Driving Accounts Payable Efficiency through Electronic Invoicing
There are many ways of reducing the cost of processing Accounts Payable transactions, including labor arbitrage. However, some organizations have focused their efforts on driving efficiency in the Procure-to-Pay process (P2P) through electronic invoicing resulting in significantly reduced labor, as well as increased efficiency throughout the process.
A Peeriosity PeercastTM in the Accounts Payable research area featured a global company that chose P2P efficiency as their way forward to effectiveness, cost reduction, and better collaboration with their preferred vendors. The discussion centered on an initiative to drive up electronic invoicing from practical nil to over 90% within five years. Our feature company, three years into this initiative, has exceeded its targets to date, including electronic invoicing at over 70% – well on its way to reaching its 90% goal within the next two years.
As with all Peeriosity PeercastsTM, participants answered iPolling® questions that helped frame the discussion:
The results indicate that the majority of organizations have not reached the 50% level for electronic invoicing and many are below 20%. While there is no shortage of electronic invoicing technology enablers available, the results point to the inherent difficulty of coordinating a companywide project that crosses functions within P2P. Many avoid the heavy lifting of process change and choose labor arbitrage as a sole solution. However, for those organizations willing to take on the challenge of managing across process functions, the rewards are great.
The PeercastTM feature company has been extremely successful in implementing Shared Services globally and partnered with their Global Procurement group for the P2P project. The project, launched in 2009, was part of a Business Commerce Vision for the company that included components of P2P:
- Electronic transmittal of purchase orders, change notices, acknowledgments, etc.
- Electronic verification of invoice against the purchase order
- Automated validation of invoices
- Supplier self-service
- Automated invoice status notifications
- Targets included: Electronic Invoicing at 70% by 2013 and over 90% by 2015 (freight included)
The company already had some technology enablers and invested in others. Tools they used to bring about efficiency to the process (and percent of electronic invoice volume for 2012) are as follows:
- Ariba (41%)
- EDI Direct (35%)
- SAP Freight / I2 (17%)
- Purchasing Card program (7%)
The design team was a highly-empowered relatively small team that included representatives from IT, Procurement, and Shared Services Accounts Payable. The ongoing support and rollout is also a split team with shared accountability for supplier enablement (Procurement), as well as day-to-day support (Accounts Payable). Their motto: “Think End-to-End Process”.
The PeercastTM ended with a discussion amongst attendees regarding what can be done with minimal investment to drive up electronic invoicing rates, bring about more efficiency, and cost reduction. The result was an impressive list:
- Tolerance settings for matching should be reviewed for appropriateness
- Unit of Measure needs to be standard and used consistently
- No backdating
- Standard formatting – invoice number, date, use of special characters
- Materials and services are different and require different processes
- Adopt ERP system rules whenever possible – limit customization
- Challenge the amount of detail required on an invoice (attachments to invoices work well for additional detail)
- Build a portal and make it supplier friendly (with automated communication status)
- Reject paper invoices
- Suppliers need training too!
- Collaborate with Procurement or it won’t get done
- Create common P2P goals, objectives, and KPI’s with Procurement, as well as Operations
- Think PROCESS, not function.
How are you driving electronic invoicing to improve efficiency and reduce costs?
Who are your peers and how are you collaborating with them?
1 “PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion. Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content. Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member. Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees.