Don't Let Your AP Automaton Solution Pigeonhole You

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Author: Craig Abramson
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Author: Craig Abramson

The scenario is all too real. A company allocates budget dollars to automate the Procure to Pay (P2P) process, bringing in a solution that seems to handle everything from creating POs and receiving invoices to automating the accounts payable process and submitting the information to the ERP system for payment. But then when it comes down to implementation, it turns out that the solution only automates one piece of the spend. It completes the processing for the indirect spend but doesnt process POs for direct materials or other supplies. In addition, it cant handle non-PO based invoices. Instead of truly automating P2P, the solution has pigeonholed the company by only handling a piece of the process. This special report shows you how to avoid being pigeonholed by utilizing an AP automation solution that breaks through the limits so you can process all invoices. The Case to Automate AP in the First Place The distributed nature of accounts payable processes often requires approval on several levels, and generates a huge amount of documentation that is difficult to effectively manage. Not only does this increase the amount of time needed to process each invoice, but it also sets the stage for costs to spiral out of control. The average cost to manually process an invoice is $21 according to a recent study by the Aberdeen Group. In another study by PayStream Advisors, the best of class companies are able to drive this cost as low as $5 with successful automation. Productivity and efficiency are critical factors throughout the AP process. Early-pay discounts are out of reach for most companies due to the inefficiencies of paper-based AP processes. The Aberdeen Group found that the average time to process a single paper invoice is 20 days, and other studies have found even longer cycles to be common. At 20 days, the window for early-pay discounts is closed. Companies that introduce effective automation see dramatic reductions in AP cycle time, and are able to capture significantly more early-pay discounts. For companies that process thousands of invoices per month, paper-based AP processing strains internal resources and traps AP departments into low productivity processes. In todays cost constrained environment, low productivity processes are under increasing pressure to improve, and organizations are turning to Accounts Payable automation solutions to drive productivity. Vendor networks and electronic invoices are often seen as the silver bullet to fix the process. However, it is not enough to focus solely on pressing vendors to deliver electronic invoices. Even in companies that have established an electronic invoicing initiative, one study found that more than half of the companies surveyed still received in excess of 85% of their invoices on paper. The costs and challenges for vendors to go paperless have made vendors resistant and slow to convert. Exclusively relying on an e-invoicing initiative to improve AP processing is one more pigeonhole to avoid. A solution that virtualizes the entire back office can deliver the benefits of electronic invoices even when the majority of vendors are still sending paper. Even after adopting an electronic invoicing initiative, an AP automation solution can pigeonhole a company if it is not able to handle receipt of electronic data in a wide variety of formats. There are multiple vendor networks with various electronic invoice formats. Each network introduces a cost and operational burden on vendors. The result is that your vendors may resist joining the network you select. A comprehensive AP automation solution must handle a broad range of formats including e-invoicing, EDI 810, and P-card information. Otherwise, you will be pigeonholed into only accepting electronic invoices the AP solution can handle. By virtualizing the back office, a variety of electronic invoice formats can be accepted and presented in a consistent manner to approvers. There are numerous benefits associated with the use of AP automation solutions in terms of helping AP departments increase efficiencies, reduce cost, and capture early-pay discounts. A complete solution that virtualizes all invoices and incorporates workflow automation offers up to a 90% reduction of costs according to the Aberdeen Group. The result is stronger internal controls, and an overall streamlining of the AP invoice review and approval process. In addition, the improved visibility and instant access to documents eliminates the chance of misplacing or losing paper, duplicating or overpaying invoices, or making late payments. Another important benefit of a comprehensive invoice automation solution is that it allows authorized users to securely collaborate in real time. Documents are delivered through a centralized online solution, and internal personnel, vendors and other 3rd parties can be given instant access, eliminating the costs and delays associated with copying, shipping, and faxing. A centralized solution can deliver improved electronic audit trails. This information provides an extremely valuable internal control that can significantly improve audit reviews and reduce audit costs. The Pigeonhole Problem Numerous companies believe that when they implement a P2P solution, they will also be able to automate the accounts payable process. Unfortunately, theyve ended up being pigeonholed with a solution that only delivers part of the process. The solution automates the payment of invoices that include POs, but it fails to process non-PO based invoices. By focusing on P2P strategies, companies limit themselves to only a portion of the process. An example of this is a hotel company that issues POs for its indirect spend. It implements a P2P solution that automates the processing of PO-based invoices and the assumption is that it will address all of the AP challenges. The problem is that there are still invoices coming in for food and beverages as well as for direct materials. These invoices dont have POs associated with them, which means that the company is pigeonholed because it is only automating the indirect spend. A company can also be pigeonholed by selecting a solution that is not ERP and procurement system neutral. Systems that are tightly coupled to a specific ERP reduce flexibility. Companies change their ERP systems. They may be acquiring or merging with other businesses that have different ERP systems. An AP automation solution needs to be flexible enough to handle information from various ERP systems and not create a roadblock to progress. How LXR Solved the Problem LXR Luxury Resorts & Hotels is a dynamic collection of hotels and resorts dedicated to an entirely new definition of luxury. From bustling urban centers such as New York and Los Angeles to timeless resort locales like Boca Raton and Montego Bay, they offer exceptional experiences and extraordinary memories. Each location received its own invoices that needed to be coded and signed. At the end of each week, the invoices were batched together and shipped to another company for scanning. A business process outsourcing company then retrieved the scanned images, validated the signatures and keyed the invoice data into Epicor, LXRs ERP system. Only then were the invoice images available in a search and retrieval application for end users. The turnaround time to scan the invoices was too long. Because of the delays, it was taking us two to three weeks to have the information entered into Epicor. The time lag, along with a lack of visibility over the status of individual invoices, made our month-end accrual reporting difficult to complete, said Ed Weiss, Vice President of Financial Services at LXR. The company started to evaluate other scanning options and wanted to implement a new search and retrieval solution. They werent planning on utilizing a complete accounts payable automation solution until they learned more about ASPEN 360 Accounts Payable Edition from Archive Systems. ASPEN 360 Accounts Payable Edition is an on-demand solution that automates the AP processes by combining industry best practices with ZeroTouch AP imaging and workflow. By turning to ASPEN 360, we realized that we would gain more control over our entire accounts payable process. In addition, we would be able to transition invoice imaging from the back end to the front end, which eliminated weeks from the review and approval of invoices, Weiss added. LXRs vendors now send invoices directly to Archive Systems Invoice Virtualization Center for document conversion and data capture. The invoices are then routed electronically to the appropriate person for approval based on existing business rules. ASPEN 360's SmartRouting streamlines the movement of the invoices by intelligently knowing where they need to go next. Once an invoice meets final approval, the information is transmitted directly into Epicor for payment. LXR was previously outsourcing 25,000 invoices per month, so they had limited AP staffing. When they brought the process back in-house using ASPEN 360, they were still able to process all the invoices with the same staffing levels. The transition to ASPEN 360 largely meant a redistribution of work among our users. The administration time is minimal. Three people spend less than four hours per day combined to route unassigned invoices to the point of contact at each location, add or modify users, and update or maintain tables, Weiss said. In addition to gaining control over the AP process, LXR was able to reduce the cost per invoice by over 55%. The change to ASPEN 360 from our prior invoice processing flow was a big improvement for our property users. They no longer have to spend time looking for delayed or missing invoices, and ASPEN 360 provides them the tools to efficiently code, approve and research invoices. ASPEN 360s automated workflow tools have significantly improved our controls over invoices and reduced the amount of time required to get invoices ready for payment, added Weiss. Conclusion As LXR discovered, ASPEN 360 Accounts Payable Edition helps companies break free from being pigeonholed in the AP automation process. Archive Systems unique approach to AP automation completely virtualizes the back office and totally eliminates the need for your organization to ever touch paper again. With the ASPEN 360 technology backbone and the secure Invoice Virtualization Service, Archive Systems delivers a full-service AP solution.About the Author:

Craig Abramson is an online marketing manager at Archive Systems.

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