Invoice Processing Automation

Transcription

1 Introduction to Invoice Processing Automation CFO s are searching for visibility into near term payables. Is Accounts Payable automation the answer?

2 Technology has transformed the way people process invoices. Ten years ago, companies received paper invoices, sent them to the field for approval, coded and entered the invoices, and called department heads and key suppliers to calculate monthly accruals. Today, companies are looking to eliminate invoice data entry, speed approvals, increase visibility into spending and capture early pay discounts. To accomplish these goals, companies are embracing a variety of invoice processing technologies*: Capture: Data Entry OCR Approval: Approval Workflow PO Flip Communication: * Definitions available on next page. EDI/cXML Supplier Network Supplier Portal

3 Helpful Definitions Invoice Processing Technologies 1. Key From Image Capturing invoice information for data entry using scanned images of invoices rather than keying invoices from paper. 2. OCR Optical character recognition technology that extracts specific data from invoices such as invoice number, vendor name, or amount payable. 3. Approval Workflow Automatically routing a document such as an invoice to a designated group of people for approval. 4. PO Flip Sending an approved purchase order electronically to a vendor who then flips the PO into an electronic invoice back to the buyer. 5. EDI Electronic data interchange between computer systems used to transmit invoices electronically. 6. cxml A machine readable messaging standard similar to XML that is used to electronically communicate invoice information. 7. Supplier Network A buyer sponsored network leveraging 3 rd party technology exclusively for invoice processing communication with preferred suppliers. 8. Supplier Portal An extranet resource utilized for secure invoicing communication between buyers and their suppliers and business partners.

4 Part I: Paper vs. Electronic A. The Internet has changed the way we communicate. Rather than relying on paperbased interactions that can take days or even weeks, we can now collaborate much more quickly in real time using and other Web based tools. B. Paper based invoice processing contributes to poor visibility. Think about it. AP waits for invoices to arrive, approvers wait for invoices to be coded, clerks wait for approvals to return, and vendors wait for payment. Paper based cycle times can take forever. It s no wonder monthly accruals are hard to accurately calculate. C. Manual data entry is expensive. Based on your monthly invoice volume, high staff overhead for manual data entry drives the cost of invoice processing through the roof. D. Electronic invoices can remedy these problems. Organizations that shift to electronic invoices can improve visibility, reduce data entry, and trim costs. Paper Invoice Cost: $10.00-$15.00 Electronic Invoice Cost: $5.00 or less

5 Part II: Reducing Data Capture and Indexing Costs Most AP departments spend 50% of their time entering invoices into their system. Electronic Invoices Are Best There are two kinds of suppliers tech savvy or not. Tech savvy suppliers will be familiar with EDI, cxml, punch outs, supplier networks and supplier portals. Non tech savvy suppliers will consider fax, and PDF to be electronic invoices and have little IT infrastructure to adopt electronic invoicing technology. How Do You Decide Which Capture Technology to Use? It depends on your supplier mix. You must go to your GL or AP ledger and identify your total number of vendors, number of invoices processed annually per supplier and your annual spend by supplier. From this data, you can draw some initial conclusions on which suppliers have enough invoice volume to justify electronic invoicing.

6 Developing An Electronic Invoicing Strategy STEP 1: Export all vendors, their annual billings and invoice volume to an Excel spreadsheet for review. STEP 2: Identify suppliers either sending 250 invoices a month or billing high volumes. Approach these suppliers about sending their invoices via EDI, cxml or supplier network/portal. STEP 3: Determine the volume of invoices that will continue being sent paper. STEP 4: Invest in the right mix of scanning, OCR and einvoice technologies to minimize your cost to capture invoice data.

7 Part III: Invoice Coding and Approval Routing What is approval workflow? Approval workflow technology automatically routes a document such as an invoice to a designated group of people for approval. Invoice automation streamlines invoice approval to achieve paperless processing, enhanced visibility, and improved control in Accounts Payable. Streamlined Invoice Coding and Approval STEP 1: Receive and review electronic invoices using EDI, cxml or other technology. STEP 2: Use software tools to ensure invoices are coded correctly based on established rules. STEP 3: Set up workflows enabling you to approve/reject invoices using and smart phones. STEP 4: Set up automated matching and straight through processing for PO invoices and manage by exception only.

8 Part IV: Visibility and Reporting What is accounts payable (AP) visibility? AP visibility describes the finance department s ability to accurately identify the nature and dollar value of all invoices and other liabilities that are due for payment within the next 30 days. Enhanced AP visibility makes it far easier to calculate accurate period end accruals, and it enables better cash management which reduces borrowing costs and provides better investment opportunities. Better Performance with Visibility and Reporting STEP 1: Replace paper invoice approvals with automated invoice workflow to fix root causes of poor visibility. STEP 2: Manage approval cycles by reporting on key metrics. STEP 3: Achieve more accurate accruals and cost allocation. STEP 4: Provide executives visibility into near term payables for better cash management.

9 Part V: Educational Resources Verian Blog ( Useful articles and commentary on ways to increase efficiency using automated purchasing and invoice processing systems. Institute of Finance Management IOFM ( Valuable tools, best practices, benchmarks, research and resources that will improve your Accounts Payable process. The Accounts Payable Network TAPN ( A Comprehensive knowledge base for executives and managers who oversee accounts payable. Part VI: Contact Verian Verian P.O. Box Charlotte, NC