A Deeper Look At Procure-To-Pay
Last month, we covered some of most important attributes that make up a quality invoice processing product. On the capture front these include ease-of-set-up and the ability to capture line items. There is one other element that needs to be added, however, if you want to turn a simple invoice processing product into complete procure-to-pay (P2P) solution. That is integration with some sort of workflow.
ReadSoft and Open Text are two software vendors that have been succeeding by helping customers manage their entire P2P processes. “Our acquisitions of Ebydos [for SAP environments] and Consit [for Oracle] really moved us into the workflow space,” said Bob Fresneda, the president of ReadSoft, Inc, the U.S.-based subsidiary of the Swedish software developer.
“This gives us a more advanced solution than most of our data capture competitors. We now often find ourselves in competition with workflow vendors like 170 Systems and Open Text, or a combination of a workflow vendor and capture vendor. In many cases, you’re not going to get time to make your pitch unless you come to the table with both capture and workflow.”
Open Text hammers on workflow benefits
Open Text’s VIM is essentially a workflow application that is similar to ReadSoft’s. Both applications run within the SAP framework and offer functionality and modules to more efficiently perform tasks like approval, three-way matching with purchase orders (POs) and receiving documents, dispute resolution, and system monitoring.
Although DIR has traditionally focused on labor savings from automated data capture on the front-end of invoice processing solutions, according to Tom Walker, Open Text’s program manager for P2P, Open Text leads with the savings that can be realized through workflow. For example, an Open Text press release advertises that Energen Corporation, a Birmingham, AL-based energy company, has utilized VIM to help it reduce the number of steps required to process an invoice from 14 to nine.
“If a customer is not using any imaging-based system or collaborative workflow, they are looking at a 30-50% labor savings by installing VIM,” said Walker. “Of course, the real key is not process automation, but process optimization. Before we install a system, we look very closely at the processes our customers have in place, because, as the old saying goes, automating a bad process only increases the speed at which you make mistakes.
“We put steps in place like automatically checking if a customer has a valid line of credit, and if they don’t, triggering a workflow to check into it. If you don’t have controls and automation like that, you run into situations where decisions are made based on the personal knowledge of employees. When those people leave, it can cause the whole process to break down.”
Combined Capture/Workflow Key For Biotech Firm
A recent conversation we had with a Fortune 500 biotech firm confirmed that users are indeed looking for combined workflow and capture solutions to handle their invoice processing. “We initially began looking for an image-based workflow application,” said Nathanael Pearson, a business analyst who specializes in accounts payable (AP) at the firm. “Of course, then we realized you need to have some sort of capture, so we started looking at OCR applications. Eventually, we decided to implement the whole thing as a complete accounts payable (AP) package.”
Pearson’s company began looking into imaging following an acquisition four years ago that greatly increased its invoice volume. “Without increased automation, the only way we were going to be able to address that increase was by adding bodies in our AP department,” said Pearson. “We realized we couldn’t do that going forward, as we expected to continue to grow.”
The biotech firm receives approximately 50,000 invoices per month, about half of which are received on paper. “Our ultimate goal is to increase the number of electronic invoices we receive, but we realize we are always going to have a significant volume of paper, especially from smaller vendors,” said Pearson.
The firm received seven responses to its request for bids, which it narrowed down to three finalists. “We were looking at combined systems from Brainware/Optika [now Stellent], Kofax/Gauss [now Open Text], and Hyland/AnyDoc, before going with the Brainware/Optika option,” Pearson told DIR. “One of the reasons was that we liked the Optika integration with our JD Edwards’ ERP system. We also liked the demo and proof-of-concept that Brainware presented. Brainware’s user interface and ability to create learn sets to handle set-up was impressive.”
The vendor interviews were conducted in Dec. 2003, and the system went live in Sept. 2004. “The integrated application has enabled us to reduce our average time for processing a paper invoice from 29 days to 13,” said Pearson. “This has enabled us to increase the percentage of vendor discounts we take advantage of from 79% to 89%.”
A recent presentation given by Pearson indicated that the firm’s AP headcount, which increased immediately following the aforementioned acquisition, has been reduced by 20% since. During this time, the company has also completed several additional acquisitions.
Capture At Center Of App For Temporary Housing Firm
Of course, not every business is an SAP shop with complex workflows for processing invoices. Oakwood Worldwide, for example, uses a homegrown accounting system to handle payment of the 75,000-80,000 utility bills it receives per month. Oakwood has found a capture-centric solution from Kofax and Phoenix-based VAR Western Office Systems to be the answer to its invoice processing needs.
“Previous to installing the Kofax system, we were manually keying data from all these bills into our accounting systems,” said Brad Niemiec, manger of national accounting processes for Oakwood. “We also had to manually look up and enter the appropriate general ledger code for each rental unit. This helps track the expenses associated with each unit, which helps us figure out our income related to various properties.”
Niemiec is the president of his local chapter of the International Accounts Payable Professionals (IAPP), and through his work with that organization was introduced to the potential of automated invoice processing. “We looked at solutions from about eight to 10 vendors before weeding out the ones we didn’t want. We went with Kofax due to a combination of factors, including our high opinion of their professional services organization, the local support they offered through Western Office, and the price. They were able to deliver everything they promised.”
PSG goes above and beyond
Niemiec’s faith in Kofax’s Professional Services Group (PSG) certainly paid off. “Kofax spent easily a couple months setting up the system for us,” said Niemiec. “Our total population of vendors is probably 2,500, with about 100 making up the majority of our volume. Kofax set up templates to handle those 100. Completing the work actually required Kofax to go beyond the number of hours they had quoted, but they didn’t charge us anything extra.
“We also have a couple employees who worked closely with Kofax PSG. Those employees will handle future templating requirements, with Western Office providing the first line of support.”
A 14-month ROI
Niemiec estimated that 40% of the invoices being captured need no manual correction or data entry. “For the non-templated invoices, operators highlight data and then drag-and-drop it into a table,” he said. “To speed up this process, the system does automatic look-ups from a vendor database that is uploaded each night.”
Calculations done by Oakwood show that an ROI will be achieved within 14 months of going live with the installation this past April. “Our company has been growing approximately 25% each of the past two years,” said Niemiec. “Anticipating that growth to continue, we are hoping to handle an increasing number of invoices with the same or less bodies in accounts payable. We are also looking at a phase-two implementation that would automate capture of data from invoices for purchased goods, such as the linens, utensils, and furniture for the apartments.”
For more information:
http://www.readsoft.com/products/invoices_sap.htm;
http://www.readsoft.com/products/invoices_oracle.htm;
http://www.opentext.com/2/sol-products/sol-pro-extensions-sap/pro-ll-sap-vim.htm
http://www.kofax.com/company/press_releases_details.asp?id=489
http://www.brainware.com/invoice.php
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