Yes, Accounts Payable (AP) is boring! But it is one area of the business that makes your business partners, critical suppliers, and employees successful and happy. If you want to run a good business, pay your partners on-time!
What prevents most businesses from paying on-time and how do you fix it?
Fouled up accounts, duplicate invoices and un-recorded vendor invoices are the main reasons why payments get delayed or consume resources.
Let’s look at a few statistics! It costs about 400% more for a bottom performing company to process an invoice than a top performer. As a percentage of revenue, the AP function for top performers is 0.04% of revenue. For bottom performing companies, costs are 0.16% of revenue according to APQC.
What do leading companies do to streamline their AP processes? They:
- Standardize; and
We helped a global specialty chemicals customer improve AP processes by implementing OpenText – a 2016 SAP Pinnacle Award winner for the 9th year in a row. OpenText offers many solutions for SAP and digital transformation.
Our solution uses OpenText’s VIM, Invoice Capture Center (ICC), and Enterprise Scan functionality integrated to SAP ECC 6.
- Enterprise Scan is for scanning hard copy invoices.
- ICC is for the initial set of business rules to allow for proper routing of the invoice.
- VIM integrates into the SAP transactions such as FB60 – Post Vendor Invoice or MIRO – Enter Incoming Invoice usually matched to a Purchase Order.
Processing invoices through the SAP Invoice Manager with OpenText is straightforward. An invoice is digitized and the meta-data is evaluated according to the business rules.
In our situation, we have basic rules that look at amount, invoice date, PO number, and other information to match the invoice to vendor and PO. When the rules are passed, the data is converted to FB60 or MIRO and posted.
If the invoice match fails, then it is routed for review and troubleshooting.
Our customer’s key metric: 50% no-touch invoices per period.
The business case and justification for centralizing, standardizing and automating is obvious and compelling. Below is a snapshot of our customer’s business case.
Assume that it costs $25 to process a vendor invoice. If invoices are processed as no-touch, the processing cost is expected to be cut in half.
Also, for top performers, it takes approximately 3 days to resolve an invoice error. For bottom performers, it takes a full week or more to resolve invoice errors.
They process approximately 15,000 vendor invoices per month. 80% of these invoices require matching to a PO, approximately 12,000 invoices. Prior to our solution, all of these invoices were processed manually: from receipt to error resolution.
Approximately 15% or 1,800 invoices are no-touch invoices in only the first month of production.
Our solution is smart, it can learn from its mistakes. The OCR and business rules can be adjusted to continually increase the number of no-touch invoices.
To increase the number of no-touch invoices, we analyze invoices with the “80/20 rule”. Improvements for vendors with a large volume of invoices, or highest dollar amounts have the largest savings and greatest benefits.
Based on our other projects with similar business processes and solutions, we have achieved as high as 80% no-touch invoices. Not every customer reaches this level.
The short and long-term benefits that our customer is seeing today:
- Significant percentage of invoices entered without manual handling.
- Reduces invoice approval times through workflow to the field and time spent on errors and exceptions.
- Reduces invoicing entry errors and duplicates.
- Improves AP Analytics and Tracking.
- Reduces invoice processing time by at least 2 days.
- Enables AP department to scale up and down with workload.
Accounts Payable may seem boring, but centralizing, standardizing, and automating can improve your processes and build your relationships with your partners.
Do you want to know how to reduce your AP processing costs or build your business case? Contact Kent Lamb at 972.377.3525 or email@example.com. You can also contact your Titan Sales Director as well. See additional information on our Advisory Services page at www.titanconsulting.net.