Accounts Payable Automation - WNS

Accounts Payable AutomationRealize Sustainable Benefitswith a Well-constructedAP Automation Strategywns.com

Accounts Payable AutomationRealize Sustainable Benefits with a Well-constructedAP Automation Strategy

Accounts Payable AutomationRealize Sustainable Benefits with a Well-constructed AP Automation StrategyAP Automation – The Market for Paperless ToolsPolitical and economic turmoil, thesovereign debt crisis in the Eurozone andthe tsunami in Japan in 2011 createdvolatility in commodity prices anddisruption in supply chains across theglobe. This led to general uncertainty andimpacted businesses, the world over,slowing down recovery across bothdeveloped and developing markets.Although, global economic prospects aregradually improving, downside risks are notallowing economic growth. A recent GrantThornton International Business Reportpredicts growth is projected to drop fromabout 4 percent in 2011 to about3½ percent in 2012.Within this environment, pressuresto realize real cost savings continueto intensify.Accounts Payable (AP) automation can bean answer to the delivery of such realshort-term efficiency savings. A Hackettreport1 established that top performers areprocessing over 40,000 invoices per FTEper annum, whereas non-top performers areprocessing less than 10,000. With reducedcycle times also comes the opportunity toearn early payment discounts, the potentialvalue of which is highlighted in an early2006 Accenture report ‘DynamicDiscounting – Transaction cost savings of50 percent are not enough’. WNS BizApsleading capabilities in this area werehighlighted as far back as 2008 in thePaystream Report 'Dynamic PayablesDiscounting and Supply Chain Finance –A Buyers Guide to Working Capital Solutions.In a January 2011 article on 'CurrentTrends in Paperless Receivables', CraigVaream, Managing Director, J.P. MorganTreasury Services, states that the movementto paperless receivables is being driven bythree factors:nTheneed to become more efficient,especially in a tough economic cyclenTheneed for better risk managementand business continuity programnAdvancesin electronic technologyWhy a Strategy?The market today is filled with solutionspurporting to deliver paperless, problemfree processing of supplier invoices – but topick the solution(s) which would makesense for you, you need to consider:nThe particularpain points in yourcurrent processnThe willingnessand ability of the businessto manage changenThe readinessof suppliers to adoptdifferent ways of workingnThe suitabilityof different solutions fordifferent supplier categoriesnAlignmentwith your technicalinfrastructure and skillsnDo thesums add up? What are the relativecosts and benefits?1AP Performance and the Role of Automation, December 2009wns.com 01

It is also important to adopt a holistic approachthrough making reference to the whole purchase-topay cycle based on the maxim 'Good purchasingmeans easy payment'. 'Good purchasing' in thiscontext means:nSupplierrationalizationnGoodcontract coverage and compliancenHighPO compliancenNegotiatedearly payment discountsHownmuch does it cost your organization toprocess an invoice today?Whichncategories of suppliers account for thegreatest share of the cost?Hownlong does it take to process an invoice?CouldnWhonyou move to self-billing with key suppliers?are your 'problem' suppliers?Hownmuch time do you spend answeringsupplier enquiries?WhatnEstablish Clear Goals andObjectivesAlign your AP goals with corporate goals andpriorities. If the corporate drive is for salesgrowth, then perhaps now is not the time todrive major change in the 'back-office'. Is there abudget available? What are the primaryobjectives of automation?Is it simply cost reduction, on-time payment,improved supplier relations, discount realization,audit compliance, fraud control – or a combinationof all of these?Understand Your BusinessAnalyze your data. Gain a real understanding ofyour process dynamics – do you have too manyfinance (non-PO) invoices? Do you makeduplicate payments? Do you pay on time (notjust on average)? How do you compare toindustry benchmarks? Who is responsible forinvoice entries – how efficient are they?Questions You Should beAsking YourselfnWhatis your level of PO compliance?nDo youneed to rationalize your supplier base?nShouldyou have a central AP function?02 wns.comis the value of available discountsthat are missed due to delayed processing orapprovals?Hownmany invoices do you expect to receiveeach year for the next three years?Whatnare the strengths and weaknesses of therelationships between AP and the lines ofbusiness?Hownlong is the tail of infrequent suppliers?Do 80npercent of your invoices come from10 percent of your suppliers?WNS advises organizations what data to extract(and how) from their Enterprise ResourcePlanning (ERP), and then analyzes the data andreports findings.Benchmark against the Best-in-Class –Know Where You Should BeWNS has access to a range of benchmarkmetrics to help your organization establishrealistic target levels of performance.Efficiencies will be based on the types ofsolutions you are able to effectively deploy.E-invoicing, Self-billing and Purchase Cards areamong the most labor-efficient solutions.OCR and image scanning are perhaps the mostflexible. With certain categories of supplier,a self-service portal may be the best invoiceentry mechanism.

Accounts Payable AutomationRealize Sustainable Benefits with a Well-constructed AP Automation StrategyWhat Can AP Automation Do forYour Organization?Below is a list of benefits – quantified andunquantified – from a variety of analystsources:Reductionnin invoice processing costsReductionnin errors and exceptionsIncreasenin capture of trade discountsdue to faster processing and approvalReductionnin time spent answeringsuppliers' questionsReductionnin routing and circulationcosts for invoice approvalReductionnin archival, storageand retrieval costsIncreasenin the value of APdepartment servicesIncreasenin compliance with auditrequirements, Sarbanes-Oxley, amongothersDemonstratenthe organization'scommitment to sustainabilityImprovenrelations with suppliers withhighly efficient processesImprovenorganization's brand imagein the marketThink Invoice Capture – The Big ChallengeNot all suppliers are e-invoice capablewns.com 03

Whatnis the distribution of invoice volumes?Typically, 10-20 percent of suppliers accountfor 80 percent of invoicesWhatnare the suppliers' capabilities? It issurprising how many suppliers are notcapable of e-invoicingWhatntypes of suppliers exist? Temporary laborsuppliers, consultants, goods for resale, utilitiesoffer / are they interested in earlypayment discounts?A number of invoicing hubs exist with a variedpresence in different geographical markets.These hubs can offer real value in committing toon-board your major (invoice volume) suppliersto e-invoicing via their hub. You then receive asingle consolidated file from the hub. This routeto invoice capture is growing in popularity.Unfortunately, these hubs do not generally offerinteroperability – so it can be all your eggs inone basket!Do theynWNS typically runs a supplier survey to establishsupplier technical capability.Invoicing Hubs and OCROn-boarding suppliers – getting them to submite-invoices directly to your system is a verychallenging proposition. You may be fortunateand find that your major suppliers are alreadye-invoice capable, but a recent survey for a WNSclient showed that only six percent of itssuppliers were so capable.Clearly, some suppliers will never beon-boarded and will insist on sticking to paper.This is where OCR delivers value to 'mop up'non-compliant suppliers.Some organizations have simply redirected alltheir paper invoices to an OCR scanning bureau– receiving a consolidated e-invoice file fromthe bureau. Although OCR will arguably bearguably more error-prone than a hub, it has themerit of not disrupting the suppliers' processes(they continue to print and mail invoices).Some hubs use OCR bureau to capture the tailof suppliers they cannot on-board electronically.Other hubs leave management of the tail to you.Assess Institutional ReadinessTypically, an AP shared-service center iscentral to optimum efficiency, as is thecentral scanning and workflow of invoiceimages. Are these acceptable conceptswithin your organization? Are standard04 wns.comprocesses an anathema to your businessusers? Do you have the skills in yourorganization to handle greater automation?Where are your blockers? Is a no-PO no-paypolicy realistic?

Accounts Payable AutomationRealize Sustainable Benefits with a Well-constructed AP Automation StrategyExternal StateUninformed OptimismInformed OptimismmeCommitrationPast StateFuture StatentloExpInformed ScepticismInformed PessimismYou need to consider:nCurrentnInstitutionalnCurrentability to changesolutions deployednCompetingnInternalReview Available Solutionsprocesses and organizationprioritiesNew solutions are constantly being offeredand existing solutions are gaining inmaturity. The analysis below explorescurrent solution maturity.competenciesPayment Innovation Life cycleIntroductionGrowthMaturityDeclineP-CardsB2B E-PaymentsE-ProcurementOCRPaper CheckEDIFront-end Imagingand atorsEarly AdoptersMajorityLaggardsThe Market for Paperless Tools is Expanding but is Still in Its Infancywns.com 05

An early Accenture Report (focusing on dynamicdiscounting) has noted that: “For manycompanies, invoice settlement processes are, well,unsettling. For one thing, the processes arepaper- and people-intensive, which is why the fullinvoice-to-pay cycle takes between 30 and120 days. In fact, up to 50 percent of paperinvoices are past due when they arrive in accountspayable [and].between 10 and 40 percent ofinvoices involve an exception process, which cantriple the transaction's timeline and cost.”Despite this range of solutions, uptake remainsstubbornly low. Some specific findings byresearch firm Gartner, Inc. include the following:U.S. companies spend as much as USD 150 toprocess each accounts payable invoice. Morethan 95 percent of all business-to-businesstransactions are still settled with paper invoicesand checks. As much as 70 percent of invoiceprocessing costs involve document handling,data entry and related manual tasks.Typical Solution Alignment to Supplier BaseXMLSelf-billingOCR / Image ScanningVendorPortalforQueryHandlingLodge CardVendor PortalTypically, high invoice-volume suppliers shouldbe targeted for e-invoicing. Infrequent or smallsuppliers may be suitable for purchase cards orsupplier portal. The objective is to squeezepaper invoices out of the process by expandingthe adoption of the aforementioned solutions.Paper will inevitably remain and will need to beprocessed as efficiently as possible – hence OCRor simple image scanning and key-from-imageworkflows. As re-assurance, we have a client whois using key-from-image and processing 38,000invoices per FTE.06 wns.comPurchase CardWe will explain the solutions available – theirrelative merits, costs and complexity.The objective is to align solutions to yoursupplier base to deliver the best possibleoutcome for the organization.Solutions AvailableThe range of solutions currently in the marketincludes, but is not limited to:Electronic InvoicesXML or EDI e-invoices with and without suitablemiddleware to enable automatic ERP posting.