Happy Last Year!

As most corporate personnel start the year with anticipation of the New Year, Financial personnel are starting the process to close the books and prepare financial statements for the Past Year.

The next few weeks will be a constant flow of emails and phone calls attempting to ensure all sales are properly recorded and all liabilities are accurately accrued. Included in the Accounts Payable effort, there will be a scramble to ensure paper invoices floating around in the corporation are sent to financial department.

Adding to the paper nightmare is the fact that many corporations also choose the start of the New Year to implement new policies, guidelines and procedures.

Finally the mantra of the day is “I need this yesterday!” tops off what is already a frustrating stressful scenario.

So what would turn this around to create a true Happy Last Year? Most of the needless inefficient use of valuable resources to shuffle paper could be replaced with leading edge ECM solutions such as provided by Open Text. New procedures, policies and guidelines are available for immediate use to ensure compliance. For example, SAP Document Access enables the elimination of the majority paper shuffle, phone calls and emails by providing immediate access to all unstructured documents and procedures required to properly record sales. Combining SAP Invoice Management with Document Access ensures accurate and timely handling of liabilities by also providing immediate access to policies and procedures as well as supporting documents and by automated problem detection and resolution through business rules and workflow.

Enabling Financial Personnel to quickly and accurate close the books and prepare compliant financial statements without all the frustration of manual paper driven processing goes a long way to move from Happy Last Year to Happy New Year!

See: http://ecohub.sap.com/catalog/?search=open+text#!solution:documentaccess

See: http://ecohub.sap.com/catalog/#!solution:SAPVIM

Are E Invoices Always Correct?

Over the past year, I have noticed a rebirth of the concept that if the information came from a computer it must be correct. One example is an e invoice. The electronic exchange of meta data between trading partners has been around for a long time but most of these routines such as edi also include varying levels of error detection and collaboration. What I have observed is that some embrace e invoicing as a way to eliminate invoice errors. The reality is that merely changing the output format does nothing to change the source of the invoice meta data. There are several business solutions that include routines to "clean up" the meta data before transferring it to an ERP such as SAP but many of the decisions as to how to resolve the incorrect meta data still must come from the receiver of the invoice. Just detecting the problem and sending the invoice back to the vendor often does not eliminate the problem. For SAP clients, SAP Invoice Management by Open Text, allows the corporation to still receive the e invoice seamlessly but then analyzes the meta data for problems and if detected, a notification is immediately routed to the person with both the knowledge and responsibility to correct the meta data. It also provides a critical component where incorrect electronic meta data is analyzed for trends thereby allowing the corporation to address the root cause. Of no surprise...the root cause is often an issue with the origin of the meta data.

One of the first computer terms I learned was GIGO...garbage in garbage out. Changing only the method of invoice delivery often cause more problems than it solves...but...if done in concert with a solution such as SAP Invoice Management...the rewards can be significant!

See SAP EcoHub for more on SAP Invoice Management

Heard at SAP Sapphire

I recently attended and presented at the annual SAP Sapphire conference in Orlando. I expected to see strong interest in optimization of back office functions but after years of attending this event, I was amazed to see the high level of interest specifically around invoice process optimization. One personal example…I conducted a micro forum related to SAP Invoice Management where we expected 10 -15 people…the final attendance was 60 people.
In discussions with many of the attendees, I found a significant growth interest related to vendor networks such as provided by Crossgate and dynamic discounting (DD). The adoption of DD will drive corporations to invest in solutions such as SAP Invoice Management to ensure they achieve a high rate of straight through processing. DD will also require invoice exception processing to occur in very few days as opposed to weeks.
I also see the increased adoption of vendor networks driving standardization of invoice meta data content and format; not unlike what edi has driven in the past. This will be slow to evolve but I think will eventually happen.
One topic that caught my attention…Shared Service. While not a new topic, I feel a combination of searching for efficiency gains and control combined with merger and acquisitions has created renewed interest in shared services. The major difference this time around is focus is on utilizing technology and out of the box solutions such as SAP Shared Services Framework & SAP Invoice Management as opposed to prior efforts that focused on moving to less expensive labor pools.

Problem Invoice: Post or Return to Supplier

I was recent ask by a client when they should send a problem invoice back to the supplier or should they continue to process the invoice.

Variables to Consider

There are several variables that should be considered when making the decision. For this discussion the first variable assumption will be that the corporation has implement SAP as their core system of record. You must also consider if the invoice input channel is paper or electronic. If you are digitizing the paper invoice, you should consider if you want to scan and create an image before returning or return before imaging.

Manual Process

If you process invoices manually, returning the invoice may seem like the simple approach but keep in mind you must keep some record (typically a spreadsheet) that the invoice was received and returned. If you have already received the goods and / or services, you must still ensure proper accounting for the liability regardless of the invoice.

Automated Process

If you have optimized your Accounts Payable processing utilizing a solution such as SAP Invoice Management, the decision shifts to a best practice of processing the invoice to the point of problem detection and review of problem. This optimization allows for fast analysis. Often the invoice is correct and the resolution requires changing the transactional data such as goods receipt. In other situations, it is more relevant to possibly short pay the invoice and if required to issue a debit memorandum.

Audit Consideration

Even if the resolution is to return the invoice to the sender, processing to the failure point and then sending the invoice back creates a strong audit trail related to the original source document. This audit is often needed for disputed payments.

Returning the Invoice

One major consideration with most vendor master files is the correspondence information includes only the contact information required to purchase from the vendor. If you are returning the invoice, it is the vendor Accounts Receivable department that requires notification. The usually prompts the question …“do I have to update thousands of vendor masters”? The answer is typically no. You would only update the vendors that you do the majority of business with and / or those you know have historically sent problem invoices. After that, you utilize reporting metrics to observe when a trend evolves and update the vendor master at that time.

One last decision is whether to include the original paper invoice or an imaging of the original invoice when communication with the supplier that you will not be processing the invoice. If electronic or if OCR is used for paper invoices, sufficient invoice meta data can be included in the notification email. If the meta data has not been captured, then it typically would improve the process by attaching a copy of the invoice. Being able to return an image not only reduces cost but also provides effective control for the Accounts Payable processing.

So…to return or not to return…that is the question…and as with most complicated business processes the answer is “it depends on the circumstance”.

See SAP EcoHub for more information on SAP Invoice Management

Electronic Invoicing…A Dog Chasing the Car

What is Electronic Invoicing? Just a simple search of the internet provides several answers. What is the correct way to write the term…spell it out or abbreviate with big E or little e? Does this relate to outbound invoices or inbound invoices? Is this just EDI? I ask for your comments based on my observation below…when you hear e-invoice…what comes to mind?
For my comments, I will use e-invoice and assume it relates to inbound invoices and I will assume that SAP is the backend solution. Invoices can be received electronically through several methods. EDI has been around for many years and seemed to have reached its peak. Most major trading partners were EDI enabled. EDI also requires a specific internal skill set to maintain. The maturity of EDI provides a proven electronic methodology but somewhat relegated to large corporations. Both large companies and small to mid size receive invoices through direct loads from vendor website and upload of files sent from Vendors. The direct link to Vendors is common with purchasing cards while files uploads are common with utilities. All of these electronic methods have in common the elimination of mail room activity and manual data entry. Another commonality is that all may still contain errors in the invoice meta data. Some consider fax or email attachment as electronic but both of these typically require first capture of the image and from that point they are handled the same as paper invoices.
There is a current trend to consider electronic invoice presentment and payment (EIPP) to be e-invoicing as provided by vendor networks. These networks accumulate invoices (typically those invoices still received by paper) from multiple Vendors and then submit them to the respective multiple clients…a many to many relationship. While these networks continue to be unique to specific providers, it is assumed they will eventually provide the ability to “roam” similar to cell phone networks.
Regardless of how a corporation receives e-invoices, it is how you process the header and line item meta data that creates significant additional value to e-invoicing. Moving from paper to e-invoice does not eliminate the vendor from providing incorrect meta data. It does not remove the labor required to correct invoice meta data, to route for approval or to report on the overall end to end processing. It does not provide the necessary process control or audit trails. SAP not only provides the vendor network capabilities through their Crossgate solution, they also provide SAP Invoice Management which is designed to work with all forms of e-invoice.
So not unlike the dog chasing the car…it is what you do with it when you catch it that makes the story most interesting.

See SAP EcoHub for more information on SAP Invoice Managment

AP and Cash Flow in EU

AP and Cash Flow in EU
Paying invoices late is a worldwide issue. Many companies attempt to apply late fees but are not successful in collecting them. Obviously this is important since it directly impacts cash management including corporate borrowing. Apparently smaller vendors have often become a lending institution for larger companies resulting in government action in the European Union.
In the EU, they are working to secure a level playing field and clear-cut rules for all players, to the benefit of Europe's many small and medium-sized companies. This deal means that SMEs will no longer be forced to serve as banks for public enterprises or big companies.
They are working on legislation that will in most cases require payment within 30 days. If not paid in 30 days there will be an 8% surcharge along with a fixed fee of 40 Euros. While this applies to the EU it is fair warning for the rest of the world.
In the UK, many corporations have already accepted the challenge by the government to pay within 10 days yet late payment continues.
It is my opinion that to assure timely payments, corporations will have to optimize their Accounts Payable solutions including document archive, OCR and most certainly business rule driven automated processing. Other options while appealing on the surface typically add more than late fees. These options include quick pay without any analysis or at the most spot analysis. For those corporations utilizing SAP as their system of record, the solution is immediately available. SAP provides Document Archiving, OCR and Invoice Management for full Accounts Payable optimization. These solutions when implemented should allow not only for improved accuracy, lower staffing requirements, elimination of duplicate payments and compliance control, they will also ensure payment within the 30 day window…or better yet 10 days as in the UK.

See SAP EcoHub for more information on SAP Invoice Management.

Paper Invoices Can Be Best Practice

I am often ask by corporations “what is best practice for invoice receipt…paper, vendor networks, EDI, direct uploads, vendor portal ?”…and the answer is YES. Most corporations rely on multiple invoice input channels. That often prompts the reply…”you included paper as best practice…are you sure?”
While electronic communication has long been best practice for almost every aspect of our businesses, invoices continue to be generated primarily as paper. The obvious negatives related to filing and retrieval of paper is compounded by the variability of the paper. This variability includes where the data is located on the invoice such as purchase order number, the quality of the paper, the quality of the printer, handling during transmittal (folding, staples, getting wet), handling after transmittal (tears, coffee cup rings, more staples) and the addition of meta data such as a time stamp showing date received or hand written notes. But on a good note I am sure that ALL your invoices are in one language and one currency? Add to this the simple task of routing the paper with in a business process (isn’t land mail great!) and you have all the necessary ingredients for making a bad process.
It might be ask that how can this be considered a bad process since paper invoices are currently used by most successful corporations.
It is not how you receive invoices but how you work with them. How you capture and use this business content is what takes you down the path of best practice or bad practice. It is the header and line item meta data that is important in the Accounts Payable processing and not the document itself. The paper is obviously just a mechanism to convey the meta data. Best practice requires that you immediately scan and store the image while linking to the accounts payable posting within the accounting system. The content will be electronically extracted from image, tested and corrected to ensure accuracy and completeness and then automatically posted. The invoice is the result of procurement, which is the component of a larger business transaction that required the purchase. It is necessary to also link the structured AP document to additional structured documents such a purchase order and unstructured information such as contained in emails related to the purchase. It is also a requirement that the AP information be addressed by corporate record retention.
Since best practice in Accounts Payable is more about the content and use of the content than the paper itself; receiving paper invoices can still be a best practice! Many corporations have already taken the best practice initiative of moving to an ERP such as SAP. When the invoice receipt is paper based, SAP provides the best practice solution by offering all the necessary components including Document Archive for scan and storage, Invoice Management for OCR and exception processing and ECM to manage invoices as one component of the enterprise picture.
If you handle the content properly most certainly, those paper invoices can become a best practice.

Rule Based Business Process Optimization

Replacing Human Touch Point…Not the Human Logic
Too often business improvement is just about automation without optimization. When optimizing a business process one must always ask the question “what value does this step add”? When dealing with the every growing meta data processed in an ERP such as SAP, this question becomes most relevant. The transformation from transactional to process flow requires that you take this evaluation and expand it to “what value does this step add and does it require human intervention”. Expansion of the evaluation criteria provides true optimization. As an example, consider the Accounts Payable portion of the procure to pay (P2P) process flow. Typically in a manual process flow there are numerous touch points that require a human touch point to apply logic to evaluate the invoice meta data and make a decision. These touch points include but are not limited to data capture, filing of paper invoices, evaluation of meta data for completeness and accuracy, account assignment and invoice approval. With a fully optimized accounts payable solution such as offered by SAP with SAP Invoice Management, it is possible to build a rule set that captures much of the human logic required to process an invoice and to apply that logic systematically.
Rule Categories Examples
Completeness – Most business processes are based on processing meta data. In AP, the initial meta data is on the invoice. SAP requires that certain information be provided by the supplier. One option is to have a human look at every invoice to see if all the required information is provided. Just one missing data point can result in non value adding time spent researching and collaborating to fill in the blank. Business rules utilize the human logic captured in code to test that every required field provide some meta data. At this point it may be wrong but at least it is there.
Master Data Validation – Once the meta data capture is complete, business rules compare the input against known values in master data to ensure it is valid. One example would be to ensure the purchase order provided on the invoice is within the SAP number range. If not, automatically route to a predetermine role for resolution.
Compliance (Legal Requirements) – Business rules can also ensure that information legally required or required by corporate rules is included. One example is VAT. Business rules can also ensure proper flow of information such as NFE requirements in Brazil.
Country Specific – Most countries have rules to do business in their specific country such as NFE in Brazil mentioned above or GST / PST in Canada. Human logic encapsulated in a business rule never forgets to ensure the information is there for selected countries but does not bother looking when the invoice is from another country.
Best Practice – Business rules can also ensure best practice such as capturing at least 2 approvals for invoices over a stated dollar level threshold.
Most Common / Most Practical – Business rules can also be made flexible so that while typically enforcing process flows such as the 2 approvals required, given selected variables, rules can deviate if it is more common in a specific company to acquire 3 signatures. If due to lack of staff in a remote location one person orders, received and approves purchases, rules can be set to allow one person to handle the process flow in a practical manner.
Reporting on the Rules
When the business process is initially designed for optimal results and automation is applied such as with SAP Invoice Management, it is critical reporting provides process metrics for human analysis. It may be necessary to adjust the follow due to changing business rules. In addition, automation should never be hidden in the “black box”. It is all too easy for those with fraud on their minds to use automation to their advantage if no one is watching the output…so…when you eliminate the human element during the process…do not eliminate the human element in review of the output. Even if you utilize automated trend analysis to spot trouble points, it always requires that human element to decide if variations are random or “randomly on purpose”.
Don’t Rule out Success…Rule in Success!
Not only does the application of business rules enable improved accuracy in the Accounts Payable process flow, it frees up the Accounts Payable Professional to focus more attention on those value adding task such as cash flow management and vendor relationships. The economy has resulted in cyclical employment levels in back office functions like Accounts Payable. Capturing and automating the human logic where possible, prevents the loss of critical process knowledge during economic downturns.
In my various speaking engagements, I often ask how many things typically go wrong when processing an invoice…the answers normally vary between 5 and 15. SAP Invoice Management applies 47 unique business rules and if you consider many are run twice…once for PO invoices and once for Non PO Invoices…the rules are applied 71 times. Checking an invoice with 47 rules rather than 15 yields significant improvement in the completeness and accuracy of financial data while ensuring compliance. In summary, utilize business rules as an integral component of your business process improves initiatives to drive increased success to your efforts.

How To Communicate Without Saying a Word

How to Communicate Without Saying a Word
This can be a difficult challenge in the world of Accounts Payable when working to post invoices accurately and quickly. Just accurately and quickly alone is a major task but when you add “quietly”…is it really possible?
Think of all the people involved…Accounts Payable Professionals, Approvers, Corporate Procurement, Field Procurement, Receiving, Contract Management, Master Data Management, Tax Professionals…just to name a few. There are a number of Vendors offering solutions to address the accurate and quick...although in many cases you have to decide…do you want it accurate or quick…one or the other but not both. Yet very few address the quietly issue. Why is this important? For invoices that are received and immediately posted without any human intervention due to issues such as problem resolution or approval, communication is not a critical factor. Yet when that 80/20 rule kicks in where 20% of your invoices result in 80% of the problems, the Accounts Payable Professional must reach out and communicate. They need to communicate with the individuals that have both the knowledge and security authorization to resolve / approve invoices as required by best practice separation of duties. As an example, in an ERP such as SAP this communication is often started by running a report such as MRBR to find invoices blocked for payment. Without a solution that includes “quietly” as a building block, the first communication triggers a barrage of activity including but not limited to emails, phone calls, entries into spreadsheets for follow up, follow up calls, making copies of invoices and pulling contracts.
So how do you add “quietly” to the process flow? You must examine the entire process flow from how you receive the invoice, how you capture the meta data at the header and line item level, how you determine if there is a problem and then who must be involved to resolve / approve. Equally important is anticipate what that person requires to complete the task…such as…access to invoice and related document images, history of others that have worked on the process including their comments, transactional data such as purchase order, goods receipt, prior postings to purchase order and options to resolution / approval.
One excellent example of a “quite” solution is provided by SAP with their SAP Invoice Management and optional OCR.
One last thought…quiet extends to reporting also…you need to anticipate the need for information related to the invoice. While invoice payment status is certainly important you must also anticipate others will want to know trends such as invoices paid without problem and if a problem…what type of problem is most common. Yet a truly quiet process goes beyond the expected reporting…the invoice occurred because of a purchase…the purchase occurred due to a larger business process such as a building project and so on. You must anticipate that others must be able to see the invoice as part of the bigger picture. This bigger picture is ECM. You would expect that a large ERP would anticipate this more holistic requirement and SAP has also done that by providing an ECM solution through it partnership with Open Text that takes the invoice and quietly makes it available as part of the ECM big picture. This allows you to see for example all the invoices from one vendor on one project in one virtual view or to see all the invoices related to the project regardless of vendor. No longer is it required to communicate and ask the Accounts Payable Professional to accumulate all the related information and wait for a response…it is already waiting for you to access immediate and quietly.
So…Accurate…Quick…Quiet…yes it is possible!
See SAP EcoHub for More on AP Optimization

You Never Know What You Never Know

You Never Know What You Never Know
Fact or Fiction
I have heard it said that “you only know what you know and you never know what you never know”. In Corporate Accounts Payable, this is a dangerous scenario. Below is a sampling of not knowing…
How Much?
It was a Friday afternoon, sun shining and birds singing…everyone was happy at a large CPG company. Everyone knew their products because they were constantly advertised. Just after lunch their major advertising vendor called and wanted to know why they had not been paid the $5,000,000 owed to them. The AP Manager reviewed the account with the CFO and they determined they only owed $500,000. They called the vendor back and told them they did not have the invoices. The Vendor explained they mailed them to several different Division VPs. When the CFO contacted the VPs, they found the VPs had the invoices on their desk. They all had reasons for not having sent the invoices to AP.
What they did not know…$4,500,000 in liabilities past due!
Why it mattered…Vendor will not do more business until paid. They want 50% payment up front. Balance Sheet would have been understated.
Give Me My Car
Business was going great for chemical company. They sales people were happy because the company had recently decided to provide nice company cars. As part of the fleet deal, the CEO was also provided a car. The cars were routinely maintained by the leasing vendor. After a scheduled maintenance appointment, the CEO stopped by to pick up the car. The dispatcher checks the computer and then told the CEO…”No. You can’t pick up the car until your company has paid its bill”. The CEO became very familiar with the Accounts Payable Manager.
What they did not know…each month the Fleet Manager had to approve the invoice. The Manager had gone out on long term disability and the person taking their place was not aware of they had to approve. They thought the invoice was just a copy for their file.
Why it mattered…Vendor was also refusing to return several cars in that time period. Several on the sales team were missing appointments. A very large early payment discount was being lost.
The Log Ride
Much like the long line at the popular log ride at the amusement park on a hot summer day, the Accounts Payable Professional at an energy company had a very long backlog. They had recently gone through a merger and their work had grown significantly…without much additional labor. Overtime became routine and temporary personnel had been brought in. It just so happened that one of the employees “retired” during the merger saw an opportunity to commit fraud through false billings. The situation was compounded in that the invoices from the “factious company” were being handled by a temp with a backlog. Only after a post merger audit was the activity uncovered.
What they did not know…significant payments were being made to factious vendors.
Why it mattered…money was lost and never recovered. Showed others how easy to commit fraud.
Only when the Accounts Payable process is under control will these stories move from real life drama to fiction. Implementation of an automated rule driven process optimization will significantly improve Accounts Payable processing. As the stories above would promote…control receipt of invoice along with movement of meta data from invoice to general ledger, strictly control and monitor invoice approval and invest in efficiency gains so that Accounts Payable Professionals have the time to properly analyze the invoices.


See SAP EcoHub for More on AP Optimization

Accounts Payable Shared Service - Round 2

Accounts Payable Shared Service - Round 2
In past years, the never ending search to increase corporate productivity led down a path to shared services. It quickly became apparent that one quick win was Accounts Payable. In round 1 many corporations equated shared services with moving the same functions to a less expensive labor pool. Obviously direct labor cost was reduced so this was deemed a success and others joined the movement. As the demand grew, basic economics kicked in…the law of supply and demand. The demand grew for skilled workers. In some areas once thought of as the place to move the tasks, the workers now move every few months due to double digit wage increases. The net result is the people processing your invoices are entry level and about the time they are trained; they are off to another company. When you compound this with the issues around time zones, language and scalability; the winner of round one may not be so clear.
As corporations reexamine their shared service concept, they are often finding that moving the transactional functions back within the corporate walls makes more sense. This is especially true when they take advantage of the process optimization and automation provided by ERP such as SAP Invoice Management by Open Text. The new solutions provide the ability remove non value touch points while replacing critical manual touch points with immediate electronic touch points. This is not to say human logic is eliminated, rather it ensures when required, the right person has the right information at the right time. In addition, AP processes now have a single point of contact. Standard process is the rule rather than the exception.
The winner of round 2 is definitely the corporation that utilizes the strength of an ERP combined with process optimization and automation. Best of class invoices are received and posted immediately without human interaction and those invoices that have an issue are resolved and posted in 1 – 3 days. Cash management is optimal, balance sheets are correct and timely and reporting promotes continual process improvement.
What will determine the winner of round 3…mobile AP functionality, dynamic discounting, ERS, standard invoice format, vendor networks, ?


See SAP EcoHub for More on SAP Invoice Management

Standard Invoices

Why not require all vendors to submit standard invoices? If you are like me, you can immediately start thinking of reasons this will never work but it has already worked for some. For years trading partners using SAP have utilized edi to send invoices in a predetermined format.
With the continual pressure to reduce cost, many corporations are moving to electronic invoicing but paper still constitutes the majority of invoices. To reduce the cost of processing paper invoices many corporations are implementing OCR solutions such as the optional OCR included with SAP Invoice Management by Open Text. Having a standard format for invoices would significantly enhance the OCR process. Even for those entering invoice meta data manually, standard invoice format would significantly reduce the time per invoice.
With a standard format, it would be expected that the vendor logo be located in one section and header information would always be found in the same place. Typical line item details would also always be consistent in format. The standard may need to be of several variations such as one for services and another for goods. The format should also be international so as to include relevant tax information.
Changing is never easy but a onetime investment in the effort could reap continual rewards in efficiency. While it would not be realistic to expect 100% participation, even if a corporation achieved 50% standard format invoices, major improvement would result.
The continuing pressure on profitability may be just the impetus to facilitate moving an old idea into the mainstream.

See SAP EcoHub for More on AP Optimization

AP and Hot Topics for 2010

The following are four Accounts Payable “hot topics” I see for 2010…
1) Paper is still with us! It appears that the movement to electronic invoices continues but at a slower pace than might have been expected. Paper invoices are still the most common form of invoice receipt. The good news is that Optical Character Recognition has improved and the focus is now on accuracy in reading the line item information accurately matching to the PO line. There appears to be greater cooperation between suppliers and their customers to ensure the necessary information is available on the invoice required for proper matching. The optional OCR for SAP Invoice Management by Open Text is being adopted by many SAP centric AP departments.
2) Whether driven by the economy or the desire to increase value to the corporate stakeholders, many corporations are moving to a shared service center for Accounts Payable. The concept of moving the functions to a cheaper labor pool and calling it shared services has had mixed results. What has been exposed is that locating AP in a remote geographic location can result in communication issues. Problems go unresolved for longer periods of time. To facilitate world class shared service centers, corporations are implementing enterprise solutions such as SAP Invoice Management by Open Text to provide controlled business processing. Not only are these solutions improving the day to day transactional processing they are generating information to internal and external clients that allow for continual business improvement.
3) Fraud is nothing new to corporations but too often the focus has been on reporting that detects the fraudulent activity after it has been committed. The cost of fraud recovery can be staggering. Many corporations pay out 30% - 50% of their gross revenue back out to suppliers through Accounts Payable. The fraudulent actives around AP are well documented but until recently, prevention was dependant on a human catching the attempt. In 2010, corporations are moving to implement business rule driven solutions that test for activities such as billings from suppliers not in their system. In addition these solutions provide the metrics to highlight trends such as a single vendor continually overbilling.
4) Last but certainly not least…Accounts Payable personnel are being recognized for the Professionals they are. Organizations such as International Accounts Payable Professionals (IAPP) are providing focus on the power of an Accounts Payable Professional. As mentioned above, AP is critical in fraud prevention. In addition, the optimization and automation of the day to day processing has allowed AP to focus on cash management improvements, improvement in accuracy of financial statements through accurate liabilities and proper inventory valuation and providing thorough and timely financial information to stakeholders from Operations to the CEO. It is becoming common for corporations to require a professional certification of all Accounts Payable personnel upon realization that Accounts Payable is a key component in a world class business!

See SAP EcoHub for More on AP Optimization

AP Fraud Follow Up

n a prior blog I made a few comments about the growing problem of fraud. I took part in a webinar sponsored by SAP through IAPP a couple of weeks back and I learned a lot from my co presenters. The focus was on AP Fraud and how SAP Invoice Management by Open Text helps eliminate fraud before it happens. I encourage you to check out the webinar on IAPP and download the associated white paper.

One interesting question during the Q&A session was “has the control mandated by SOX reduced the occurrence of fraud”. The answer was … no! A case can be made that economic pressures may be driving individuals to seek ways to cope with personal financial problems. My observation is that many companies have focused on the control of the individual transaction as opposed the process. SOX section 404 talks about “process control” and not transactional control. I feel it is essential to remove as many non valuing adding human touch points as possible not only to streamline the process but to also remove temptation. For those touch points that remain, utilizing a rule based solution such as SAP Invoice Management by Open Text to involve the right person at the right time with the right information provides the opportunity to tighten controls and ensure compliance.

Another importance aspect of the overall process control is to immediately secure the original invoice source document and access the image during controlled processing. It is not only costly to route around the original or copies of the invoice, it also opens the door for manipulation of the document. Paper invoices should be digitized immediately upon controlled receipt. Immediate scanning secures the source document while reducing the cost to copy and distribute the invoice.

See SAP EcoHub for More on AP Optimization

PO Based Invoice are a Best Practice but are they Most Practical

Many in the P2P world agree that best practice is to create a purchase order before procuring goods and services…but…is that always the most practical?

If purchase orders are a best practice why do so many corporations pay invoices without purchase orders? It is not uncommon for major international corporations utilizing a strong ERP like SAP to have 50% or more non PO invoices. SAP provides an excellent tool set for the creation and approval of purchase orders. All of the benefits you would expect from a world class solution are there for the taking. So why not demand all invoices be PO based?

From a practical view, there is a point of diminishing return where the cost to create, approve and issue a purchase order is more than the cost of the goods being purchased. You may not want to create a PO to purchase a $5 book but at the same time, why would you purchase $5,000 in services without a purchase order?

In some companies, the purchase order is created only after the services have been rendered and the invoice received. The reason often given is that they don’t know the actual hours until the invoice is received. This scenario seems to only capture the budget reporting benefit of purchase orders. It is not considered practical to create the purchase order up front.

While processing 50% non po invoices is uncommon, I have worked with some companies where there is a corporate mandate that only selected invoices will be paid without a purchase. Tax payment, contributions and legal invoices are some that fit within the non po realm. In some companies as few as 5% of invoices are paid without a purchase order.

Is the acceptance of invoices without a purchase order always more practical or just easier? Most of us have “hated” filling out a purchase request at some point in our jobs. If ordering the $5 book without a purchase order is quick and easy, we tend to make larger purchases without a PO also. This can quickly become the norm. As companies tighten their budgets there seems to be a new commitment in P2P world to fully embrace the best practice of utilizing purchase orders. Is your company demanding the use of purchase orders…if not…should they?

For more on Accounts Payable Automation and Optimization see the SAP EcoHub for SAP Invoice Management by Open Text.

When Is An Invoice Approval NOT an Approval?

Possibly when the approval is ALWAYS “approved”.

As part of the implementation of SAP Invoice Management by Open Text, we conduct a blue print session to ensure all business requirements are met rather than just automating the current process. During the blue print sessions, the subject of non purchase order invoice approval is often an interesting discussion. Companies that have implemented SAP find that utilization of purchase orders and the associated release strategy has required them to implement a rule driven approval process. They often take advantage to simplify the rules at this point.

But for invoices without a purchase order, it is common to have a complex approval matrix that has developed over time. The matrix is often kept in spreadsheets and with manual interpretation by the Accounts Payable department. The matrix design evolves with input from various sources to fulfill various needs...some of which are not approvals at all.

The use of purchase orders helps with managing budgets, conversely purchasing without a PO can lead to unfavorable departmental budget variances. Departments forget what they have spent only to be surprised when cost reports and budgets are reviewed. One very common method to overcome this loss of visibility is to require all non PO invoices to be approved by departmental management. In this scenario, the invoice is almost always approved. The reality is they are not approving the invoice, rather it serves as an early notification of their spend.

A case can be made that these “always approve” approvals should be eliminated from the approval matrix. Should the Accounts Payable process be slowed for these non approvals…assuming without a pressing reason to be timely in approvals they often sit in the queue of the approver for long periods of time.

Obviously, these individuals need to be aware of their spend to effectively manage their departments but I suggest this information be passed in the form of a report and not an approval.

So next time someone request they be added to the approval…ask the simple question…would you ever not approve?

See SAP EcoHub for More on AP Optimization

Accounts Payable and Economic Stimulus

It is difficult to go a day without seeing or hearing something about stimulating the economy. The basic tenet of the effort is to get more money flowing in the economy.

Most often this is thought of related to spending, i.e. “buying” or “procuring.” Too often, we do not consider the second part of the procure-to-pay (P2P) equation and that is “paying”. It is well documented that in many situations it is advantageous for a company to extend the Days Payable Outstanding (DPO) in order to increase working capital. While in the short run that is completely logical, one must consider the full economic supply chain.

Late payments to one supplier compounds into late payments to downstream suppliers. In order to compensate, the suppliers must raise prices, eliminate discounts or go out of business in many cases. This narrowing of the available selection of suppliers inevitably causes a trend toward higher prices from the remaining suppliers… hence the law of supply and demand.

Fiscal responsibility to the corporate stakeholders goes beyond the current economic crisis. Corporations and Government that realize the importance of their Accounts Payable (AP) departments have invested in the necessary tools to optimize and automate the payment process.

One example where commitment to AP process optimization has been realized can be found in the England. Government officials pledged to pay suppliers within 10 days. While the typical AP issues have prevented this from becoming the norm, it does demonstrate the governments understanding of how AP impacts the economy.

SAP provides the granularity of information required to fully manage complete P2P transactions. Implementation of SAP Invoice Management brings the power of the individual transactions into a tightly controlled process while providing a comprehensive view into the process from invoice receipt whether electronic or paper (via optical character recognition (OCR)) through to exception resolution.

As companies and government order goods and services, it is essential that payment for these goods and services be managed as a process to keep the stimulus flowing, rather than coming to a stop with the first purchase. Financial management must provide immediate and full visibility and control of the AP process to fully participate in the stimulus so that it ultimately provides the benefit we expect.

So…is AP an undeniable significant component of economic stimulus initiatives around the world? I for one say YES!

See SAP EcoHub for More on AP Optimization

AP Multitasking

One significant advantage of SAP Invoice Management by Open Text automation is that it reduces or eliminates calls from vendors inquiring about when invoices will be paid. In a manual process, the AP Analyst often receives several calls per day while they are entering and posting invoices.

In reading a recent article on multitasking I was reminded that being interrupted during a routine task such as entering and posting invoices results in significant time loss and leads to errors.

The article point out that workplace studies found it can take up to 15 minutes to return to a deep state of concentration after a distraction. It also mentioned that when our working memory is presented with a new problem, within 15 seconds it will become difficult to recall the prior issue. This is not unlike the stories we hear about how using a cell phone is a major distraction from driving our cars.

If you apply this logic to the world of an Accounts Payable Analyst, you can quickly see how receiving one “where is my money” phone call from a vendor can have a dramatic impact on the number of invoices normally processed around the time of the call.

By ensuring the vendors are paid timely and accurately, the distracting phone calls are reduced if not eliminated. Fewer distractions results in more efficient processing of invoices

See SAP EcoHub for more on AP Optimization