Converting the paper on the front end is generally an easier approach than adopting a true E-invoicing or Procure-to-Pay solution. Less is required by converting your paper to data from a change management and vendor adoption standpoint and the outcome can still yield tremendous business advantages from a process time and visibility perspective.
Whether you receive invoices in a central location or across multiple locations, get the paper converted to image. Once you have it in an image format, you can pass it through Intelligent OCR to extract data and make it highly usable.
Tip 2 - Validate the data
The reason for this is so that the data contained on your invoices can be brought to 100% accuracy and effectively utilized to drive your process forward efficiently. Optical Character Recognition (OCR) on its own is a very effective tool in converting paper and image files to data, but it has its limitations. With a manual validation process against low confidence characters, you can get the data to 100% integrity and move the process forward with solid quality control.
In addition to this, you can get additional mileage out of a bounce against your Purchase Order System (PO System) and Vendor Master File by way of a reverse lookup. This fundamental step can really make life easier for you by validating the existence of vendors or the need to add vendors to your master file in addition to fetching the data contained in the PO system for later matching and automation purposes. This is a highly useful step in detecting and preventing fraud within your AP organization as this step can serve as an introductory check and balance to the process as a whole.
Tip 3 - A fork in the process road - PO vs Non-PO
PO based invoices are a great way to promote internal controls within your Procurement and Finance organizations. In addition to that, they are easier to process in a general sense, requiring less human intervention when fully converted to data. PO based invoices should have all header information as well as line item data extracted and converted data for assimilation with the correlating PO documents and Receiving documents to facilitate the 2/3 matching process. Ideally, this process occurs within your ERP system, as an extension of its functionality, preventing you from reinventing the wheel by having that matching process in a third party application. Most major ERPs provide this ability, though in some cases you might have to rely on the match outside of the ERP.
Non-PO based invoices require should be routed and expedited via an electronic workflow to drive efficiency in processing. Like PO based invoices, you should extract the header detail from Non-PO invoices to identify the appropriate routing methodology. For instance, certain vendors are typically approved by a certain approver and as such, should be routed to that person consistently for expediency. An example of that could be a groundskeeping or cleaning service provider whose invoices are not driven via a PO process and whose ultimate approval always resides with the head of a Corporate Facilities organization. These types of guidelines should be implemented to ensure that invoices get to the right person in an organization quickly for faster processing. Once approved push the invoice data to your ERP for posting.
Tip 4 - Prioritize and Pay Invoices with Terms Quickly
This may seem like a foregone conclusion, but it is important to underscore how this act can quickly impact your bottomline. Many Accounts Payable solutions providers play up the ability of their software or service to reduce data entry and the implication of that can often be headcount reduction and the correlating cost savings. While that certainly may be true, the bigger financial opportunity to pursue lies in increasing your percentage of invoices captured with terms offered.
We'll use one of our clients who has affected tremendous savings by better working capital management courtesy of their AP automation initiative with us. Prior to using our system they were capturing about 10% of their invoices with terms offered. Data suggests that companies that automate their AP processing achieve over 90% capture rates on early payment discounts.
In this case the difference is about $27,000 of impact per week, and their processing staff is only 4.5 Full Time Employees. With an assumption of about $1,000 per FTE, that's a weekly payroll burden of $4,500 compared to $27,000 of potential COGS reduction.
Weekly Payables Dollar Amount
Volume of Invoices/Week
Invoices with terms - 30%
Average Invoice Dollar Amount
Dollar Amount of Invoices w/Terms Weekly
2% savings - 10% of potential
2% savings - 100% of potential
Tip 5: Simplify Your Internal & External Audit Times By Retrieving Invoice Images & Data Digitally
This can also seem like a somewhat obvious item, but the facts are simple.
If your invoice data and images are in a easy to use electronic repository, getting the back up information to your auditors can be painless and accelerate your audit process.
In working with a hospitality industry client, we learned that they were able to cut their audit times by about 50% and they found that when they were able to quickly retrieve and present the necessary documents to the auditor in a way that was painless for their AP staff and for the auditor, that the auditor became less micro-managing.
These are five quick high level tips to making a big difference in how efficiently you process your payables. If you want to learn more about making your AP organization strategically valuable click here. We hope to hear from you soon and as always are looking to help you address any questions you have around improving your Accounts Payables processes.
You can learn more about these tips and other best practices to ensure a rewarding AP automation initiative by downloading our free eBook on 7 Best Practices to AP Automation!
If you want to learn more about benchmarking your departmental efficiency in AP, you can click here and we'll provide you a complimentary Rapid Process Assessment!