by Ted Ardelean | 7/3/14
This is the second post in a three-part series about attaining high-performance Accounts Payable. To read the first post of the series, please click here.
Previously, we identified some of the most common challenges associated with the first stage of the accounts payable (AP) process: invoice intake. This stage is typically the most time consuming due to the fact that, according to our studies, roughly 60 to 85 percent of invoices arrive in paper or paper-equivalent format and commonly involve distributed receipt — meaning the invoice is first received by a buyer who then forwards it to the AP department.
Our recommendations to improve the invoice intake stage included centralizing invoice receipt, automating the data entry process through imaging and data capture and extraction technologies, and encouraging suppliers to enroll in e-invoice submission.
Once an invoice has been successfully received and converted to ERP-formatted data it needs to be validated (confirmed as a legitimate invoice), discrepancies need to be resolved (confirmed as accurate) and the invoice must be approved before it can be paid. The challenges associated with this stage are due to the fact that invoice approval and discrepancy resolution is largely a manual process. Fortunately, technology that automates many, if not all, aspects of invoice approval and processing is more accessible than ever before and substantially reduces the amount of time, cost and errors.
The invoice approval process involves matching invoice line items against company data. This is incredibly time-consuming, as invoices can be long and complicated — particularly in industries such as manufacturing and healthcare. If the invoice is received by the AP department first, then it is necessary to route the invoice to the buyer. Often, the buyers who placed an order must check the order received against the invoice to confirm it is approved before the AP department can move on to the invoice payment stage. This is especially true of orders placed without a purchase order (PO).
AP workflow automation technologies designed for discrepancy resolution matching and approval can accelerate this stage of the AP process considerably. These solutions can often be implemented in tandem with the imaging, data capture and data extraction technologies that enhance the invoice intake stage, and generally work together seamlessly.
Invoice automation software effectively completes many or all of the steps in the invoice approval and processing stage that otherwise would have been completed manually. This involves matching data from invoices with data in the PO receiving system and flagging any discrepancies. Invoices for which the data is effectively matched are processed “straight through” to payment without human intervention. A complete audit trail and real-time status reporting provide the AP department with visibility into the invoice workflow at all times.
Implementing invoice automation software can significantly reduce the amount of time required by AP departments to process each invoice, freeing up staff time to focus on other, more strategic tasks. A survey sponsored by Canon Business Process Services and conducted last year by Ardent Partners found that companies that utilize imaging, capture and AP automation solutions cut their invoice processing cycle time by 31 percent and are processing 117 percent more invoices per full-time employee per month. This essentially reduces workload by half.
The survey also showed that the cost per invoice for these best-in-class AP departments is $5 (or 29 percent) lower than the average, which can add up to big savings considering the high volume of invoices many companies process.
Whether done in-house or with a managed services provider, updating a company’s AP department by introducing workflow automation technologies can be a daunting task. However, not only do these solutions help to substantially improve the invoice approval and processing stage, they also overlap with the first (invoice approval) and last (invoice payment) stages, which should result in a more holistic and efficient AP process from start to finish.
The third article in this series will focus on optimizing the final stage of the accounts payable process: invoice payment.
Survey data from Canon Business Process Services (2013) “High-Performance Accounts Payable: Three Key Drivers to Success.” White paper is available for download at http://cbps.canon.com/resources/index.aspx
Ted Ardelean is a marketing director for Canon Business Process Services, Inc., a leading provider of managed services and technology that enable organizations to improve operational efficiency while reducing risk and cost.