Maximize return on investment with supplier invoice automation

Transcription

1 Viewpoint paper Maximize return on investment with supplier invoice automation Transform the procure-to-pay process

2 Table of contents 1 Streamline the P2P process 1 Automate supplier invoicing 3 Automate process flow 4 Automated P2P capabilities 4 Benefits of invoice automation 5 Leverage our experience 5 Automate P2P; realize the benefits 6 About the author

3 Streamline the P2P process As organizations seek to further streamline their procure-to-pay (P2P) processes and also improve the management of their working capital, many are now investigating invoice automation for the first time or returning to evaluate its requirements and benefits. In today s business environment, there certainly is room for automation-related improvement in the processing of business-tobusiness (B2B) invoices. For example, at the end of 2010, 89 percent of B2B invoices distributed within Europe were still submitted in hard-copy paper form. Most executives intuitively know that a positive business case can be made for invoice automation. They understand that automation yields increased productivity, efficiency, and greater visibility, but few organizations have aggressively pursued this potential improvement. Instead, many have focused on harmonizing enterprise resource planning (ERP) systems and implementing shared service centers. And, until recently, there have been significant barriers, real and perceived, to implementing invoice automation. From a strict return on investment (ROI) perspective, there have been legitimate concerns about the ramp-up time and high onetime investment requirements particularly for organizations that attempted to create and operate their own automated in-house invoicing solution. Labor costs also have been viewed as a concern, with many analysts seeing insufficient staffing-related savings. This is particularly true in global shared services environments, where technical issues might require additional high-cost IT attention rather than low-cost staff in paper processes. Invoice automation does present a number of substantial technical challenges, including the need for greater connectivity and robustness, improved security, and the scalability needed to handle high volumes of electronic documentation. Enterprises will need to manage technical- and process-oriented invoice fall-outs, including line item mismatches, discrepancies in purchase orders, vendor code mismatches, and tax code variations. It is also unlikely that electronic invoice delivery will be viable for the entire supplier population. This will lead to a split in processes for paper and electronic invoices, which adds to the process complexity and can create additional difficulties. In addition to system challenges, many suppliers have been less than ready to embrace the electronic means of sending invoices despite partners requiring invoice automation. enrollment has lagged despite the high-level economic advantages of automated invoicing which offers up to an 80 percent savings when compared to the production, delivery, and archiving cost of paper-based processes and systems. The clear challenge for suppliers is to react to their individual customer requirements in terms of invoice automation technology. This can lead to different connections to the customers solutions and different e-invoicing networks or electronic data interchange (EDI) value-added networks, all of which increase invoice delivery cost and decrease the overall business value of electronic invoicing. Government regulations from differing rules across countries to the reluctance of national tax authorities to adopt new technologies and agree on standards have also hindered the extensive deployment of automated invoice processes. This issue continues to be most challenging in Latin America and Asia Pacific regions. In Europe, there is now much more clarity on this subject but there still remains a few localized complexities especially in Eastern Europe. On the whole, however, times are changing. The reality is, P2P automation is a maturing technology. It is seen as a logical and increasingly accepted option for a broad range of organizations in an increasingly global framework. Invoice automation solutions available from e-invoicing network providers are now able to show e-invoice compliance for all of North America and the vast majority of European countries. They also are slowly adding capabilities in key Asia Pacific countries and Latin America regions. At the same time, some of the larger, more experienced network providers have been able to leverage years of best-practice lessons to create new-generation tools and technologies. And, more importantly, they are developing the crucial methodologies needed to govern the complex task of supplier enrollment. Previous concerns about interoperability largely have been addressed by some of the larger network providers, providing improved connectivity for suppliers with the emergence of one-tomany networking. Improved integrated invoice automation technology also has alleviated some of the problems associated with system implementation. These include the management of fall-outs and approvals, value-added tax coding, and integration between invoice automation suppliers and ERP systems. More standardized compliance requirements, including more consistent rules on tax and signature information, have brought greater clarity to the regulatory issues surrounding invoice automation. An example of this is the European Community directives on the rules governing archiving and invoice receipts. To take advantage of the more favorable environment that now exists for invoice automation, to maximize ROI, and ensure automation success, companies need to develop formal structured program management and ensure disciplined processes. Automate supplier invoicing Organizations require a specific approach when looking to automate their supplier invoice process. This approach should combine bestpractice processes, selected technologies, and best-of-breed solutions from a range of sources to successfully automate this crucial finance activity. A successful invoice automation program should incorporate centralized governance, single-source project management, and a formal approach to continuous process improvement. By leveraging this comprehensive approach, organizations can realize the tangible and intangible benefits of invoice automation. Working with a trusted partner enables companies to gain those advantages and focus on core business activities rather than on managing administrative tasks. 1

4 Figure 1. Automated invoice environment Enables HP to process any supplier invoice format, maximizing the levels of automation possible for clients Provides a consistent control mechanism and a single governance process whether invoices are received electronically or physically e-invoicing global network Document & data capture EDI ERS/Self-billing Discrepancy management Document management workflow Program management best-in-class experience Continuous improvement analysis, reporting, KPIs P-card Governance process account management To enable invoice automation, the key starting point is electronic data receipt or data translation from paper into electronic format. Program management, continuous improvement, and governance are the keys to the success of the process. Figure 1 shows the automated invoice environment. Handling any invoice format By using the best available technologies and partner capabilities, finance departments are able to receive invoices in a full range of tax-compliant electronic formats. This increases the likelihood of suppliers complying with organizations. Broad capabilities enable organizations to reduce invoice-related errors and inefficiencies, to drive automation and reduce paper use, and accelerate the entire invoice management process. Invoicing formats may include: EDI These are delivered through advanced business exchange, B2B hub technologies. Evaluated receipt settlement (ERS)/self-billing P2P process eliminates supplier invoice from payment matching requirement. e-invoicing Sophisticated global networks now provide e-invoice creation and delivery, purchase order validation, line item matching, and other value-added capabilities. Data capture Modern document processing services use optical character recognition (OCR) systems to automatically capture information from paper-based or PDF invoices. P-cards Payment or purchasing cards (P-cards) are enterprise charge cards that can be used to procure goods and services without using traditional purchasing processes. P-cards eliminate the need for paper-based documentation, increasing automation and process efficiency. Successful program management Successfully implementing an invoice automation program requires more than compliant technology solutions. Finance groups must also have a clear plan to ensure their suppliers convert to and correctly use electronic invoice submission methods. By employing best-practice methodologies, organizations can maximize the number of suppliers enrolled in electronic invoice receipt mechanisms. Achieving this level of participation requires close coordination with service providers. It also demands a high level of buy-in by key stakeholders within the organization, including finance, treasury, and procurement. To ensure optimum success of an automated invoicing effort, HP recommends the following program management approach: Stakeholder management Gaining buy-in is a crucial first step in any invoice automation effort. To ensure the highest possible level of supplier enrollment, the effort must include clear internal and external communications regarding instructions, changes to processes, and timeframes. enrollment Direct written and oral communications with suppliers are intended to motivate them and manage the process of on-boarding them into an invoice automation system. Written communications alone are not enough for the majority of suppliers to make a key change in terms of how they deliver invoices to a customer. 2

5 Figure 2. Invoice automation process flow Invoice automation process flow e-invoice service provider e-invoice service provider e-invoice networkingselect roaming e-invoice data Paper invoice/ OB10 e-invoice service provider network File & image Firewall/ Server Firewall/ Server Data capture OCR PERFECT FLOW Document management system workflow-autopost Approval process, document management, PO matching HP BPO AP operations fall-out management Client ERP HP BPO-programme management & service provider account management EDI, ERS, P-card-data HP B2B Gateway-BES Firewall/ Server EDI Project management By accessing a turnkey invoice automation solution, organizations can gain a wide range of benefits. A single-source service partner can manage project setup, supplier communications, and coordination. They can integrate differing electronic data receipt technologies, and, at the same time, provide a central point of responsibility for all invoices, regardless of the mechanism by which suppliers provide the invoice. A single-point account management structure also supports a more workable, standardized governance model that eliminates the need for organizations to manage a diverse range of service providers. Operations In addition to ensuring high levels of supplier enrollment, a successful invoice automation solution should also measure the various levels of automation gained from differing invoice mechanisms. A robust solution should include documentation, control, reporting, and continuous improvement services designed to maximize efficiency and ROI. Managing the process Close attention should be paid to two key aspects of invoice automation that become part of a company s internal processes after electronic invoice data has been received: fall-out management and the need for ongoing review of newly automated processes. Fall-out management Invoices that fall out of the automated flow must be addressed in a timely and orderly way. This is similar to how fall-outs are handled in a traditional paper-based system. A formal system is needed to monitor, report, handle, and minimize fall-outs and should be an integral component in any invoice automation project. Ongoing automation review To pursue continuous improvement in the invoice automation effort, the program should incorporate a formal, controlled review process. The review regimen should examine all transaction types to control and reduce fall-outs, increase automation levels, and maximize efficiency and service levels. Automate process flow A well-planned and correctly implemented invoice automation project gives organizations the flexibility of choosing the best receipt mechanism to meet their needs and the needs of each of their suppliers. Ideally, the individual processes should be set up independently, but all should be governed by a centralized program and reported through an integrated management dashboard. The best of today s invoice automation solutions can be implemented using electronic invoicing workflow and document management technologies or deployed with the organization s workflow systems. Figure 2 depicts an invoice automation process flow. 3

6 Linking suppliers To forge direct EDI links for supplier self-billing capabilities, finance organizations can now access sophisticated B2B-oriented business exchange systems. These hosted exchange services provide comprehensive integration and automated trading partner processes to companies across the globe. By leveraging a global exchange, finance units can gain EDI and ERS capabilities without the cost and complexity of deploying and operating their own B2B infrastructure. Deploying payment cards Finance groups can give their organizations greater speed and agility through the planned deployment of payment or P-cards. When evaluating potential P-card support services, organizations should consider a range of variables, including: Strategic consulting capabilities, including ghost card process services and close integration with credit card partners Program management in collaboration with credit card providers Support for supplier enablement Administration and policy adherence controls P-card processing and receipts reconciliations Best-practice process methodology Because P-cards are critical to invoice automation, they must be integrated with other payment methods and have clear policy guidelines for their use. Creating global capabilities Many of today s finance organizations operate on a global basis and require invoice automation solutions to match their extended business reach. A robust automation approach leverages taxcompliant invoice-automation delivery centers in key markets around the world. Proven solutions are now available to meet a broad spectrum of needs, including: Tax-compliant solutions custom-tailored to regional or countryspecific requirements Clear and precise volume, budget, and invoice category expectations Workflow, ERP, and process solutions designed for unique organizational or partner requirements Flexible models to meet various business case strategies Automated P2P capabilities By accessing today s largest global automated service networks, finance organizations can leverage integrated inbound invoicing and invoice processing solutions. s can invoice through this established network, using select roaming interconnections with best-in-class invoice automation service providers. Enterprises can gain the maximum automation and efficiency from an electronic invoicing environment by partnering with a single, experienced service provider. When selecting an automated invoicing solution, firms should look for a partner capable of providing: Automated invoice creation and delivery Either directly on their own workflow or ERP system, or through their vendor s AP workflow system PO services Including PO flip, PO creation/delivery, and upfront invoice-to-po validation to improve data quality and reduce rework e-archiving Enabling electronic invoices with digital signatures to be archived in a secure, compliant storage system Web-based self-service portal Where firms can quickly and easily access up-to-the-moment invoice tracking and status information invoice financing Offers suppliers the option of working with a global banking institution to finance the early receipt of invoices before payment terms Dynamic discounting Enables buyers to make an early discounted payment dynamically per supplier or per invoice and overriding established payment terms to optimize working capital Benefits of invoice automation Throughout the entire P2P process, all key stakeholders including procurement, finance, and treasury can realize significant tangible and intangible benefits from invoice automation. Measurable advantages to organizations employing invoice automation within their P2P process include: Cost savings through automated invoice processing and decreased levels of query resolution Additional savings from elimination of mailing costs and paper archiving Increased process efficiencies and process quality Improved business controls and process transparency Improved on-time payment and increased potential to use early payment discounts Enhanced cash management through invoices received and booked earlier, enabling better payment planning and decreased need for costly urgent payments Enhanced business intelligence with critical data points available to facilitate other key organizational projects, such as moves to increase coverage of PO use or establishing approved suppliers Environmental savings 4

7 Leverage our experience HP views invoice automation as the key transformational element within the P2P process. Such programs add value to clients by transforming their processes, making them more efficient and cost-effective. The Finance and Administration Services invoice automation program is a dedicated solution combining technologies and processes to leverage HP s experience in this area. The solution ensures clients achieve considerable tangible and intangible benefits when successfully employing invoice automation. Invoice automation program capabilities should include: Any type of invoice receipt technology EDI and evaluated receipt settlement (ERS) capabilities via HP proprietary B2B hub Business Exchange Services E-Invoices, PO flip, and e-invoicing network through OB10 partnership Paper and data capture P-cards Additional value-add services in invoice automation E-archiving PO validation validation and rejection/flagging of invoice data against PO data as governed by business rules Self-service vendor portal invoice status and payment remittance Dynamic discounting Automate P2P; realize the benefits Automation is the logical strategy for handling supplier invoices and payments. The real question is how to implement such a strategy, ensuring ROI and full value-add benefits while avoiding the potential of a fragmented process and the many other potential pitfalls of this complex process. Organizations of all kinds can realize measurable performance, visibility, and ROI benefits by automating their crucial P2P process. Advances in tools and outsourced capabilities have dramatically reduced the cost and complexity of invoice automation. By applying best-in-class technologies and by collaborating with today s most advanced network service partners enterprises can provide their suppliers with a variety of options that enable automation in back-end processes. By leveraging a program approach to continuously monitor, analyze, resolve, and take preventative action to minimize fall-outs in the process, companies around the world are successfully transforming their P2P process and maximizing the full range of benefits from successful invoice automation. Program management best practice methodology Stakeholder communications and influence Project management, including supplier enrollment Ongoing process improvement and fall-out management One stop account management The key strengths of HP s invoice automation program all the necessary technologies, as well as program and process management are all under one roof through central governance. All invoices, regardless of how they were received, are monitored, controlled, reported, and subject to necessary improvement actions. A singlepoint account management structure also supports a more workable, standardized governance model, which eliminates the need for organizations to manage a diverse range of service providers. 5

8 About the author Peter Downie Peter Downie is an economics graduate who works in the HP Business Center in Spain. He has 12 years of experience in shared services and business process outsourcing, specifically in the areas of order-to-cash and P2P. Downie has been responsible for many successful invoice automation projects, for internal HP businesses, and external BPO clients. He shares his best-practice knowledge in webinars, at conferences, and through white papers. Get connected hp.com/go/getconnected Get the insider view on tech trends, support alerts, and HP solutions Share with colleagues Copyright Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein. 4AA3-6732ENW, Created September 2011; Updated July 2012, Rev. 1