for invoice receipt, approval processing, and discrepancy resolution. Organizations are increasingly seeking straight-through-processing solutions. Organizations are seeking to leverage their ERP systems so that the AP staff and approvers can focus on more value-added tasks than reviewing invoices. Demand is increasing for solutions that facilitate STP by delivering strong functionality around automated invoice matching and automatic approval of clean invoices as well as strong functionality around approval workflow to manage exceptions and dispute resolution in a collaborative manner. Advanced data capture will be a catalyst for adoption. Solutions that rely on template based OCR to find and extract data from invoices have experienced mixed success. OCR templates are sufficient for an AP department that receives invoices in just a handful of formats, but are inadequate for high volume operations or global organizations that see a myriad of formats every day. As a result, the application of OCR for data extraction has been limited in AP environments. However, recent strides in advanced data capture technologies such as ICR and IDR and the emergence of industrial strength solutions that can extract data accurately without having to rely on templates are the key drivers that are unlocking adoption of front-end imaging and data extraction solutions, which are critical to achieving touch-less processing in an environment. AP automation is impacting working capital management. Until recently, automation efforts in AP were focused on the operational benefits of technology. Increasingly, savvy finance managers are considering the strategic impact of AP automation on the financial supply chain and the working capital improvements it can deliver within an environment. Innovative solutions are emerging to meet organizations strategic objectives by offering solutions that unlock significant value from the financial supply chain through advanced features like vendor self-service, supplier on-boarding and dynamic settlement. Multiple solution models will co-exist. There is not a single model for an AP automation solution for users. Solutions range from operating completely within to integrating so tightly with that users cannot tell 21

24 8 Building Blocks whether they are working in or the bolt-on solution to integrated solutions that provide their own distinct user interface. There is also considerable variability in terms of solution focus. Some vendors focus tightly on specific aspects of the invoice receipt-to-pay cycle, while others strive to provide AP automation functionality as part of a larger procure-to-pay offering. Industry consolidation notwithstanding, this diversity will continue. 8 Building Blocks of P2P Automation Figure 7 THE EIGHT BUILDING BLOCKS OF INVOICE AUTOMATION Invoice automation starts with a vision of touch-less AP processing and requires extensive insight and planning. 22

25 PayStream Advisors About PayStream Advisors, Inc. PayStream Advisors is a technology research and consulting firm that improves the way companies plan, evaluate, and select emerging technologies to achieve their business objectives. PayStream Advisors assists clients in sorting through the growing complexities of IT applications related to business process automation with the goal of making objective, analytical, and actionable recommendations. Wherever business process automation technology is an issue, PayStream Advisors is there to help. For more information, call (704) or visit us on the Web at About the Lead Analyst An industry analyst and receivables management thought leader, David Schmidt has served as a senior analyst with PayStream Advisors since Prior to that he spent over 25 years working in corporate finance and consulting. David is co-author of the seminal text on automating collections, "Power Collecting: Automation for Effective Asset Management," (1998, John Wiley & Sons, NYC), and has publishes over 250 articles in a variety of trade and business publications primarily on receivables and payables management topics. An experienced workshop leader, he has also served as the lead analyst for several PayStream Advisors reports and white papers covering receivables automation, collection technologies, workflow, imaging, and EIPP as well as sales tax and freight bill automation. Online Resources Free Reports Software Directory Technology Solution Profiles End-User Case Studies Advisory Services Assess your current state Develop your business case Create and manage your RFP Review and select the perfect vendor Search for Accounts Payable Solutions SEARCH BY FUNCTION: Business Process Management Business Process Outsourcing Dynamic Payables Discounting E-Procurement Supply Chain Management Enterprise Content Management Imaging/Workflow/Document Mgmt. Purchasing Card (P-Card) Recovery Audit Services/Solutions Supplier Electronic Payments Contract Management/Payment Review Free, Online Service. It s built upon PayStream s proven, in-depth research. Receive a CUSTOM Buyer s Guide packed with industry trends, selection tips, and in-depth solution profiles of qualified vendors. 23