Accounts payable would be easy if it weren’t for all the paperwork, as anyone who works in the area will tell you. Manual, paper-based accounting systems have been the bane of corporate accounts payable departments for decades.
Even the most tightly organized AP system has plenty of opportunities for problems, including lost or misplaced invoices; incorrect manual data entry; time wasted sorting and filing paper, or trying to locate matching purchase orders. All of which leads to slow processing, which can directly impact the organization’s financial reputation with partners and suppliers. Additionally, manual AP systems make it nearly impossible to meet Sarbanes Oxley, IFRS and other compliance and regulatory requirements for full document traceability and auditability.
All in all, it’s a recipe for a fruitless paper hunt. Throwing manpower at the problem is not a viable solution. More people means more invoices processed, but employment and labor costs are significant for such a skilled staff, limiting the expansion of the accounts payable function. On average, a full-time AP employee can process around 8,500 invoices per year through manual processes. However, world-class companies can process more than 80,000 invoices per person per year, a quantum leap in efficiency.
flipping the switch
So how is it possible to multiply productivity tenfold? It’s simply a matter of automating as many aspects of the AP function as possible. The actual costs involved in AP are the man-hours involved in manual tasks, including: finding purchase orders and welcome notes; check and match these; manual data entry into core business systems, such as ERP; manual validation; process complex invoices that may involve checking service level agreements, and more.
Even greater costs are incurred for tasks such as long-term document archiving and storage, staff turnover, and training systems for new staff. If these tasks can be automated, then accounting staff can be redeployed into more strategic roles, such as data analysis, and not be involved in time-consuming paper records.
The ultimate goal is sometimes referred to as “off accounting.” [http://www.dvtl.co.uk/index.pl?art=14]” – in other words, turn off the lights while work continues automatically. And although it is still not possible to turn off the light switch all At the same time, state-of-the-art invoice data capture and processing solutions actually deliver productivity gains of up to 1,000%, helping make AP a profit center, not a cost center.
Let’s take a close look at exactly how this can be achieved. We will use a real life example of the AP department of a large licensed trading company, which undertook a phased migration from manual, paper-based processing to fully automated invoice processing.
Raising a glass to automation
DrinkCo is a UK-based company that owns several well-known pub chains. As one of the UK’s largest pub operators, the company processes 600,000 bills a year. As a user of Peoplesoft (now Oracle) accounts, DrinkCo wanted to implement invoice capture [http://www.dvtl.co.uk/index.pl?art=31] to bring key financial data directly into the Peoplesoft solution and speed up processing.
Since ROI is a key factor in the decision to implement, DrinkCo conducted a proof-of-concept exercise with Digital Vision [http://www.dvtl.co.uk] that showed that ROI was possible in months, rather than years.
The proof of concept relied on an invoice capture solution from Paradatec, integrated with data extracts from the Peoplesoft system so that invoices can be matched against purchase orders and goods received notes. This demonstrated that high levels of accuracy were possible with data capture on most of the invoices received.
Before the optimization of the capture process, the data capture in general invoices was 73%. By focusing on high volume supplier invoices, this was raised to close to 100%. In addition, the process demonstrated that the AI system worked independently of the invoice design and that the invoice capture engine’s AI rules could be adapted to handle different invoice designs or those of new vendors.
Upon completion of the proof of concept, Digital Vision provided a detailed specification to DrinkCo to integrate the Paradatec capture solution, SpeedKey validation and Contempus invoice processing with Peoplesoft Accounts, with invoice images stored in an IBM Content Manager repository.
goes live
When the green light was given to proceed with the automation project, additional pressure arose. One of DrinkCo’s offices would be closed and work transferred to its headquarters in the Midlands. This also meant layoffs among AP staff, putting additional pressure to get the automated invoice processing system up and running as quickly as possible. As staff left, a backlog of bills accumulated.
The solution was implemented in just 8 weeks. The backlog of 4,500 invoices accumulated while staff left was handled by just four employees, who validated and corrected the backlog in less than three days. With their previous system, clearing a similarly sized backlog would have taken 12 employees over 10 days, clearly demonstrating the time and labor savings possible with the automated solution and immediate ROI delivery. The AP team continues with four validation staff and the project achieved full return on the original investment in just 8 months.
Lights Out Accounting Planning
In addition to showing the possible ROI of automation, DrinkCo’s process is an excellent example of how companies can plan their move to full accounting. First, evaluate the invoice capture solution and, if possible, pilot it to ensure that invoices can be captured ready for processing with near 100% accuracy and with high levels of automation. This creates the “funnel” for automated processing and helps define subsequent workflow paths.
Second, integrate the capture with core business systems to automate the comparison of invoices with supporting documentation, such as purchase orders, and to highlight any exceptions (for example, non-order invoices) that need to be escalated to a customer’s workflow. authorized staff member. This workflow should be governed by custom, business-specific rules to allow AP staff to manage exception bill processing rather than hands-on, freeing up staff for more strategic tasks.
Third, use an invoice automation system that ensures every transaction, modification, and data movement is fully audited, providing irrefutable evidence of any workarounds and unsanctioned processes. The record should be stored with the electronic version of the invoice to give full visibility of the invoice path through the organization. This evidence alleviates audit pressures which, in turn, can translate into reduced audit costs.
Given the compelling evidence of ROI from AP automation, it is not a case of Yeah you will ever be able to turn off the lights, but if you can afford not to.