CloudX Blog

Why AP Automation in Healthcare, like Rod Tidwell, gets no love!

Posted by Steve Briggs

Apr 4, 2013 10:01:00 AM

AP Automation gets no love!

 "I get no love from Nike...!"

Healthcare is a whirlwind industry to be in at this moment regardless of whether you’re a healthcare provider, hospital administrator, or a healthcare IT vendor thanks to the American Reinvestment & Recovery Act (ARRA).

So do you love the American Reinvestment & Recovery Act (ARRA)?  You’ll no doubt get a variety of answers to that question depending on who you ask, and this hold true for the business of healthcare.  If you were to ask Judy Faulkner (founder of Epic) she’s very likely to say that she loves it for a variety of reasons with one of those reasons being that she’s now worth around $2,000,000,000.  Yes, that’s two billion dollars, and while it would have been easier to write “two billion dollars” I personally feel all those zeros really drive the point home.  If you were to ask that same question to Neal Patterson (CEO of Cerner) he’d probably say the same thing too considering he’s now worth $1.4 billion dollars (I’ll spare you the zeros).

Show Me The Money!

Ok, so we get it that some of the vendors are happy, but what about the healthcare system administrators.  It’s a whirlwind world they’ve been living in right now trying to meet “meaningful use” criteria.  They’re dealing with a “carrot and stick” situation in that they need to implement all this lovely technology (amongst many other things) in phases by various dates, and in doing so are met with a lovely reward of ARRA money.  However, if certain criteria is not met then say bye bye to that Medicare & Medicaid reimbursement.  IT leaders, while they’re going greyer at much faster rates, are generally getting some funds approved to tackle a variety of projects to meet this “meaningful use” criteria.  The bottom line is that they’re getting funding to make improvements.

Oh yeah, let’s not forget that the business of healthcare is centered around taking care of people, and to do that sometimes you need to buy some new equipment.  You know....  small things like CAT scan machines (up to $3 million), MRI machines (again up to $3 million), diagnostic quality monitors for the radiology staff (expect to pay tens of thousands of dollars), and so on.  Yes, all of these healthcare tools can cost a pretty penny.  But hey, it’s the sick patients that bring in the money, so you gotta do what you gotta do.

I love AP People!!! 

So how much of this money get cycled through the back office to improve things like the Accounts Payable process?  Probably about as much money that gets passed over to Materials Management.  About the same that Human Resources receives to enhance the HR systems.   Translation...nada mucho!

The bottom line is that generally speaking the departments that make the hospital run from a business perspective oftentimes receive a fraction of funds to enhance and streamline the operation components to the organization.  Granted, Accounts Payable software can cost quite a few bucks, and one can understand why this is the case, but it still can stink pretty bad for the people that work in those areas.  It’s like being on the freshman team back in highschool and getting the worn, ragged, and irreversibly smelly jerseys from the varsity team of long ago.  At least that’s what it can feel like sometimes. 

Hmmm....  I wonder how hospital administrative staff might think if they realized the literal cold hard savings that could come from faster invoice processing and increased early pay discounts (EPD).  Here’s a good benchmark to shoot for in guesstimating the financial impact of AP automation from an EPD perspective.  Take 10% of your annual payables volume, and multiply by 2% (most common discount being 2% 10 days, Net 30), and you can figure out what might be slipping through your fingers.  This has been a realistic, achievable goal for many of the healthcare clients we’ve worked with, and faster processing and visibility have largely been responsible for improving this specific cost area. 

Do you want more dollars for your department?  Do you want to enhance your processes?  Good for you, but where to start with Accounts Payable automation?  The first step is figuring out how much your current processes are costing you today. 

I could go on and on about that, but I don’t need to considering we’ve already written an eBook on the topic (check it out here)

 

Your ambassadors of kwan!

Also, we’re here to help.  If you want to find out how much your processes are costing you today, and what life would look like if you were a bit more steamlined then we can help with that too through our Rapid AP Assessment service.  By the way that’s a free service do you’re not going to have to ask for any of that $$$ that’s so hard to come by (thanks a lot IT projects, and medical equipment!).  Last, for those who are serious about improving this area, it’s a good idea to get a handle on Accounts Payable best practices from AP software / AP automation perspective, which we can guide you in as well!

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Topics: Accounts Payable Process, Accounts Payable Automation, Invoice Processing, Invoice Conversion, accounts payable best practices, accounts payable improvement

AP Automation Troubles - Reconciling Supplier Statements

Posted by Chris Cosgrove

Apr 2, 2013 10:03:00 AM

 

AP Automation - La Dee Frickin' Dah!

La-dee-freaking-daaaa!

 

Have you ever been in a situation where an outsider interjects their opinions into your conversation or situation without their thoughts being solicited?  Or better yet…perhaps their observation is contrary to a point you were making, and so to speak, steals your thunder.  If not, I suggest that on this April Fool’s day you take a second to watch this classic motivational speech by Matt Foley, when Brian’s dad accidentally subverts Matt’s encouragement in Brian’s presence…big mistake!  It’s my observation that AP professionals sometimes respond with the same amplified ambivalence to the issue of processing supplier statements?  Why?

 

A few reasons to consider…

 

AP Departments are crazy busy!

Supplier Statements are generally issued by Vendors as part of their AR function and they become a tangential part of the Accounts Payable process.  They are designed to be an overview of all invoicing activity for a defined period of time, and as such to be used as a tool to within the AP process to reconcile the period’s transactions.  Often times, there are variances between what’s issued on a supplier statement and the individual invoices that are submitted by the vendor during that period.  Thus, for many organizations establishing an AP audit process for these statements is important.  However, with most AP organizations constricted by existing productivity barriers, validating against supplier statements is a challenging, manual, and slow process that is viewed as a hassle and can often go unreconciled.

 

Statements come in varied formats!

Statements, like invoices, can be submitted in various formats.  Paper based tables, MS Excel spreadsheets, PDFs…you name it!  The challenge also arises that there may exist reference or index data on statements that differs from reference data off of the originating Purchase Orders or that may not align if the items or services were obtained without an initiating PO.  One of the benefits of most Accounts Payable automation initiatives is the normalization of these disparate data sets to facilitate better processing of invoices.  Similarly, you can leverage data normalization from indexing the relevant fields of an invoice or statement to perform automated validation.  The simple example is to run the statement, once OCR’d against the invoices that reside in your invoice imaging database.  Anything that doesn’t match up should be treated like an exception and processed accordingly.

 

The rise in demand for Vendor Portal technology!

The ironic thing about invoice processing is that Suppliers tend to call (aka harass) their customers to check the status of their invoice payments, despite the fact that repeated inquiries don’t do much to advance the processing of the invoice, but more likely, slow the processing of invoices due to distracting the AP staff from their core responsibility.  So, instead of continuing the vicious cycle, the advancement of technology has now created some improved platforms for vendor invoice submission, self service, and communication.  Through a portal approach vendors can electronically submit invoices dynamically for processing, as well as submitting supplier statement information for processing.  Finally, they can also use the search for submitted invoices by status to determine where their invoices reside in their customer’s approval process.  This, in turn, can shorten the reconciliation process for vendor statements, as vendors can even audit their statements against the invoices in their respective processing queues.

 

The many advances in capture and AP software,  workflow, and document management technology have created newfound abilities to enhance process while making it more secure and easy to advance.

If you are not sure of what the right approach to introducing Accounts Payable software is in your environment, check out our eBook below!  In it we explore e-Invoicing and traditional AP Automation, letting you determine what's right for your business!

 

 

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Topics: Accounts Payable Process, Accounts Payable Automation, Invoice Conversion, accounts payable software, ap automation, supplier statement reconciliation

3 Ways Visibility from AP Automation Improves The Bottomline

Posted by Chris Cosgrove

Mar 27, 2013 1:07:00 PM

 AP Automation Gangnam Style!

What's more viral than AP cost savings?

 

One of the most talked, viewed, and buzz worthiest items of 2012 (heck, all time for that matter), has got to be the hilarious and catchy music video by Psy – Gangnam Style.  Similarly, many pages have been written, discussed, and buzzed about (ok, maybe not)  on the myriad ways that Accounts Payable automation projects improve the AP process for AP leaders and staff.  However, one of the common questions that we get from Finance leaders, especially departmental leaders that are looking to gain project sponsorship from their CFO’s and Controllers, is ‘how do you break out cost impacts from a hard vs. soft view?’

Great question…and unlike you in your 9th grade chemistry class, we’re paying attention! J

So with that said, we want to dive right into the issue here and share with you three ways that AP automation, and the Visibility it delivers, helps you improve organization financial health.

 

1.Audit Cycle Improvement

 

 

The typical external  Accounts Payable Audit generally follows one of two courses:

A.  An external Audit firm will look at invoices across a period of time carte blanche.

B.  An external Audit firm will look at selective invoices by GL Code, Department, Vendor, or date range in much more specificity.

Either way, in a manual, paper based Accounts Payable process, the audit cycle tends to be longer.  Why? Because auditors and the AP staff they rely upon have to locate, dig out, and extract the relevant invoices and supporting documentation necessary to identify the audit trail.  Unfortunately, this is a clunky, slow, inefficient, and costly process.   Therefore, by leveraging an automated, electronic Accounts Payable system with document management, it’s common to be able to reduce audit cycles by as much as 50%.  Also, from an AP leadership perspective, it means being able to keep your staff more focused and productive on their core responsibility instead of playing gopher for the Auditors.

 

2. Accounts Payable Accruals

 

One of the primary duties for any AP Manager is the monthly process of closing the books on AP.  Additionally many organizations have the recurring joy of having to forecast spend for the upcoming period, and this is done via an accrual process.  However, in most instances, the accrual process is at best, a predictive guesstimate based upon prior months or years purchasing behaviors.  Not exactly a fly by wire approach to accurate financial reporting, if you know what I mean.  Again, through AP automation, and by indexing invoices with total amounts cross-indexed by GL codes, you can get dynamic, near-instant visibility to outstanding payables spend.  Also, from our experience, this process can range from a half a day for AP staff up to several days in a multi-team member environment, so freeing up resources again to focus on more strategic issues is clutch, and the cost savings associated with it is valuable.

 

3. Early Payment Discounts

 

It’s astounding to me that many organizations capture nominal amounts of early payment discounts.  This could be attributable to poor negotiating on the procurement side, tight cashflow, or inability to advance invoices in process fast enough to meet favorable terms.  Whatever, the case, EPD represents the most significant way the AP organization can influence the financial performance of the greater organization.

With that said, by leveraging a dashboard approach to invoices, and especially term data, you can create an actionable, prioritized list of invoices for payment.  When you consider that a 2% Net 10 invoice discount represent a 24% rate of return, it’s an appealing proposition to leverage cheap money (credit lines for instance) to execute EPD initiatives, though this would most definitely require the sponsorship of either your CFO or Treasurer to accomplish successfully.  With that said, industry data suggests that companies using Accounts Payable software capture as much as 90% of their available discounts compared to 18% in a manual environment.

 

The point here is that whatever your flavor, whether bringing in AP software or going with an AP services provider, there are a bunch of ways to improve your soft costs through visibility in your AP department!

 

To learn more about other hidden costs associated with invoice processing and what to do about them, check out our eBook Below!

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Topics: Accounts Payable Process, Accounts Payable Automation, Improve Accounts Payable, Invoice Processing, Invoice Conversion, accounts payable software, ap automation

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