CloudX Blog

Distributed vs. Centralized Capture in Today's Accounts Payable Process!

Posted by Chris Cosgrove

Aug 3, 2016 4:42:52 PM

Accounts Payable Process Mission Critical!

Today’s Mission:  Review the challenges of distributed vs. centralized capture and how it impacts the Accounts Payable process.


In today’s complex and changing business landscape, many organizations have to grapple with a variety of challenges that beset their Accounts Payable departments.  One of these is the inundation of inbound invoices, especially paper invoices or paper-formatted invoices.  While many electronic initiatives like EDI or e-invoicing have resulted in fewer paper-based invoices, the fact remains that virtually all businesses will have to process some subset of invoices that are paper based or PDF (paper formatted electronic documents).  The challenge of invoice processing is a subject that has been examined at length by us here, but you’ve got some options for how you handle the capture of these documents that really depend on how your business is structured.


For most small to mid-sized businesses, there is typically a centralized AP department and process whereby invoice scanning and capture becomes the norm because it fits hand in glove with your organizational structure.  However, for larger businesses or those who are dispersed over a broader geographic area (ie. a multi location retail format), the challenge of capture becomes more difficult.  Not that the problem can’t be solved, as scanners are inexpensive, reliable, and easy to deploy.  That is of course, if you are of the mindset that we advocate.  That is that invoices need to be converted instantly upon receipt to data.  The data needs to be extracted via intelligent, advanced OCR (not archaic template based OCR certainly, and optimally not by your AP or IT staff) in the cloud, which then gets cleansed dynamically with human operators to bring data levels to near perfect thresholds.

 

Document On-Ramps

 

Now in terms of the document on-ramps, there are multiple approaches that would fit this scenario.  For sure, numerous desktop or workgroup scanners could curb the paper by converting it to a digital image.  Alternatively, a monitored, centralized PO box could be amenable unless preventing invoice flow to outlying locations is entirely out of the realm of possibility.  Even leveraging mobile devices for image capture and PDF creation is a possibility in some cases and certainly something that is easily deployable considering the proliferation of smartphones and tablets today.  Anyway it takes, essentially, is the preferred method for routing invoices for capture, but you have isolate the method that is most suitable to your business considering volumes, workflow, capital investment available.  Two other options that would assist with the flow of invoices into AP whether centralized or distributed involve a dedicated, monitored email address which vendors can submit their invoices for processing.  This however assumes that the invoice data contained on the surface level would be enough to auto-identify the key header data which would then enable workflow and processing automation.  In other words, if invoices sent to outlying locations required manipulation of some sort before they are processing by the receiving personnel at the location, then it may be necessary to continue with the aforesaid distributed capture options.  A final, higher-order option is the use of a vendor portal by which vendors could submit their invoices dynamically through a single / bulk upload process into the OCR and validation queue.  So now that we’ve looked at the different cases for distributed capture, it makes sense to turn attention to the centralized capture.


Centralized capture, as we stated above is ideal for small to medium businesses and for large / enterprise level organizations that function in a shared services model.  In this way, you can pool the hardware and processing components needed to streamline the document flow.  We believe a still better way is to process documents dynamically through the cloud, so you don’t have to bring in big ticket OCR technology (which has to be curated and managed extensively and is an expertise that is very nuanced and hard to find in the market) and have your people or hired people manage the data validation efforts.  Besides pooling your personnel and hardware resources, in both approaches to alleviating invoice conversion efforts you’ll want to deploy dedicated email monitoring and a robust vendor portal.  These efforts will directly contribute to reducing the quantity of invoices that have to be physically sorted and scanned.


Regardless of your situation and physical setup, getting invoices converted early in your payables process is the key to unlocking the automation puzzle.  Of course this assumes harnessing OCR and multiple means of automated validation, but the point is that if you’re pushing this method forward, you’re operating in accordance with best practices for handling invoices expeditiously.

Free eBook on  AP Automation vs E-Invoicing:

 

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Topics: Accounts Payable Process, OCR, Advanced Capture

Is OCR right for my Accounts Payable process?

Posted by Chris Cosgrove

Jul 19, 2016 4:01:13 PM

OCR can mean a sweet ride in your Accounts Payable Process

What's the best line for your next ride?


An all too common question that we get from people who are looking at automating their processes is does it make sense for me to deploy such and such a technology? In this case OCR is the item in question.  OCR stands for optical character recognition, and believe it or not, is not some new-fangled thing, but rather a technology which has been around for decades.  It is admittedly not the sexiest of technologies on the planet and thus not exactly one which will be causing legions of fans to go swooning over it at the Javits Center anytime soon, however it does portend significant commercial value for those with the insight and skill to leverage its capabilities in the right way.


How does OCR work?


OCR essentially recognizes data at a character level through a variety of advanced technologies that allows it to compare the character in question to a known library of characters.  Because it stems from a language codex, OCR is offered numerous languages, though some OCR engines perform these conversions on a more industrial and positive basis.  OCR has a few ways of looking through a document for data.  In older, outmoded scenarios of OCR document templates would need to be created and the areas on the page where the relevant data resides would have to be defined.  In this way, you could extract information on an automated basis, but in a way that necessitated deep and ongoing user involvement, especially as it relates to invoice processing.  Whereas schools the world over use Scantron technology (which is an OMR - optical mark recognition system) to facilitate rapid and accurate processing of multiple choice test data, OCR goes a level beyond to actually pick up character strings in the defined areas.  With that said, the complexity of the accounts payable process piles on additional burdens to managing the OCR process because a vendor can change its invoice template at any given time, necessitating a new template creation or augmentation for this older method of OCR.  This just translates to process delay and issues.  


Additionally, managing OCR is not exactly a set of technological expertise that is profuse.  Because of this it is difficult to find and train true experts on the technology as most of the people who have expertise in it are either employees (current or former) on the technology development side of the big OCR software providers.  In fact, we have literally seen scenarios where overzealous IT newcomers who have stepped in to help existing OCR deployments do irreparable harm to their businesses by changing logic and adaptations that had been enacted by previous OCR administrators. Tsk tsk tsk.


Who is OCR right for?


Well the question there depends largely on the transactional value of the documents that you are considering having to OCR?  If for instance you are a part of a multi-billion dollar a year concern and are doing tens of thousands of transactions across a small set of vendors, there may be other avenues to consider...EDI, eInvoicing, etc that may provide you better control and procurement / payment benefits.  However, if you’re a mid-sized company that doesn’t have the deep financial or personnel resources of an enterprise level account, then OCR may be a fantastic fit for you.  Alternatively if you’re a micro-business, OCR could be overkill from an ROI standpoint.


It really depends on the number of transactions you’re touching on a daily basis and the amount of pain, redundancy and time that they are costing you.  One key thing to remember is that you never want to go fly-swatting with a chainsaw, because there will be some damage for sure.  In other words, find the appropriate tool to match your level of business issue / priority.


In the case of OCR we find a real sweet spot for mid to large sized businesses that for whatever reason, may not have automated their processes yet, but want to do so in an economically viable way.  An additional thing to consider is who is managing the OCR process? Because talent is a tricky thing to acquire and retain, we’re of the mindset that if you can divest yourself of having to administer the OCR solution and instead have a dedicated team run it as a service to you, that’s generally a shorter path to glory than building it from the ground up, however again that needs to be evaluated on an objective basis per scenario.


One thing is sure as well.  OCR isn’t going to be obviated by newer technologies in the Accounts Payable arena like eInvoicing or EDI either.  The reason being is that these other approaches require massive effort to onboard vendors, and in many cases you’ll never get to 100% because smaller suppliers who have niche products may not be capable of executing or be even willing to enroll in either of these services.  As such, there will always be some level of paper or paper formatted digital document (pdf) that enters the Accounts Payable process and will require interaction.


So, if you need assistance in determining whether OCR makes sense for you it might make sense to run through a rapid assessment of your AP process, which you can do here, gratis!


That being said, it still may be a technology that is out of reach for companies who can’t allocate the personnel resources or capital investment required to bring it in house.  As such, a better approach may be a software-as-a-service or BPO approach, assuming that makes sense (though this is typically more favorable for large entities with high volume processes).  This is something you’ll need to evaluate for yourself, but if having it in the cloud and performed as  a service sounds appealing then you might like this!


So, there’s no universal guarantee that OCR will make your wildest dreams come true or that it is perfect for your business, but if at some level you’re AP staff are contending with data entry, manual validation and workflows, then it could be the key to unlocking high levels of automation.

Free eBook on The 7 Best Practices To AP Automation!

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Topics: Accounts Payable Process, OCR, eInvoicing

The Worst Advice We've Ever Heard On 'Improving' The Accounts Payable Process

Posted by Chris Cosgrove

Oct 27, 2015 3:43:41 PM


Ever have one of those friends who has the best intentions, but gives absolutely terrible advice?  

 

Like, Godzilla proportions of catastrophe...exactly, that’s what we’re talking about here.

Now, granted, we don’t cover an area of technology or life that’s at the forefront of societal consciousness in terms of personal interest, but our contribution towards bettering horizontal business process shouldn’t be overlooked, because for most mid to large sized businesses, the areas we deal with are altogether a difficult reality to deal with, especially when it comes to the accounts payable process.

 

In our travels, we’ve heard some doozies in terms of near-genius attempts at improving transactional document processes, and while some are harmlessly laughable others are shockingly stupid, almost painfully so.  

 

Well, we wanted to expose these grandiose thought gems:

 

1.  Scanning at the end of the process

I mean, c’mon what’s the point is our essential perspective on this.  This is kind of like drinking Diet Coke or asking for a no-whip hot chocolate at Starbucks.  Some things just ain’t right.  Certainly putting the scanning at the back end of the accounts payable process adds a cumbersome step, whereby the invoice processing has occurred and now the image has to be archived.  Sure, that’s a noble goal, and I think many companies stop at this junction because some of the loftier aspects of AP automation are costly and so there is some kind of a justification mentally akin to ‘at least we’re doing something’.  In this case, perhaps doing nothing is a better option because the only true benefit you get from doing this is strictly from an archival standpoint.  Granted that will save your AP staff some time from having to get up and dig out  boxes or file cabinets to produce an invoice, but it provides little other benefit.

 

If you’re falling into this camp, we really want to challenge you to consider what you’re doing and why you’re doing it.  Beyond that we want to encourage you to move the right process levers that will actually yield a return for you that is sizable and sustainable.  For the love of God, please, please consider converting your invoices and related Accounts Payable process documents (credit memos, check requests, etc.) at the process outset using your own OCR technology or by offloading it to someone to do on your behalf.  It is an investment that will actually enable you to improve all the ensuing process components from data matching and validation, approvals, and GL coding.

 

2.  Shipping batched invoices between outlying and central processing locations

Now this may seem like a reasonably good option for a business with a broad geographic footprint, but in today’s day and age, it’s kind of wasteful in our opinion.  Sure, documents may need to be received in outlying locations for practical business reasons and we understand that, but having to pay $15-20 per UPS or Fedex package once a week per location adds up.  At $20 an overnight package, over the course of the year you get about a $1000 spent.  That would more than cover the cost of a decent scanner, whereby you could eliminate that cost and get the documents into the Accounts Payable process faster than through a bundling and courier process.  Alternatively, organizations can be more nimble and leverage camera technology in phones or tablets and create PDFs dynamically.  Sure, there could be some IT work around, this but it would be minimal, and a one-off investment that kept dollars in the organization.  Shockingly, we’ve seen this in numerous retail scenarios, especially when there is regional control of franchises as back office processes tend to get the shaft rather than reinvestment as the glitzier money making areas of the business.

 

If you’re doing this, it’s time to rethink the approach through invoice centralization or via the other means we outlined above.

 

3.  Leveraging headcount for scale.

 

This being the kicker, we thought it beneficial to address just how ridiculous this really is.  First, any time you leverage human capital to do a job that can be automated by a machine, you’re going to incur human error...that is inevitable.  That being said, we don’t make the case for divesting human labor positions, but we do make the case for elevating the focus of work to higher order opportunities because data entry is for the birds...or the bots as it turns out.  Seriously, if you’re staff is not benefitting from OCR or a capture and validation process then you’re essentially married to an unscalable, inefficient, and error prone, antiquated mechanism for conveying invoice information through the accounts payable process.  

 

Until and unless you get this portion of your people’s day workload, you’re going to be behind the eightball as they toil and sweat under the burden of data entry.  However, the other side of the coin is that once this is gone, you can delve into more strategic opportunities.  Through analysis of your vendor master file, you can identify opportunities to pursue early payment discounts or strategic payments.  What’s that you say...don’t know what that means...well check this out!


So, don’t follow the advice that we’ve exposed and dispelled that some unfortunate souls have profferred.  If you want to have your accounts payable process move like a Swiss watch, then shake it up and do the things that are going to provide you the most bang for your buck!  For starters check out this eBook below on AP automation and you're on your way!

Free eBook on The 7 Best Practices To AP Automation!

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Topics: Accounts Payable Process, ap automation, OCR

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