In Chapter One of this series, we outlined the Benefits and Capabilities of Document Management Technology and reviewed the elements of a basic content management system, including invoice capturing, indexing, workflow and storage, and how to implement DMS as a simple first step in the automated AP process.
In Chapter Two, we discussed Levels of Data Capture For Ease and Efficiency in Accounts Payable, including an overview of how various technologies can read data and how this information is shared from basic capture with structured templates to more advanced technology like barcode readers, Optical Character Recognition (OCR) and Intelligent Data Capture (IDC).
In Chapter Three we explored how to Optimize Indexing in Your Enterprise Document Management System to ensure you can retrieve the right data from your system via proper indexing to significantly reduce processing time and get you to the data you need faster.
In Chapter Four we will investigate the various levels of workflow from basic to advanced and discuss the benefits of each. The goal of automating your AP is to standardize your invoice process to improve speed and accuracy, increase access and accountability and reduce errors. With condensed processing time you can reap the cost saving benefits of increased efficiency, additional costs savings by taking advantage of early payment discounts while increasing visibility into every stage of your AP process.
Implementing workflow can have a positive impact on your entire accounting process– from simply electronically routing an invoice to a full integration with an ERP or CRM system.
Like capture and indexing, there is a season for basic workflow, advanced workflow and special considerations for integrating with other systems and processes. So what is the right level of workflow automation for your business to achieve the quickest ROI?
The first step in figuring out which strategy can help you best improve your AP process is to evaluate your current cost of doing business. Once you consider costs, take stock of where you are today in terms of process – are you still utilizing a full paper system? Perhaps a hybrid solution of scanning and data entry?
Whatever the case, you need to determine where you are in your AP and set goals of where you want to be in the future.
Define your biggest issues: costs per invoice, processing speed, data accuracy – whatever your biggest pain point start there and document for future reference so you can see how your workflow efforts have paid off and justify ROI for additional investments down the road.
According to PayStream Advisors, on average, a typical invoice cycle time from invoice date to posting date is more than 20 days. When we calculate the cost per invoice for a full paper process, the estimated Cost Per Invoice (CPI) runs about $10.11. Multiply that by hundreds or thousands of invoices and the costs of manual processing become evident.
By comparison, companies that utilize some form of automatic AP processing average about $6.86 CPI. By eliminating the paper process, archival/storage and retrieval you can save significant money – but there is room for more efficiency. The same study shows that innovators who are fully automated run about $2.67 CPI – with an AP process that is highly automated, invoices that are matched, routed approved and filed – without any hands touching paper.
There are many efficiencies to be gained when looking at an invoice lifecycle. From purchase order and receipt of invoice to routing for approval, matching, coding, data entry, reconciling with your general ledger and ultimately processing payment – each step of the way there is room for time and cost savings.
Consider also that when you are processing paper a great deal of visibility is lost – not only when you are trying to manage the initial processing of an invoice and its approval, but also when searching historical data for audits. Doing a digital search of all your invoice records, related documents and status is much easier than looking through paper files.
Focus on your biggest pain points first and work to adopt a scalable solution around one given process, then expand the solution to other business processes. The great thing about a phased approach is you can always add automation elements like advanced capture or workflow to further refine the process when your team is ready.
One of the simplest workflow solutions to facilitate movement from paper to paperless is by taking paper invoices and manually scanning and saving them to a computer or company network in order to access or share them electronically. Typically this involves some level of manual data entry into an AP/Accounting system as well. This process can streamline AP in two ways.
First, by scanning an invoice and making it available on a network you increase access to that document and eliminate the paper processing time as well as the cost for copying, faxing or mailing. You can also then attach an invoice and email it for attention or approval and reduce the time it takes to mail or fax an invoice.
These very simple steps provide a level of basic insight and accountability. The same linear process for invoice routing and approval can be done electronically with minimal upfront investment.
The downside to only scanning means you still have to enter data into a system and spend time scanning a document. Searching can also become cumbersome after you’ve filed many documents into what we affectionately refer to as “The Digital Junkyard.”
But, for a defined period of time, even this small level of automation can provide benefits. Smaller organizations with smaller numbers of invoice documents will achieve some benefit here.
As we discussed in Chapter Two, moving from basic capture with structured templates to more advanced technology like barcode readers, Optical Character Recognition (OCR) or Intelligent Data Capture (IDC) can make the process of importing your invoices much faster. Businesses who have a large number of invoices to process can realize significant time and cost savings from having a system automatically read, index, classify and store data.
The next logical step in workflow automation would be to automatically match invoices to purchase orders and utilize electronic submittal – via a document management system for approval.
With proper indexing (as discussed in Chapter 3), all relevant invoice data is stored in the same location, making it easy to search for an invoice and related documentation – all from one location.
With added transparency, everyone from the CFO to the AP clerk can have access to the same information simultaneously without having to search through paper files. With OCR and IDC aiding the data entry process, it takes less time to get the data in, so more time can be spent addressing invoices that are being held up, managing exceptions and avoiding late payment penalties.
The true measure of a workflow solution is how much less work it requires of you. The ultimate goal is to capture, digitize and store documents with the least amount of manual labor. Initiating the AP process electronically can lead to less time in processing invoices and fewer errors.
Advanced workflow improves productivity and business process insight with documents and other business content directed automatically to the right place, at the right time with email notifications — simplifying collaboration and improving efficiency throughout your organization. With automated workflow administered every step of the way – from invoice received to payment processed – businesses can increase speed, reduce costs, enhance visibility, internal controls, accuracy and cash management.
Automated capture from multiple sources – like email, PDF file scans, fax and other systems means there is no data entry to manage. An automated AP system can recognize the invoice, capture index info, classify and appropriately assign the invoice to the correct workflow while simultaneously populating your ERP or accounting system transactions.
Productivity reports can show you what’s been done and what is still outstanding. Invoice 3-way matching is accomplished via integration with your ERP backend and sent for approval / payment. With one-click ERP retrieval or by pushing data automatically into an AP/ERP system, you can eliminate double or even triple data entry. With less time spent on entering information, more time can be spent determining status and assignment of all in process invoices so you can take appropriate action when necessary.
Document management systems can transform manual labor into intelligent, efficient automated processes, freeing up your staff for more important tasks. Ultimately, having invoices enter your system without manual intervention would save even more time.
But this requires cooperation with your vendors. When you compel vendors and suppliers to submit invoices electronically you can eliminate the time to scan these documents, manage paper, postage and handling and are at less risk of an invoice getting lost.
You can also work with them to negotiate early pay discounts. Many of your vendors may already be doing this with other customers and it can’t hurt to start the discussion now as systems across industries are moving to automation.
AP can be a strategic asset to any organization with better control. Identify where you want to be, research what technology fits your needs best and measure the success of your changes.
And don’t stop there.
Document management systems can take care of everything from travel and expense form workflow to HR records management, new hire onboarding, legal, medical and compliance documentation and more. By starting in one area of the business, many systems can be successfully utilized in other departments.
From emailing an invoice for approval to automatically advancing files to multiple branches with complex business rules, workflow – from basic to advanced – is a powerful way to streamline your entire AP Process. And you can start today.