Introduction
An invoice comes into the mailroom and is sent over to the AP department. The AP clerk finds the matching purchase order and packing slip (often a feat in itself), and since it’s over $10,000, she knows it has to through the department manager and VP before it’s paid. The clerk makes a copy and drops it into the interoffice mail to get the approval process started.
Once it arrives at the department, it sits in the incoming mail bin for few days. It’s sorted into the manager’s mailbox, where it sits for another few days. It eventually makes it to the manager’s desk, where it gets buried under some new reports that just came in. A week later, the manager notices it, takes a look, makes a copy, and walks it over to the VP’s office. However, the VP is traveling for the rest of the week. She finds it a week or two later, approves it and sticks in the interoffice mail, and it’s finally on its way back to AP.
In the meantime, the early discount deadline has long passed. Not to mention, it has yet to be recognized in the accounting or ERP system, the cost of processing the invoice has skyrocketed and there are multiple copies floating around (increasing the risk of duplicate payment).
Sound familiar? This process happens over and over again at organizations large and small. The good news is that it doesn’t have to be this way. When organizations take the paper out of AP invoice management with imaging and workflow technology these problems become much more manageable.
In fact, we see five main reasons to go paperless in your AP department:
1) Eliminate the costs and risks associated with a paper environment
2) Create a single place to go to for information
3) Take out the delays linked to manual paper processes
4) Improve visibility into invoice management for a clearer financial picture
5) Realize a return on investment that is proven and measurable
Survey Results Support What Many AP Departments Already Know
In a recent survey of 110 CEOs, entrepreneurs and business executives, the majority of respondents indicated that they are now using technology to increase these efficiencies in their AP departments:
· 50 percent said they used technology to improve workflow
· 18 percent said they use it for quality control
· 7 percent said that it reduced their throughput time
The survey didn’t apply to just companies with a high volume of invoices – or just to those with a low volume either. The survey respondents process a wide range of invoices per month:
· 15 respondents have less than 50 each month
· 7 have 50 to 100
· 20 have100 to 250
· 26 have 250 to 500
· 16 have 500 to 1000
· 26 have more than 1,000
1. Eliminate the costs and risk associated with a paper environment
Paper is expensive, and its costs over the course of a year add up significantly. Five minutes lost here, a discount lost there. It doesn’t seem like those little things make a big difference. But a leaking faucet loses just a little bit of water in every drop. Over a year’s time, it’s wasted more than 100 gallons of water.
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Paper is also easier for you to misplace or lose. Finding and replacing lost documents is extremely costly. With document management, AP departments capture documents electronically as soon as they arrive – whether that’s through mail, fax, EDI transfer, e-mail or any other way. By eliminating paper from your AP process, you cut out that cost and rest easy knowing that you won’t misplace any important documents.
2. Create a single place to go to for information
Eliminate the frantic paper shuffling and long wait times. With paper processes, too much focus ends up being on where an invoice is, who has it, where’s it been and where does it still need to go. Instead of focusing on handling exceptions or their core job functions, everyone from clerks to VP’s get stuck worrying about paper. Plus, if a vendor calls with a question, it can take days to find an answer.
Document management stores all your AP content in a central electronic location so staff has everything they need without leaving their desk. They know exactly where to find what they have, what they need, the moment they need it. They can even pull it up without leaving their familiar screens. Just a click in the accounting or ERP system and a list of related documents immediately opens.
This is an important tool in the approval process when all the supporting documentation is in the same place and available at the click of a mouse. In addition, with just one copy of the invoice for everyone to see, organizations dramatically reduce the chances for duplicate payments. And when vendors call with a question, their questions have immediate answers.
3. Take out the delays linked to manual paper processes
When invoices and related documents are captured immediately, they’re also available for automated processing. AP can automatically route these items through the right approvals.
It immediately removes any slowdowns in the interoffice mail process. Automatic notifications and reminders make sure invoices don’t get buried under other work. Plus, with mobile approval applications, approvers don’t necessarily need to be in the office – they can approve invoices over the Internet or through apps on their BlackBerry, iPhone or other mobile device.
Without paper hindering processes, many organizations see their invoice approvals go from two to three weeks to two to three days.
4. Improve visibility into invoice management for a clearer financial picture
Automated processes don’t just manage invoices faster, they also handle them with more visibility. AP managers know exactly where in the process each invoice is at any given time. This makes a significant impact in two ways:
· AP tracks vendor deadlines to collect early pay discounts and avoid late payment penalties. Every time AP misses an early discount, it misses a chance to save money. Plus, when you pay consistently on time – or even better, early – organizations build a better relationship with vendors and negotiate better contracts.
· There’s a gap between when an invoice arrives and when AP can record it in the system. In the meantime, it’s nearly impossible for AP to know exact liabilities at any given time. However, with automated processes, managers have a clear view into unaccounted liabilities so the organization can make more informed financial decisions.
In addition, automated processes leave concrete audit trails and document histories. When auditors (internal or external) come in looking for information, AP has hard evidence that all needed documents are present and that correct processes are followed each time.
5. Realize a return on investment that is proven and measurable
You may be thinking that technology always comes with a price tag, and you can’t possibly spend any money right now, but the old adage that you have to spend money to make money exists for a reason. If you invest in automated AP solutions, you’ll quickly see a return on your investment. AP automation has consistently proven to bring a measurable return on investment:
· Cost per invoice falls – more efficient processing, more early payment discounts, less late penalties and lower hard costs means AP reduces the cost of processing each invoice
· Hard costs shrink – costs from paper, toner, copying and storage (onsite and offsite) fall dramatically
· Days payable outstanding (DPO) drops, improving cash flow
· Employee productivity improves. They spend more time on exceptions and core job functions, not hunting through and shuffling around paper.
AP Automation Case Study – Emerson Climate Technologies
With growth coming in rapid waves, Emerson Climate Technologies (ECT) realized its existing systems and applications weren’t built to share information across departments, let alone countries. Leaders at the three billion dollar manufacturer realized if the company didn’t get its paper problems under control, the success of the company’s aggressive growth strategy would be at risk. The first place ECT made changes was in AP.
Before any improvements were made, ECT scanned all of the AP invoices and POs onto microfilm. If a vendor or internal customer called with a question about an invoice or PO, an AP clerk would have to go to the reader to find the document. This not only took the AP clerk away from their regular responsibilities, but also often led to an hour-long wait in line at the microfilm reader.
When the machine finally broke, Tim Arthur, IT Director, knew he needed a better solution. “Document management changed the lives of our AP clerks,” he says. “It had huge consequences on productivity because it eliminated their frustration from waiting in line and sped up their ability to get answers off of invoices.”
The AP team also improved the manual and error-prone three-way match process. Clerks used to manually match paper invoices, PO’s and receipts to check for discrepancies. Although important for balancing the books, this process was time-consuming and tedious.
Now, ECT has automated three-way matching. All invoices, PO’s and receipts are scanned into the document management system. When a mismatch is found, it instantly flags the group and routes it to ECT’s procurement team for investigation. An automatic timer makes sure that a procurement representative makes a timely decision about whether to pay the invoice.
The success of the system was instant. “Within a month, I got a call from AP and calls from four internal customers telling me how great the solution was,” says Arthur. ”When we first implemented document management, we had nine AP clerks. Now, we have eight clerks and we’re also handling AP responsibilities for three new companies. With the increased volume, we likely would have had to hire seven more clerks.”
Conclusion
AP is a document-driven department. By sticking with manual AP document processes, organizations face higher costs and slower processing. The paper shuffle often results in higher hard costs, missed discounts, late payment penalties and low visibility into processes. However, by implementing a strong document management solution, AP departments find an answer to these problems.
In slow times, document management cuts costs and saves money when every penny and every minute of productivity counts. When resources are scarce, document management helps handle the budget cuts that AP departments are feeling around the country.
At the same time, it allows you to build a scalable AP department for future growth. Even if you’re not growing right now, as the forecast starts to shift, you’re prepared for the future and able to handle today whatever comes your company’s way tomorrow.
This whitepaper is presented by Hyland Software. For more information, contact Hyland Software, www.onbase.com, (888) HYLAND.8. To attend a webinar led by Hyland Software, register here.
