This guest blog was contributed by Ken Neal | 10/23/13
Recent advancements in data capture and workflow automation technology provide new opportunities for accounts payable departments to cut costs and become more efficient. We believe that leveraging these opportunities is more important than ever.
According to a study by industry analyst Paystream Advisors, 84 percent of invoices enter processing in formats that include paper, fax and email attachments. Converting these invoices into data formatted for enterprise management software used by organizations requires time, resources and higher costs. In our experience working with large enterprises, the average cost of manually processing an invoice can be approximately $20 compared to $4 for automated processing. Additionally, correcting errors and processing invoices in a timely manner pose other significant challenges.
To help companies overcome these obstacles and improve their AP function, we recommend centralizing and digitizing invoice intake as one important way organizations can begin to effectively transition from manual, paper-based invoice processing to an automated methodology. Centralizing intake enables processing activities to begin more quickly compared to receiving invoices from multiple locations. Replacing manual data entry, digitizing invoices at intake involves using optical character recognition (OCR) technology and implementing business rules to guide the workflow that takes place after scanning.
Centralizing and digitizing invoices can provide up to 70 percent of the benefits projected from a fully automated process. One example is a global cosmetics and beauty company that, after centralizing and digitizing incoming invoices, now completes invoice payment in an average of two days instead of its previous cycle of 45 days. Invoices are received in one location and are usually available in the company’s electronic workflow within 24 hours.
Another approach companies can use to improve their AP function is to automate workflow. This provides a way to effectively transition from manual, paper-based invoice processing to an automated methodology.
Automating workflow involves creating a straight-through-processing system that manages invoices from receipt to payment without human intervention. This includes controlling purchase order (PO) and non-PO invoices within any enterprise management software system. Organizations should also consider integrating straight-through-processing with their electronic content management, procurement and mobile-enabled invoice processing systems. Other considerations include line-item matching, a vendor Web-based portal and a performance management system to monitor results and help ensure continuous improvement.
The benefits of automating AP workflow can be significant. One example is a bank that centralized invoice receipt and implemented an automated paper-to-digital conversion system. The bank also created an invoice validation workflow procedure that prevents duplicate and otherwise unacceptable invoices from entering the payment system. As a result of these and other changes, the bank’s amount of on-time payments increased from 40 percent to 80 percent.
The cosmetics company and the bank are just two examples of how organizations can achieve a variety of important business benefits by leveraging new approaches in data capture and workflow automation. By identifying and implementing new ways to improve workflow, organizations can help maintain their competitive edge and continue to succeed in the days ahead.
Ken Neal is a certified enterprise content management practitioner (ECMP) and fellow, corporate communications for Canon Business Process Services, an international leader in managed services and technology.