Some Insights on Accounts Payable Processing from the Recent SIG Summit
by Ken Neal
March 22, 2015
I recently attended the Sourcing Interests Group Summit. While there I noticed there were a number of presentations focused on software and methods for transforming the procure-to-pay (P2P) process. As I listened to the speakers and questions from attendees, one thing stood out. While technology helps in every activity of the P2P process, ultimately the majority of invoices from suppliers still come in paper or paper equivalent format that requires conversion from paper into data formatted for the organization’s ERP systems.
This situation reminded me about the data we see from accounts payable (AP) processing studies year after year, which disclose that a least 80 percent of invoices still require manual transformation from paper to digital in order to make the P2P process truly electronic. Managing incoming invoices is still the weakest link in the P2P value chain.
I heard presentations from organizations that implemented technology to automate the process from initiating the purchase order (PO) to invoice payment. In one session, there must have been at least thirty questions related to features. Following are some examples of these questions. Can I link to catalogs? Can I put services through the PO process? Is it possible to approve a PO via smart phone? Are we able to see contract terms? Does the PO workflow escalate? Does the invoice approval process include a three-way match? Most of the time the answer was yes; there are many ways to customize technology. But when asked what percent of purchases flow straight through without manual intervention from PO to payment? Well, that depends because most of the suppliers submit paper invoices.
The lesson here is one most of us know: a chain is only as strong as its weakest link. In this case, indeed, a fair amount of the P2P process can be improved by the installation of a P2P system. On the purchasing side of P2P many organizations are satisfied with benefits such as user adoption that can help get costs under control, create shorter invoice processing cycles and yield other benefits.
However, on the pay side of P2P, potential benefits are lacking because many suppliers send paper or email-attached invoices that require scanning and data conversion. This manual approach creates a weak link in the invoice processing chain. Two solutions are being explored.
One is that the organization can enroll all suppliers in an eInvoice system. Companies are trying this, but they admit getting the majority of the invoices returned electronically, even with PO Flip and a no-fee e-commerce network, is not likely to happen anytime soon.
Second, which most organizations have not yet tried, is to automate invoice conversion through OCR (optical character recognition) and workflow technology. The challenge here is this it will require a separate process with staff, facilities and additional technology. Since it took years to install the P2P system, this is not likely to happen soon either.
That is, unless the organization outsources this automated approach to an experienced service provider such as Canon Business Process Services. Outsourcing the invoice receipt-to-ERP phase of invoice processing (or the “centralize and digitize” phase as we call it) can replace that weak link in a matter of weeks, enabling a faster, more efficient P2P cycle.
If your current invoice processing approach is dragging down the performance of your P2P efforts, feel free to visit the Accounts Payable Services of our website and learn how Canon can help turn the situation around by automating your invoice processing workflow.