w h i t e pa p e r Automated invoice processing and approval workflow for any financial system. This whitepaper describes benefits and best practices when automating invoice processing. Author: ReadSoft AB Copyright 2007 ReadSoft - www.readsoft.com
Page 2 Table of contents 1 Introduction 3 2 The problems 4 2.1 The company is losing money 4 2.2 The company is wasting time 4 2.3 The company s AP department is inefficient 4 3 The solution 5 3.2 INVOICES 5 3.3 APPROVe 6 3.3 Ensuring a smooth IT project 8 4 Return on investment 9 4.1 What do I need to invest? 9 4.2 What benefits can I expect? 9 5 User testimonials 10 6 About ReadSoft 11
Page 3 1 Introduction How much does an invoice cost you? Today, most companies have some kind of financial system to handle financial flows and other business critical information. But when it comes to handling invoices, processes are often painstakingly manual. Invoices are manually fed into computers and then passed around in the company, sometimes even as paper copies, for approval and allocation. But this tedious and time-consuming way of working can be rationalized using a technology called Document Automation. This means that information from invoices is automatically extracted, no matter if the invoices are on paper or in electronic format. The extracted information is then interchanged and verified against a financial system, and the invoices passed around for approval in an electronic workflow, creating a highly automated document flow. Document Automation speeds up accounts payable processes, allowing for faster financial statements and fewer late payment fees. And this is no small matter. According to a survey by the Institute of Management Administration (IOMA), 25 percent of all invoices are paid late, often incurring penalty fees or at the very least eliminating a company s chance of receiving early-payment discounts. In other words, Document Automation can add to a company s bottom line from day one. But although savings in time and money are important, user testimonials usually reveal that the most appreciated effects are better business processes and increased control. This whitepaper explains how to automate the AP process, and what type of investments and benefits can be expected.
Page 4 2 The problems Processing invoices manually is expensive and time consuming, There are numerous studies on how much it costs a company to pay a single invoice with manual processes. Most studies show that the cost per invoice is somewhere between $15 to $50 depending on the complexity of the process. At the very least, the invoice must be keyed into some kind of financial system, sent for validation and approval, and then posted for payment. These are all processes that can be automated. Automating the invoice process generally produces savings of 25-50%. According to a report called Leading an Accounts Payable Extreme Makeover from the Aberdeen Analyst Group, the average cost for processing an invoice is down from $34.8 to $12.51 with electronic invoice processing. When using manual processes, many organizations report the following problems: 2.1 The company is losing money The cost of processing each invoice is too high. Recurring late payment penalties. Early payment discounts are missed. 2.2 The company is wasting time Staff spend a lot of time chasing information. Bottlenecks occur whenever people are out of the office. 2.3 The company s AP department is inefficient Paper-pushing is frustrating and time-consuming. Problems arise when invoices arrive in different formats (paper, email, XML, fax, etc.) Staff spend too much time on simple and repetitive tasks instead of more skilled efforts like researching invoice discrepancies and process improvement.
Page 5 3 The solution: ReadSoft DOCUMENTS for Invoices ReadSoft has worked with invoice automation since the mid 1990ies and can be said to be the pioneer in the field. The business solution ReadSoft DOCUMENTS for Invoices follows the invoice through its entire lifecycle, from arrival to payment posting. The solution includes both software and services such as customization and support. The solution consists of two main products: ReadSoft s INVOICES software automatically captures information from invoices. INVOICES can be seamlessly integrated with most financial systems on the market so invoice information can be automatically matched against a purchase order. ReadSoft s APPROVE software which is an electronic workflow for invoice approval and coding/allocation. 3.1 INVOICES ReadSoft s INVOICES software extracts information from incoming invoices, regardless of their source. Paper invoices are placed in a scanner and are converted to electronic images from which informaton can be extracted. Electronic invoices (PDF, XML, web, fax, etc.) are even easier to interpret. INVOICES has extracted information and line items from an invoice. This information is now ready to be matched and validated against a purchase order in your financial system.
automated invoice processing and approval workfl ow for any fi nancial system. page 6 By eliminating physical handling of paper (printing, copying, paper and postage/courier services and typing of ap data), most users see a productivity increase of 25% to 50%. INVOICES can be integrated against most financial system on the market. Some examples include SAP, Oracle E-Business Suite, Microsoft Dynamics, JD Edwards, Lawson, and several custom-built financial systems. This integration allows INVOICES to auomatically match the information from the invoices against data in the financial system, for example a purchase order. If there is a complete match between the invoice and the data in the financial system, the invoice is automatically posted for payment. If there are discrepancies between the PO and the invoice, or if it is a non-po invoice, it will be routed for manual approval and posting in APPROVE. Reduce administrative costs and error rates By eliminating manual keying, data entry will be faster, less expensive and more accurate. The automatic matching of AP data really speeds up the process. Since the solution is scalable, there is less need for overtime and extra personnel during peak periods (such as the end of a quarter or financial year). 3.2 approve ReadSoft s APPROVE software will provide you with an electronic approval workflow where staff can approve invoices wherever they are through a simpleto-use web interface. When an invoice has arrived, the responsible person gets an email (using his regular email system.) The email contains a link which takes him to to an APPROVE intranet page where he can allocate the invoice. This is what the user sees when getting an invoice in APPROVE. Users can see both the image of the invoice and all the extracted data (including supplier name, invoice number, invoice amount, and line items). readsoft - white paper 2007
Page 7 As mentioned earlier, PO invoices can be automatically posted for payment if there is a 100% match with the purchase order. If there are discrepancies or if it is a non-po invoice, it will be sent to a user who releases the invoice for payment or rejects the invoice and suggests what needs to be done before it can be paid. The invoice flow through a company The invoices can arrive in any format (paper, email, PDF, fax, XML...) INVOICES automatically extracts the correct information from them. APPROVE makes it possible to carry out highly automated price and quantity controls using data in the financial system. Users can allocate and authorize the invoices before they return to the financial department for payment control. Better control and supplier relations means potential savings Tighter cost control is achieved since you get a complete audit trail of all your invoices. You can see what has happened to the invoices at every step of the process, (who did what and when, and any steps pending). The improved overview will help you comply with financial legislation such as the Sarbanes Oxley Act and Euro- SOX. An electronic workflow is much faster than manual handling, especially if users are sitting in different locations and time zones. Faster processing times will decrease late payment penalties and allow you to negotiate early-payment discounts. And if you have a lot of suppliers, this is no small matter. Quick and easy access to financial and administrative metrics will enable management to make better decisions based on the latest information.
Page 8 3.3 Ensuring a smooth IT-project Big IT-projects are always a little intimidating. Costs and deadlines may be hard to keep and projects can become very expensive if they are not prepared and handled correctly. But if they are, the benefits can be substantial. As with any IT-project, it is therefore crucial to pick the right supplier when implementing invoice automation a company with extensive experience in both invoice processing and AP processes. At the end of the day, it is always the people that make the difference. ReadSoft is the most trusted supplier of invoice processing in the world. With more than 2000 installations, ReadSoft has more users than the rest of the market combined. Over the years, we have made thousands of integrations to different business systems such as SAP, Oracle E-Business Suite, Microsoft Dynamics, JD Edwards, Lawson, and several custom-built financial systems. With a well-proven project process, including pre-study, project planning and project implementation, you will be guided all the way through the project.
Page 9 4 Return on investment 4.1 What are the investments? Different companies have different needs and pricing varies greatly depending on how many invoices you process and how your financial system is set up. This also affects how long the implementation project takes. Generally, an AP Automation projects take somewhere between one and six months to implement. After working closely with large and medium-sized companies in several countries, we can safely say that the return on investment is usually around one year. 4.2 What benefits can I expect? There are numerous benefits with automated invoice processing. Below are some that we often hear from our clients: Improved control of cash flow and invoices Companies gain time and money when implementing solutions for invoice automation, but improved control over the whole AP process is often cited as the greatest benefit.. Increased control of delivered and invoiced goods This means more accurate information to base decisions on. It also reduces the risk of paying fraudulent invoices. Compliance with legislation Compliance with legislation such as the Sarbanes Oxley Act (SOX) is becoming increasingly important. Document Automation helps achieve this compliance. Decreased manual work Since processes are automated, staff can focus on more rewarding tasks such as process evaluations and follow-ups. Shorter total processing time This allows companies to take advantage of early-payment discounts, and more importantly, reduce late payment fees. Decreased costs for invoice handling There have been several studies on how much it costs to process an invoice manually vs. automatically. Although the results differ, the difference is always surprisingly large. The Aberdeen Group writes: the average cost of $34.8, is down to $12.51 with electronic invoice processing. Early notification of errors Invoice automtion gives the AP department more time for research and problem solving.
Page 10 5 User testimonials In all, we have lowered our invoice handling costs by 40-50%. Staffan Wennberg, Financial Director, Telia Ekonomiservice, Sweden. This technology is truly a part of the future. Lutz Meschke, Financial Manager, Porsche, Germany We have had two objectives: to reduce costs and to automate the process of our supplier invoices. After a few months of using INVOICES, we can see that both objectives has been successfully achieved Jessica Persson, Responsible for the Accounts Payable Department, Ericsson, Spain. It s a very smart solution! ReadSoft has been able to solve all our specific needs. Anders Svensson, Invoice Services Administration Manager, IKEA, Sweden. We are impressed by the benefits of ReadSoft s product. Phil Wilks, Group Systems Business Controller, MJ Gleeson UK. Time can now be spent on more specialized tasks Georg Haken, Head of the invoicing department, Emons Spedition GmbH, Germany We are very pleased with the result and I feel that I can recommend INVOIC- ES to other finance companies. INVOICES is simply outstanding! Anders Lartelius, responsible for factoring projects, SEB Finans, Sweden. It has given York the opportunity to improve the process of invoice handling, matching and booking, Torben Hansen, Cash and Risk Manager, York Refrigeration, Denmark. Overlapping tasks can be eliminated, resources can be reduced in repetitive automated processes and be re-oriented in core, front-line activities of the group Danny Lietart, Controller, Borealis, Belgium The efficiency increase, the time savings, the increased security and the lowered personnel costs are the most important effects. Tomas Larsson, Financial Manager, Dahl, Sweden. ReadSoft s technology is far ahead of the competition, which means better interpretation and safer production. Anders Flötra, Production Manager, Nokas, Norway. It is one of the most successful IT-projects we have run Göran Westblom, IT Manager, HSB Housing, Sweden
Page 11 6 About ReadSoft ReadSoft was founded in 1991, and has been the technical innovator of the market ever since. With offices in 16 countries and partners in an additional 70, ReadSoft has the most extensive support network in the business. Today, more than 4500 customers use ReadSoft s software to automate their document processing. ReadSoft s customers come from all over the world and all lines of business telecommunications, finance, mail order, insurance, market research, aviation, banking and many more. Some organizations have been able to cut down on their document processing costs by as much as 50%. ReadSoft DOCUMENTS for Invoices is the most widely used software for invoice processing in the world. With more than 2000 installations, ReadSoft has more users than the rest of the market combined.