Your favorite AP blogger is taking a break !

Hi everyone....thanks for the emails over the past few weeks.  All is good on this end. 

Just wanted to report that I will be refocusing my energies toward a number of dimensions of business process outsourcing (BPO) and offshoring, and therefore taking a break from my blogging on AP and invoicing initiatives. 

Thanks for all of your support.  I've met some very interesting AP professionals via blogging, and wish you all the best for the future !

Automation reduces AP fraud risk

Really terrific article here from Graham Smith on the subject of how AP Automation can reduce fraud in the AP department.  This is one of those topics many people know about, but don't talk about often. 

Graham's article starts:

"...the elimination of as many human “Touch Points” in the Accounts Payable process and adherence to strict business rules is a critical success factor in the reduction of Accounts payable fraud. In short, the solution to most of today’s current AP fraud risks and processing inefficiencies involve the implementation and proper management of automation tools.  A key issue in regard to most forms of AP fraud is that there are so many opportunities open in the manual process for dishonest employees acting either alone or in collusion with dishonest outsiders to defraud a company. Specifically, in a conventional manual AP function, enforcement of business rules is based on after the fact audits, whereas AP automation offers the opportunity to enforce these rules during the process...."

The article goes on to discuss very specific instances and causes of fraud...a very well-thought-out article for those of us who work towards excellence in the payables process.  Check it out !

Outsourcing vs. Offshoring AP - this just keeps coming up !

I've written in the past on this subject:  What's the difference between outsourcing and offshoring ?  Given how often I get questions or end up in conversation on this, I figured I should refresh this post.  Its in the archives, and can be accessed by clicking here....

Supply Chain Finance - UK vs US

Jason Busch over at SpendMatters has an excellent blog post recently regarding a topic I hear of often in discussions with senior payables and treasury managers:  Supply Chain Finance (SCF).  AP Automation is a foundational item for success in SCF, and hence its interest to me and other blog readers.  In brief, the quicker an organization can accurately process PO and non-PO invoices, the greater the opportunity for SCF can be.

In one of my earlier posts, I discussed SCF in some detail.  That post is here.

In Jason's current post, referenced here, he makes the following points:

• The North American market for SCF is relatively immature
• There are signs that the UK will lead the adoption curve for SCF
• SCF will take on a more important role in the US as companies continue to hoard cash, and as working capital initiatives remain strong.

In the work we do, we see many examples of SCF (as Jason puts it) as "convenient extensions of eProcurement or AP Automation" programs.  Our day to day work squares with his comment.  But we do believe SCF can bring a myriad of opportunity to buyers (AP) and suppliers (AR) once the complexities are sorted out.

Concentra wins Paystream Advisors ePayables Excellence Award for AP Automation

Last month at the 2010 Paystream Advisors Summit, Kurt Ohlenbusch of Concentra received Paystream's ePayables Excellence Award.  More details on the award are posted here.

If you were at the Summit (its a great event, by the way), you had a chance to hear directly from Kurt about how AP Automation has helped Concentra meet their business objectives.

If you weren't, here are the headlines:

AP Automation helped Concentra centralize the invoice approval process across 300+ centers across the US for 50,000 invoices per month.  They went from a paper-intensive to highly-automated AP process, and gained improved visibility to the nature and amount of corporate liabilities among many opportunities.

Below on the left is Kurt Ohlenbusch, AVP of Disbursements at Concentra, and at right is your favorite AP Automation blogger....

Palette signs another manufacturer for AP Automation

Palette, a Swedish provider of AP automation technology to over 750 organizations in 33 countries, announced recently another win in the manufacturing sector on 28 June 2010.

Directly from Palette's website:

Rohde & Schwarz choose to automate their processes with products from Palette. 

Rohde & Schwarz has stood for quality and innovation in test and measurement, broadcasting, secure communications as well as radiomonitoring and radiolocation for more than 75 years. By pursuing this four-pillar strategy, the company addresses customers from various market segments: wireless communications, broadcasting, electronics – as well as government authorities and organizations with security missions. The electronics group, with its headquarters in Munich, Germany, counts among the leading suppliers worldwide in all of its business fields. As a manufacturer of EMC test and measurement equipment as well as terrestrial TV transmitters

Approximately 7400 employees currently generate a net revenue of € 1.2 billion. A service and sales network with subsidiaries and offices in more than 70 countries worldwide helps to ensure that customers always find a Rohde & Schwarz office nearby. Exports make up about 80 percent of company business. Rohde & Schwarz Sweden AB is a subsidiary of the Group and responsible for the entire product line on the Swedish market.

Palette describes themselves as "the market leader in field of electronic processing and matching of supplier invoices. We are proud to be recognized as to having the most automated approach to supplier invoice matching and straight-through-processing".

US Firms step up spending .... higher AP volumes will follow

As reported last week in the WSJ, companies are stepping up spending on capital goods, equipment, machinery and other related products.  The article, here, has an excellent chart showing manufacturers new orders in May.

"We're seeing global commerce expand and as a result we want to be very aggressive in our international expansion," said Alan Graf, chief financial officer at Fedex Corp. "We're back on the offensive."  The WSJ article then goes on to note that they intent to spend over $3B on equipment and facilities, with 2/3 of that for new growth.  3M and Cummins are others noted in the article as spending more this year than last.

Such increased spending translates into more activity in the AP department of these companies, as well as others following the same increased spend patterns.  More spend = more invoices for that spend from the suppliers, thus more activity in corporate AP and in the field who need to approve the PO's and invoices.  And with many US companies having leaned out their AP operation between Q408 until Q409, there are less now AP resources to handle that spend.

Should spend continue to grow, companies will need to look at rehiring AP professionals or investing more heavily in technology that improves throughput and keeps the costs per invoice for processing low.

CFO Magazine announces 2010 Working Capital Scorecard

If you work in the finance and accounting industry, working capital was definitely on your mind in 2009.  If you are unsure of the term, check out my earlier blog posts or click here.  I've been beating the working capital drum for some time, given its critical importance over the past 18 months as corporates have been conserving cash while seeing their access to capital constrained (sometimes very constrained)

Each year, CFO magazine publishes the CFO/REL Working Capital Scorecard, which lays out in very granular detail the working capital metrics and results of the F1000.  It's fascinating data, to see which companies sit in each quartile of performance, and how they have improved (or not) their working capital positions over the past years.  The data is here. 

Working capital itself will remain a critical metric of an organizations financial health going forward.

Record cash on hand - will it accelerate adoption of dynamic discounting ?

As reported in today's Wall Street Journal, as of the end of March, cash made up 7% of all company assets - the highest level since 1963.

Its a fascinating article, here, describing the reasons behind so much cash on hand.

For AP departments (and providers to the AP industry as well), the notion of dynamic discounting was starting to take off, then completely dropped off everyone's radar, when credit markets froze and corporates began conserving cash as best as they could.  This "cash conservation notion" brings us to where we are today - record levels of cash.  But it crippled the thought of dynamic discounting being any sort of actionable initiative in supply chain or AP.

As described in the article, companies are starting to recognize that so much cash on hand depresses shareholder returns.  So while cash conservation will continue, companies also need to deploy that cash appropriately. 

With the favorable returns that a dynamic discounting program can generate, I have to believe this initiative could gain some meaningful traction in 2010.   Thoughts ?

Can you automate invoice processing for a dollar an invoice ?

It depends on a number of factors, including: 

1. How an organization calculates its cost per invoice:  Some organizations see their cost per invoice as the total annual AP budget divided by the total annual number of invoices processed.  This disregards corporate overhead, as well as the costs of work performed in other departments in order to approve and pay invoices.

2. The scope of service required: the costs to open, prep, image and OCR an invoice are lower than those same costs plus an AP Automation application.  Or for those companies who want to automatically match invoices PO's and goods receipts, the scope of service is broader (ie. costlier, given the amount of data to be captured) than for companies who have no PO matching and instead use workflow to approve invoices.

But back to the question.  Yes, it is possible.  And its being done today. 

Zero to AP Automation in 45 days or less...

Most companies would find it hard to believe that they can, in fact, stand up a sophisticated AP Automation service in 45 days or less.  AP Automation projects provide for invoice imaging upon receipt, the capture of relevant invoice data, and the provision of PO-matching and/or approval workflow....all in order to improve corporate visibility to outstanding liabilities, reduce the costs of the P2P cycle, and improve compliance with corporate policies around accrual recognition and approval authority.

But one guy I know - Mike Cichy - has been involved with pulling this off at least 2, perhaps more, times in the last couple of years.

The first time was for a well-known hotel chain in the US who was sold by their foreign parent company and given 60 days to move off that foreign parent company's ERP.  Mike and his colleagues helped the hotel chain scope the AP Automation project and stand it up in approx 45 days.  The vendors chosen for this engagement included BancTec and their AP Master application.

The second example of properly standing up AP Automation in a very short time frame is the subject of a presentation this coming week at IAPP's FUSION 2010 conference.  On Tuesday, Mike will be joined by Laura Williams of GateHouse Media as well as Tim Schmandt of Datrose to discuss a case study entitled "Zero to AP Automation in 45 days or less".  Again, a component of this success story is BancTec's AP Master P2P application.  Let's connect if you want to learn more about this case study, but won't be at FUSION....

Early pay discounts – they’re back !

The Wall Street Journal has recently reported increases in US GDP, home sales, manufacturing output and other key indicators. Obvious signs of an improving economy. From the perspective of Accounts Payable management, we are seeing another sign of improvement: corporates willing and able to take advantage of early pay discounts are on the rise.

Last year, with corporate capital constrained and organizations conserving cash, the notion of taking early pay discounts had all but completely vanished. Almost no AP leader we talked to was talking (out loud anyway) about taking advantage of early pay discounts. But fast forward one year. The topic comes up fairly often at this point – 3 times alone last week. A clear indication that organizations are feeling more confident about their cash flows, their access to capital, or both.

In addition, with investment returns very low, and bank earnings credit rates hardly meaningful, corporates who do feel comfortable with their cash balances are taking early pay discounts since the return easily outpaces these alternatives. AP departments taking early pay discounts – they’re back.

P-Cards and AP optimization

Purchasing cards have been an excellent AP optimization and cost-saving technique for over 10 years - perhaps longer. As a process tool, US corporations have adopted p-cards at an increasing rate, with over 80% of the F500 having a pcard program in place already.

In our practice, we are seeing an increasing complement of p-cards to invoice automation. Both tools reduce cycle times, increase visibility to liabilities, create process improvement, increase control, and reduce administrative costs.

I would be interested in hearing from users who have implemented both pcards and AP automation together....please let me know...

Shared Services & Outsourcing Network (SSON)

Just back from the SSON show in Florida. Excellent event for Shared Services professionals, and certainly for AP professionals given AP is the most frequently included activity in US Shared Service initiatives. Some really thorough and interesting presentations from companies such as Petco, Universal Orlando and many others. For example, at both of those companies, senior leaders walked the audience through their initiatives to improve process and reduce costs in very granular detail. One of them had capital available for their initiatives, the other did not. Both identified and delivered some unique improvements in invoice automation, T/E, pcard, vendor master cleanup, and other AP processes.

next IAPP "virtual" manufacturing chapter meeting - March 16

As many of you know, I co-chair this IAPP virtual chapter for manufacturers with a seasoned pro from Campbells Soup company. This virtual chapter is a great way for AP professionals from manufacturing organizations across the US to collaborate with each other without having to leave their offices.

On March 16 we will be hosting a preso and roundtable discussion on the topic of sales and use tax (presented by Avalara) in the manufacturing industry. If you are a manufacturer and IAPP member, please join us and your fellow manufacturing colleagues for this discussion....

As demand increases, so do invoice processing solutions...

Great article by Mark Brousseau on the IAPP website this month....pasted below...

The economic downturn has many technology companies reeling. But you won’t find providers of invoice scanning solutions complaining. Their business continues to grow at a brisk pace:

• Bob Fresneda, president of ReadSoft North America, said his company has seen no let-up in the number of attendees to its webinars, the prospect calls it receives, or its Web traffic.

• Diversified Information Technologies CEO Scott Byers said his service bureau is seeing more demand for outsourced invoice scanning. “Companies are going paperless as a way to reduce cycle time and cost,” he said, adding that Diversified Information Technologies now provides digital invoice conversion services to roughly 10 percent of its more than 500 customers.

• Jim Bunn, national business development management, for IBML, sees increasing demand for automated invoice processing technology as part of corporate shared services initiatives.

• Paul E. Diegelman, vice president of finance and accounting optimization for BancTec, said, “Although capital remains constrained to many corporate buyers, and many companies are still in cash-conservation mode, the recent broader economic improvements have allowed both ‘lookers’ and ‘buyers’ to get back into the market for AP automation solutions.”

With new technology pushing invoice automation beyond the back office to the front lines of the enterprise, some say invoice automation could experience even faster growth in the future.

The recession as a ‘catalyst’
So why has invoice automation grown so fast at a time when other technologies are limping along?

“Economic conditions in the United States have spawned a ‘cash is king’ philosophy,” said Samuel L. Schrage, president of AnyDoc Software. “This means lengthy manual invoice processing cycles are no longer accepted as unavoidable. Instead, companies are looking to streamline their processes. The positive economic impact of eliminating manual data entry and document processing makes the AP department — traditionally dependent on manual processes and paper — a great fit for automation.”

“Prior to the economic downturn, automating invoice processing was not necessarily top of mind for most CFOs because they were focused on tasks such as compliance,” noted Andrew Pery, chief marketing officer at Kofax. “But when they looked at invoice processing, they discovered that they could achieve short-term gains by taking paper out of the process, and improve compliance in the bargain.” He noted that electronically stored invoices provide more accessibility and better visibility.

Diegelman said cost considerations are driving interest for invoice solutions from “the healthcare, consumer services and manufacturing verticals, with meaningful interest from a number of others.”

“Industries that are subject to substantial regulation and frequent audits are leading the charge for adoption,” said Jim Thumma, vice president of sales and marketing for Optical Image Technology, Inc., pointing to financial services, insurance, and healthcare. “However, as businesses in other industries start searching more earnestly for cost reductions that don’t compromise services to their customers, it’s likely that invoice processing automation will be adopted there as well.”

But there’s another reason the economic downturn has spurred invoice processing automation.

“Everyone is familiar with the ‘lower cost, increase efficiency, do more with less’ pitch, but with the state of the economy in the last 12 months, we’ve seen improved cash management as a key driver,” commented Fresneda. “Being able to accrue all expenses and know when invoices are due allows executives to manage their cash better. It also provides better visibility into outstanding liabilities.”

Bud Viancourt, director of commercial sales for Hyland Software, noted that, “one of the best, and certainly most proven, ways to maximize cash is to better control financial operations.”

“By eliminating manual data entry, accurate data is available much faster, giving companies the ability to approve invoices more quickly and make business decisions more effectively,” said Shrage.

The role of technology
Today’s leading invoice processing solutions rely on a combination of optical character recognition (OCR) engines to maximize data capture; are easier to customize according to existing business processes; and are less dependent on data capture templates, which typically provide mixed results.

A key trend in invoice processing solutions is that corporate buyers expect implementations to be far quicker and more efficient than they have been in the past. “Six months and hundreds of thousands of dollars for setup and implementation are out of the question. A compressed ‘time to value’ is required,” Diegelman said. With improved technology that allows business-user configuration, rather than costly and time-consuming IT-driven customizations, 45-day implementations that generate the expected business case are now achievable – and corporate buyers expect it, he said.

One of the advancements in invoice processing technology is the concept of cascading matching. Cascading matching is similar to traditional PO-based invoice matching, Diegelman explained, but it allows for an expanded range of data elements from an expanded range of source documents (such as contracts and approved purchase lists) to be matched during the invoice approval process. The benefit for the corporate buyer is an automated process that results in far fewer “exceptions invoices” that require manual intervention in order to complete the invoice approval process, Diegelman said.

Although it’s not exactly new, Thumma noted that more companies also are e-mailing invoices in the form of PDFs that can be stored, securely accessed, and managed within a content management system and easily pulled at the right time into the electronic invoicing process. “This helps them to deal with accountability, compliance, and audit issues, and provides efficiency gains,” he said.

Pery said new invoice processing solutions are able to automate hybrid AP environments where invoices are received as PDF attachments, by fax, by e-mail and by paper. “Paper is not going away, and most organizations don’t have the capacity, resources or leverage to implement full-on electronic data interchange (EDI). So there need to be integrated solutions that capture both paper and electronic invoices, in a single stream, with the same underlying best practices,” noted Pery.

Moving forward, Schrage believes automated invoice processing will increasingly become a viable part of business processes rather than a front-end feeder. This will drive efficiency throughout the organization, not just with automated data entry, but with a complete birth-to-death solution spanning the life of an invoice. “Interest in incorporating front-end document capture, classification, and data capture with business process management will grow in the year to come,” Schrage said. “Integration capabilities with both front-end imaging hardware, such as leveraging metadata from scanner communications, and back-end ERP and document management software, are improving, he noted.

Pery also sees a convergence of invoice processing technologies. “Customers want an end-to-end invoice solution. Companies are not inclined to acquire a capture technology from one vendor, workflow from another vendor, and somehow undertake the integration of the technologies.” This seamless integration can provide organizations with common underlying administration tools, consistent deployment, and a common user experience end-to-end, from the time the invoice arrives.

By automating accounts payable processes from start-to-finish, Viancourt said companies can achieve significant savings due to early payment discounts, reduced overall transaction costs, no more duplicate payments and better management of compliance mandates. “It also means that already spread-thin staffs can focus more on work that really adds value to the organization,” he said.

Building on demand for end-to-end solutions, Pery predicts invoice automation will move from the back-office to the fringes of the enterprise and the front office. “There is a push to truncate paper as early as possible, where the invoice is received,” he said. “Companies want to use multi-function devices and desktop technologies to scan invoices, extract line-item information, truncate documents, and feed the data as quickly as possible into the downstream workflow.” As invoice automation moves toward the fringes of the enterprise, Pery predicts mobile capture of invoices will grow.

Schrage added that more companies are investigating a shared services or centralized processing model for AP processing. “The centralized processing model is facilitated by the ability to implement distributed capture, allowing invoices to be scanned at a remote location (or many locations), and transmitted via the Internet to a central processing operation. This approach reduces paper handling, postage costs, and delays. The combination of data capture, workflow and BPM offers users a powerful new business solution that was not previously available, Schrage said.

Another trend to watch is the emergence of Web-based solutions that allow for the outsourcing of processes for correcting POs and invoices. “Let’s assume you receive a PO and the number is missing,” Pery said. “An automated solution can initiate a trigger that would send a notification back to the supplier asking them to supply the information. The solution would provide a browser-based portal for correcting and re-sending the PO. This removes the burden on the AP department of dealing with day-to-day inquiries, freeing them to focus on more complex exceptions handling.”

The bottom line
“Invoice automation is increasingly becoming a mission-critical, time sensitive, document driven business for corporate buyers,” said Pery, adding that he anticipates strong growth ahead for automated invoice processing solutions. Optical Image Technology’s Thumma agrees.

“Industry statistics show that approximately three-quarters of businesses have not yet automated their invoice processing, so there is still a lot of potential for growth,” he said. “As an increasing number of businesses add digital record keeping into the business models, it’s natural to anticipate that invoice processing automation will continue to increase steadily, as it has over the past decade.”

How can a company determine whether it is a candidate for an invoice processing solution? Bob Fresneda, president of ReadSoft North America said any of these conditions may make a company a prime candidate for this type of solution:

•  It has very manual processes.
•  It has very little or no control over its processes with poor visibility into those processes.
•  It has low visibility into its outstanding liabilities.

“Basically, if a company is spending too much money to process an invoice compared to industry benchmarks, they would be a good candidate for AP automation technology,” said Fresneda.

Looking to the future of Finance and Accounting Outsourcing....

Each year, Everest Group rallies up a group of industry leaders to discuss various themes in the outsourcing arena. The article here has some comments in regard to the Finance and Accounting discipline, where accounts payable and invoice optimization or outsourcing are delivered:

supplier consolidation
mergers of platform-based and process suppliers
more verticalization
increased buyer expectations
advice for buyers

Good article - take a look...

What to look for in an invoice scanning solution...

In the Document Capture section of the November/December issue of TAWPI's Today magazine, there's a great one-page article (click here) helping AP users know what to look for when considering document imaging. Some excellent and insightful comments from a number of industry sources, including me. Have a look !

Visibility to outstanding liabilities is critical...

One of the areas where corporate management sees value in AP process optimization centers around what’s called “visibility”. Visibility is a term that describes the finance department’s ability to know, with a high degree of confidence and accuracy, the nature and dollar value of invoices and liabilities that a company has incurred at any given point in time. Visibility helps management in many ways, including the following two examples:

1. It is far easier to calculate period-end accruals when AP knows the nature and dollar amount of all invoices received on a given date. Accrual accounting becomes “more calculation, less assumption/estimation”. Visibility reduces the cost of calculating period-end accruals and also improves balance sheet accuracy.
   
2. Finance departments always seek to forecast cash inflows (collected revenues) and cash outflows (payables, payroll, debt payments, etc) into the future. Better visibility provides improved cash management, and the opportunity to borrow at lower costs or invest excess cash at higher returns.

AP process optimization often attacks the root cause of “lost visibility” – paper invoices received in different geographical areas, departments and divisions around the company but not yet accounted for in AP. Process optimization vendors, through central receipt, front-end image and data recognition, as well as conversion to e-Invoicing, can often assist AP management achieve dramatically improved visibility in an environment that also reduces payables unit costs .

See all of my more recent posts here.

Client AP challenge: centralize or optimize ?

My colleagues and I spent the afternoon with a long time client, who is wrestling with an issue: Their payables process is decentralized over 7 sites in the US feeding 2 ERP systems. They want the improved visibility to liabilities and cash flow forecasting that AP workflow provides, but can't decide whether to first centralize or go ahead and deploy workflow against the decentralized operation.

My view: Although centralization of the 7 processing sites will increase the time (and costs) to then get to workflow and its associated benefits, centralization is the foundation and first step toward their ultimate "point of arrival" where workflow generates the process benefits they seek.

Could they deploy workflow "on top of" the 7 locations ? Yes. But over the long run, centralization should have its own successful business case, onto which the workflow business case can then be layered. And that workflow business case will be much improved in a centralized environment versus a decentralized operation.

For this client, my belief is this: take the longer road, as it will generate increased process improvements and unit cost reductions albeit over a longer time horizon. Sort of like building a house - set the foundation first.

See all my blog postings here

Aberdeen Group announces top-performing e-payables vendors

Kofax, Ariba, Bottomline Technologies, and U.S. Bank PowerTrack received the highest rankings in the latest e-Payables AXIS™ Report released by the Aberdeen Group, a Harte-Hanks company....

Andrew Bartolini, Vice President Global Supply Management, Aberdeen and Report Author, had this to say about the report, "In the midst of the current global recession, finance and other enterprise executives have intensified their focus on cost containment and the optimization of working capital. The A/P department is uniquely positioned to support these objectives. Unfortunately, the average A/P department lacks the automation, executive focus, and general business alignment needed to effectively do so." Bartolini goes on to say, "While A/P automation offers compelling transaction cost savings and other strategic benefits, only one-third of all enterprises have any significant level of automation in place."

According to Aberdeen's findings after evaluating over 40 e-Payables vendors, the solution providers offering the best combined Value Delivered and Market Readiness scores include: Kofax, Ariba, Bottomline Technologies, and U.S. Bank PowerTrack.

Click here to obtain a copy of Aberdeen's e-Payables AXIS(TM) Report....

Are Outsourcing and Offshoring the same thing ?

From a recent post, I received a few questions that prompted me to generate this post.

Outsourcing and Offshoring are not necessarily the same thing.

Outsourcing is defined at Wikipedia as "the subcontracting of a service to a third party", while Offshoring is defined as "the relocation by a company of a business process from one country to another".

So, a company can choose to outsource something, but choose not to offshore in that process. As an example, very few companies run their own cafeterias - they outsourced that to Guckenheimer, Sodexho and others. But it's pretty hard to offshore your cafeteria (if you actually want to eat there). In the same regard, any US company (for example) with a captive Shared Service Center that's not in the US has chosen to offshore, but not outsource.

In Accounts Payable, both outsourcing and offshoring are methodologies to potentially reduce unit costs and improve processes. But they are not the same thing.

Webinar on AP process efficiency

In reviewing the re-launch of the BancTec corporate site, I had another chance to review the webinar posted entitled "Increasing the Efficiency of Your Operations". The webinar is presented by a very seasoned veteran, and talks to improving P2P operations and control with advanced automation. Invoicing, workflow, automated matching and other tactics are discussed...

Matching Invoices to Contracts - Opportunity for Reduced Spend...

The AP optimization software provider Palette has introduced a Contracts module, which allows AP and Purchasing to monitor terms and duration of supplier agreements. There's obvious benefit to linking AP business processes to specific terms in original supplier contracts.

A useful element of Palette's Contracts module is the ability to auto-match inbound invoices to relevant contract data elements within the matching/approval process before AP, buyers or other corporate resources have to spend time comparing contracts to invoices in the approval process.

As an example, when invoices from suppliers arrive and the buyers negotiated terms and conditions are not met, the invoices will not auto-match and the Palette application will suggest necessary and appropriate action.

There doesn't seem to be any crisp quanitifiable information about the overspend in buyer organizations from invoices that do not comply with contract terms. But a number of industry sources have intimated that there is significant savings to be realized from an automated contract-to-invoice matching process....

See all my blog postings here...

WSJ: Big Firms Are Quick to Collect, Slow to Pay Suppliers

Large corporations are tightening the screws on their smaller counterparts as the credit crunch intensifies companies' efforts to hold on to their cash.

In an example of corporate Darwinism at work, the recent round of quarterly earnings results showed companies with annual revenue of more than $5 billion sped up their collection of cash from customers while slowing their own payments to suppliers....

See the complete article from the Wall Street Journal here. It's a fascinating read for anyone interested in AR, AP and working capital metrics and how they are being employed in the current economy.

See all my blog postings here.

AP Automation market starts picking up again....

Arguably, the last 9 months have been challenging for providers of hardware, software and services that reduce the cost and/or improve the underlying processes of Accounts Payable. The credit situation has buyers focused on the need to conserve cash, and also changed (or halted) their internal decision-making processes on which projects to implement.

In talking with a few vendors in the AP Automation space, the following themes are emerging:

> Shelved projects are slowly moving back into the discussion phase
> The demand for AP solutions seems to be improving somwhat
> Senior management at buyers can offer their team members more clarity on how to proceed on evaluating opportunities to reduce AP costs

This is not to say that demand is back where it was in early 2008, but it does offer a glimpse of hope for companies looking to automate their AP processes, and also for the industry that supplies them.

Click here to see all blog posts....

AP process management, and its impact on corporate Working Capital

Last week, Michael Alfonsi and I presented a session entitled "Understanding Working Capital and its Implications for your Company" to attendees of IAPP's national webinar series, which is part of IAPP's commitment to providing continuing education for the organizations national membership. The preso can be accessed here.

With over 90% of the attendees lasting through 90+ minutes of financial discussion on working capital and its implications, it appears that the event was a success !

An interesting stat learned through polling the audience was that ~30% are new to the concept of working capital management and learning about it, approximately 60% have had some involvement in the topic and its optimization in their organizations, and <10% saw themselves as having performed a significant amount of work on working capital.

Payables is one of the 3 contributors (along with receivables and inventory) to working capital, and in an environment where capital is constrained and elusive, AP professionals can make a meaningful contribution to optimizing their company's working capital structure...

Outsourcing of Accounts Payable ?

The IAPP (International Accounts Payable Professionals) is currently running a web poll asking if members have considered outsourcing their AP department at all, and if so, to onshore or offshore providers. To see the real-time results, which are somewhat suprising, click here.

BancTec releases new website

BancTec has launched a new website which is completely redesigned, making it easier for corporate clients in the US, EMEA, and around the globe, to find information on Accounts Payable Optimization, Finance Transformation and other capabilities: www.banctec.com

Electronic Invoicing in Mexico

Last month (May 2009), Mexico's tax authorities began requiring a new complex set of rules and requirements for electronic invoicing. The purpose of these rules are to provide better visibility into the sales and revenue streams of businesses in Mexico.

Crossgate provides global e-Invoicing to many fortune 1000 companies already, but the Mexico requirements are different and unique. We have now completed these requirements and are in production. Here are some of the high level requirements for you to understand:

• You must be registered with SAT (Mexico Tax Authorities) to exchange electronic invoices
• You must register and download a list of folio numbers (similar to invoice numbers but provided by SAT)
• A folio number must be assigned to every invoice. You will likely have your own invoice number with an associated SAT issued folio number
• On a monthly basis, companies must provide SAT with a list of folios that were used during the month
• Companies must archive a special XML file for each folio used during the month and it must be stored on premise

Email me if you would like the rest of the detailed requirements and information on Crossgate's automated e-Invoicing solution for Mexico.

Notice - Mexican e-Invoicing Requirements and EDI Requirements

In May 2009 the Mexican government will change the way companies can send paper invoices to customers. Current regulations allow paper invoicing using government-issued invoices or customer-generated invoices. But with the new regulations, instead of being able to print their own invoices, companies using paper invoicing will now be required to obtain pre-printed invoice forms certified by the Servicio de Administracion Tributaria (SAT) or adopt a solution to send digitally signed invoices electronically to domestic and international customers.

SAP and Crossgate press release on Mexican e-Invoicing requirements.

AP vendors and financial trouble ?

Jason Busch over at spendmatters has an excellent blog on the topics of Supply Chain Management and Procurement. Given the inherent connection between these activities and Accounts Payable, I check his blog a few times per week.

He's got an insightful article here describing one of the challenges that all professionals - including AP professionals looking at AP outsourcing, cost reductions and invoice process improvement - face in this economic environment: do your current and potential vendors of AP optimization tools have the financial stability to remain viable providers as the economy becomes harder and harder to operate in profitably ?

Take a look here - real good article...

Supply Chain Management and Procurement

Jason Busch over at spendmatters has an excellent blog on the topics of Supply Chain Management and Procurement. Given the inherent connection between those activities and Accounts Payable, I check his blog a few times per week.

He’s got an insightful article here describing one of the challenges all professionals have – including AP professional looking at AP outsourcing, cost reduction and invoice process improvement - in this economic environment: do your vendors of AP optimization tools have the financial stability to remain viable providers as the economy becomes harder and harder to operate in profitably ?

Take a look here – real good article…

Changing Top Priorities for Companies in Today's Economic Climate

The ambitious business plans that many companies hoped to be executing in 2009 have in most cases been set aside and a new list of priorities advanced. This article called Top Priorities for Companies Today and the Growing Need for EDI and B2B E-Commerce discusses an emerging set of priorities that are being seen in Q1 2009. Note priorities 7, 8 and 9 all have to do with e-Invoicing and accounts payable optimization.

Companies today are looking for ways to accomplish more with less. They are seeking ways to automate people intensive processes with business automation, and replace paper with electronic data exchanges. They are seeking to consolidate systems and processes into Shared Services Centers and to simplify labor intensive IT environments with more third party managed services providers.

International Accounts Payable Professionals (IAPP) 2009 Annual Forum

Like many AP practitioners, I'm looking forward to IAPP's 2009 Annual Forum. This year, I'll be presenting in the Wednesday sessions with a preso entitled:

Insource, Outsource, or Co-source ?
Building a Successful Business Case for Payables Automation in Today's Economic Climate

The preso is a thorough discussion, presented in business case terminology, related to how payables organizations can match existing capabilities to acquired capabilities ("acquired" as a license or as a service) to create the invoice automation outcomes they need to improve process and reduce unit costs in this challenging business climate.

In an environment where capital for new projects is elusive, and even support for inhouse automation is being reconsidered (perhaps in favor of outsourcing in the US or abroad), accounts payable practitioners are being challenged (perhaps) like never before to do more with less.

I hope to see you at the Forum...

Supply Chain Financing and EDI / B2B

This week I have been involved in a lot of discussions around Supply Chain Financing. This is a world I barely knew existed a few months back. Corporate Treasures are of course focusing on Working Capital and its components. One component DPO (days payables outstanding) is an indicator of how long a company is taking to pay its suppliers. Manufacturers and other companies are looking to find ways of extracting more cash from their supply chain, as the credit markets are clearly constrained. Companies may be looking to take longer to pay suppliers, helping suppliers remain financially stable, and at the same time negotiate early payment discounts. Some times, there may be a bank willing to provide a short term loan to the paying company so they can pay suppliers early and get an early payment discount, or to loan money to the supplier so the manufacturer can take longer to pay their bill. All great stuff, but how is EDI and B2B E-Commerce involved?

Let's discuss the processes involved in the financial supply chain. First let's look at it from the perspective of the manufacturer:

1. Send Purchase Order
2. Receive products
3. Receive an invoice
4. Perhaps dispute an invoice
5. Issue payment (and thus impact working capital)
   
6. Archive Invoice and Payment information

Let's now look at the supplier side:

1. Receive order
2. Deliver product
3. Submit invoice
4. Resolve invoice dispute
5. Receive payment (and after posting, impact working capital)
   
6. Clear receivables
   

Every time you see the words; receive, submit, send or issue there is a place for EDI and B2B e-commerce (for more on EDI and B2B issues) - the electronic exchange of business documents and data. If fact, there is a whole industry dedicated to helping large companies optimize their accounts payable processes.

In the world of Financial Supply Chain there is a lot of business information that is being exchanged in a short amount of time. The ability of a manufacturer to receive an invoice, process it and negotiate an early payment discount and make the payment all needs to take place in a few short days. The whole discussion around early and dynamic payment discounting is mute if processing the invoice takes longer than the early payment discount term allows.

To take advantage of the various Supply Chain Financing opportunities available from banks and other parties, manufacturers must have the capability to support a high level of business process automation and have advanced EDI and B2B capabilities. The manufacturer can either support the EDI/B2B requirements internally, or find a managed services provider that can support these processes and provide a tight integration with the manufacturer's ERP and accounting system.

Crossgate and BancTec are 2 of many companies that are active in this solution area. For a more comprehensive list see this directory.

No capital available for Accounts Payable projects ? No problem.

In this economic environment, accounts payable operations are looking to reduce their unit costs to process each invoice. However, many companies are presently "capital constrained", meaning they have little or no capital dollars available to invest in order to realize the returns that present themselves as lower costs. Does this mean that, as a payables business owner, your attempts to reduce costs should be put on hold ?

Not at all. Many vendors and business partners who specialize in accounts payable automation, optimization, and accounts payable outsourcing have programs that create the desired outcomes (reduced invoice processing costs through process improvement) without requiring any upfront capital. While every project is different, the following vendors are noted for these capabilities:

Archive Systems
BancTec
Datrose
Deutsche Bank
New England Document Systems
Sourcenet Solutions

There are many others. I welcome your comments to round out this list.

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Implementing e-Invoicing

In these times of economic uncertainty, there are many reasons a company may want to implement e-Invoicing (Electronic Billing, EBPP, EIPP, Paperless Billing) processes with both their suppliers and their customers. Let's start out discussing why a company may want to consider implementing e-Invoices with their customers.

• Reduced paper costs
• Reduced printing costs
• Reduced handling costs
• Reduced postal costs
• Reduced (DSO - days sales outstanding)
• More environmentally friendly (Go Green)
• Compliance with local tax authorities
• Reduced payment processing costs
• Reduced data entry costs (entering payment information from paper)
• Reduced data entry errors
• Reduced billing disputes
• Reduced paper storage

There are also many reasons a company would want to accept electronic invoices from their suppliers which we will discuss later in this article.

How does a company implement e-Invoicing with their customers? Let's lay-out a plan:

1. The company must notify their customers that they want to implement an electronic invoice process with them and get their agreement. This is typically done via a letter and/or email sent to the accounts payable department of your customer.
2. The notice should request that the customer read and agree to the terms of the online agreement form, and then register to participate.
3. Once the online form is completed and the customer agrees to accept invoices electronically, the agreement should be automatically emailed to the customer for printing and safe keeping.
4. The online form should also include a survey of the customer's electronic data exchange (B2B)capabilities. Can your customer exchange EDI or other B2B data formats, or do they want to exchange invoice information only via email or a web portal?
5. Once your customer is ready an email should be sent to them with a link to a secure website where they can login and view current and past invoices. This reduces the customer support and accounts payable workload. This portal should allow the company to see when their customer's read and/or download the invoices. Unread invoices should be flagged and the company alerted that more customer training may be necessary.
6. e-Invoices that must contain a digital signature that is compliant with tax authority regulations must be archived. The length of time that electronic invoices must be archived differs widely depending on local regulations. It is often from 5-10 years.
7. If your customer is a high volume customer and can support EDI or other B2B data exchanges then the portal may be useful to check on the status of invoices, but a fully automated B2B process may be more efficient.
8. The portal should also enable both you and your customers the ability to verify the integrity of the digital signature. The portal should have integrated functionality to send a verification request to the digital signature authority and receive a response. This ensures that the invoice on record and in the archive is valid.

Now on to the topic of implementing the exchange of electronic invoices with your suppliers. This linked blog article highlights some of the costs and benefits, but let's address some of the issues here.

• Large companies often receive tens of thousands of paper invoices monthly. These must be received in a mail room, opened, organized and moved to the appropriate processing centers where the invoices are manually read and the data entered into the accounting system. Many large companies receive invoices in dozens of different locations where this process is repeated. The manual processing of invoices can be a huge expense.
• Unprocessed paper invoices prevent management visibility into the true state of liabilities.
• The longer it takes to process an invoice, the more customer service and accounts payable issues arise.
• Unprocessed or slow processing of supplier invoices prevent companies from realizing early payment discounts that may be offered by suppliers.

It is important to note that not all problems with supplier invoices can be solved through EDI, B2B or other forms of electronic invoicing. This article details business process challenges that often need to be corrected before the full value of electronic invoices and accounts payable optimization measures can be realized.

There are several key areas that I would suggest looking at first when considering how to optimize the accounts payable processes in a large company.

• Consider the consolidation of disparate software systems into one ERP
• Define and implement formal invoice approval work flows
• Consolidate management of invoice receipt into shared service centers
• Outsource the scanning/OCR solution to lift data from paper invoices
  
• Implement an automated invoice approval work flow engine
• Convert paper invoices to electronic invoices by implementing EDI, Supplier Web Portals or other B2B strategies.
• Implement an electronic payment system
• Consider how a consultant might help you manage through this sort of process change
  

Click here to go to most recent blog postings...


***************************************
Paul Diegelman
http://www.linkedin.com/in/pauldiegelman
***************************************
Kevin Benedict
http://www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/
***************************************

Accounts Payable optimization firm Basware makes acquisition

The previous 6 days have been meaningful for followers of the Basware invoice and accounts payable applications. A new acquisition and strong 4-year growth plans were both announced at on Basware's website at the following links:

Long-term net sales growth objective of 20 to 40% presented in 2009 - 2012 plans:

http://www.basware.com/News_and_Events/stock_exchange_releases/Pages/News.aspx?newsUrl=http://cws.huginonline.com/B/131662/PR/200901/1284126.xml


Acquisition of Itella's SaaS application for invoice automation:

http://www.basware.com/News_and_Events/stock_exchange_releases/Pages/News.aspx?newsUrl=http://cws.huginonline.com/B/131662/PR/200901/1284807.xml





************************************
Paul Diegelman
http://www.linkedin.com/in/pauldiegelman
****************************************
Kevin Benedict
http://www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/
****************************************

EDI, B2B and Electronic Invoices are Not Always the Answer for Accounts Payable Optimization

Converting paper invoices to electronic invoices is not always the best first step to optimizing a high volume accounts payable department as this article on a blog site that covers EDI and B2B issues explains.

Electronic Billing and Invoice Processing ROI

I am working on an interesting ROI study and business case for an electronic billing project. The client is in South Africa and due to the troubled state of their postal service, the client has been forced to send their invoices to their customers via courier service. This service is expensive. The client came to us to learn how we could help them automate their invoice processing. They wanted a system that would permit them to do invoice processing electronically and compliant with the e-Invoicing laws of their local tax authorities.

Implementing e-Invoicing and electronic billing are common requests, but reducing courier service fees as part of the ROI is a first.


Typically the savings would come from the following:

• Reduced Days Sales Outstanding (DSOs)
• Reduce Cash Conversion Cycles
• Best In Class – 5x Faster at converting Sales into Cash
• Faster Dispute Resolution
• Compliant with tax authorities
• 60% Print & Postage Reduction –from $5 to $2 (Gartner)
• Lower Call Center Volumes
  –Up to 60% of calls relate to invoice disputes

Some of the requirements for being e-Invoicing compliant in South Africa are:

• Authenticity and integrity can be guaranteed by Advanced e-Signature
• The customer needs to agree to receive electronic tax invoices (explicit, in writing)
• Outsourcing the issuing (e-Signing) to a third party is possible
• No specific invoices format requirements – and presenting an invoice in .pdf format on a website is considered as electronic invoicing in South Africa
• Archiving (sender and receiver) must be in electronic format (for 5 years) and can be abroad (prior notification to tax authority is recommended)
• Statutory Background (http://www.sars.gov.za):
  •VAT Tax act 89 of 1991, section 16,20, 21, 55 and 57
  •VAT Practice Note 2 of 25.9.91 (self-invoicing)
  •VAT 404 VCAT guide for Vendors (2004 ed.) pager 56 (EDI)
  •VATNEWS 20 – Sept 2002
  

Paul Diegelman
http://www.linkedin.com/in/pauldiegelman
****************************************
Kevin Benedict
http://www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/

Will OCR technology reduce the cost to deliver a high quality payables process ?

Optical Character Recognition (OCR) technology gives payables departments the opportunity to "lift" characters from printed documents and turn those characters to data that is available for ingestion into any number of corporate systems. The premise is that OCR technology will reduce the level of human effort (and perhaps more importantly, the cost of such human effort) required in order to automatically post data which was printed on incoming paper documents into payables, receivables, or other systems of record.

In an evaluation of OCR technology, there are typically two factors that buyers must determine: first, can the buyer create a successful business case, which management will approve, for acquiring OCR technology (as either software or as a service) and second, should the technology be acquired as a capital expense or acquired as a service, and therefore as an operating expense ?

The business case for acquiring OCR technology, to a large extent, relies on being able to predict with a high-level of confidence what percentage of expected data can be captured without human intervention.

As it relates to licensing OCR technology or acquiring it as a service, capital is elusive to many companies today, and capital for backoffice projects such as OCR is even nore difficult to obtain.

Future posts will discuss these two dimensions of OCR acquisition in much greater detail. Your comments are welcome.



Paul Diegelman
http://www.linkedin.com/in/pauldiegelman
****************************************
Kevin Benedict
http://www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/

Why Convert Paper Invoices to Electronic Invoices in Uncertain Economic Times?

Paper invoices have been at the core of financial transactions for as long as sellers and buyers have existed. Manually preparing an invoice and mailing it to a customer is second nature to most companies and the business world has been moving along for centuries using paper invoices and account ledgers. But in the last few decades as business operations have spread out to cross geographical borders and time zones, companies have begun to realize that manual operations – particularly in regard to financial transactions – are slowing down success and growth. Here are some of the problems with using paper invoices:

1. Slow paper processing may prevent receiving early payment discounts
2. Postage costs
3. Mail room sorting and handling costs
4. Data entry of paper invoices into accounting systems costs
5. Data entry from paper invoices introduces errors that cause invoice disputes
6. Invoice disputes cause supply chain friction
7. Lack of visibility into real time accounts payable liabilities
8. Paper storage costs
9. More...

In these challenging economic times more and more companies are making the conversion of paper invoices to electronic invoices a higher priority.

See all my blog postings here.....

Paul Diegelman
http://www.linkedin.com/in/pauldiegelman
****************************************
Kevin Benedict
http://www.linkedin.com/in/kevinbenedict
http://b2b-bpo.blogspot.com/

Accounts Payable Visibility and AP Optimization Challenges

One of the areas where Corporate management sees value in AP process optimization centers around what’s called “visibility”. Visibility is a term that describes the finance department’s ability to know, with a high degree of confidence and accuracy, the nature and dollar value of invoices and liabilities that a company has incurred at any given point in time. Visibility helps management in many ways, including the following two examples:

1. It is far easier to calculate period-end accruals when AP knows the nature and dollar amount of all invoices received on a given date. Accrual accounting becomes “more calculation, less assumption/estimation”. Visibility reduces the cost of calculating period-end accruals and also improves balance sheet accuracy.
   
2. Finance departments always seek to forecast cash inflows (collected revenues) and cash outflows (payables, payroll, debt payments, etc) into the future. Better visibility provides improved cash management, and the opportunity to borrow at lower costs or invest excess cash at higher returns.

AP process optimization often attacks the root cause of “lost visibility” – paper invoices received in different geograhical areas, departments and divisions around the company but not yet accounted for in AP. Process optimization vendors, through central receipt, front-end image and data recognition, as well as conversion to e-Invoicing, can often assist AP management achieve dramatically improved visibility in an environment that also reduces payables unit costs .

Click Here to go to most recent blog postings...

Accounts Payable Optimization

There is a lot of interest these days in AP optimization. Why? Companies are looking under every desk and business process for inefficiencies and cost reductions. AP optimization is a good place to look. Many companies that I have spoken with over the past few weeks are very interested in reducing paper processing and data entry costs associated with handling and managing inbound paper invoices. In addition to cost reduction, CFOs are also seeking ways to speed up the processing of inbound invoices so they can take advantage of early payment discounts with their key vendors.

It is worth noting that many companies cannot take advantage of early payment discounts because the process of managing the paper invoices takes too much time. Paper does not easily give up it's information. Somehow the information on the paper invoice must be extracted and entered into the AP software application, approved or rejected and payments made. Sometimes this takes 45 days just to process.I have worked on a number of projects over the past few weeks where CFOs were seeking to out-source the entire process of handling inbound paper vendor invoices. They want the following:

• Reduce the current costs of processing the paper (labor, IT, facilities, etc.)
• Scan/OCR the data on the inbound paper vendor invoices to quickly digitize it
• Have a human review the scanned data and fill-in any missing or unreadable data from the original paper copy
• Submit the digitized invoice into a work flow for approval or rejection
• Convert as many paper invoices to electronic EDI or B2B file transfers as possible to achieve real-time integration with SAP

I was surprised to learn this year how many CFOs were interested in out-sourcing this entire process. It seems there is little perceived value of keeping the following functions in-house:

• paper processing
• scanning/OCR
• data review and correction
• converting paper invoices to electronic invoices (expanding the use of EDI and B2B data exchanges)

The CFO's office wants the benefit of all-of-the-above, but not necessarily the internal costs of doing it. There are a number of companies now that have developed a managed services offering that combines state-of-the-art scanning technologies, low-cost labor, AP work flow, best practices and managed EDI/B2B services for AP optimization. I have read several analysts reports recently that suggest this is a rapidly growing trend. Typically the costs for these managed services are considerbly less than processing in-house.

Once the AP process is optimized, the CFO will have the flexibility to capture negotiated early payment discounts, and to start looking at things like dynamic discounting. Dynamic discounting is when the CFO or his/her team can negotiate in real-time with key large suppliers to pay earlier than agreed in exchange for additional discounts. On large invoices these numbers can be meaningful.