creating a paperless & profitable ap department using ap ... kurt wachten… · benefits of...

Creating a Paperless & Profitable

AP Department using AP Automation

Kurt Wachtendorf, APSC, CDIANational Solution Consulting ManagerCommerce Bank

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What Drives Organizations To Want To Change?

Going paperless

• Intensive, paper-based, manual processes

• Increasing volumes of paper from multiple sources

• Green initiatives

• High document processing and storage costs

• Lack of visibility of invoice and other documents in the process

Impacting the bottom line

• Improving processes to be more efficient

• Employee reallocation to higher value activities

• Capturing payment discounts

• Cost savings for paper reduction (win-win)

• Revenue earning card programs

2

Presenter

Presentation Notes

Don’t need to cover this too in depth, but just to intro the two focuses of the workshop will focus on paper reduction and payment strategies that impact the bottom line

Can you go paperless?

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WHAT IS AP AUTOMATION??

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Defining AP Automation

• Automating the invoice payment process– Invoice Capture: Receives paper or electronic

invoices, captures important data, and inputs into a workflow or payment system

– Workflow/Approval: Routes invoice for approval

– Payment and Reconciliation: Processes vendor payments via a number of payment methods (AP Card, ACH, check, wire, Supply Chain Finance)

• Why the need?– Companies looking to increase process

efficiencies and reduce costs

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Making The Case For Automation

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Accounts Payable Account Receivable

AVERAGE INVOICE PROCESSING COSTS

Manual invoice $30.00 per invoice $4.00 per invoice

Fully automated invoice

$3.50 per invoice $2.25 per invoice

Cost Savings $26.50 per invoice=90% savings

$1.75 per invoice=44% savings

AVERAGE INVOICE STORAGE COSTS

Paper invoice $3.90 per invoice $1.90 per invoice

Electronic invoice $1.30 per invoice $1.30 per invoice

Cost Savings $2.60 per invoice=67% savings

$0.60 per invoice=32% savings

ERROR REDUCTION

Automated invoices 37% reduction 37% reduction

How do we get there? Document the process & Activate

the solutionIdentify the right

solution to match

your needs

Creating A Paperless & Profitable AP Department Using AP Automation

7

Understand the current

AP environment

Develop a

payment strategy

Map the current processIdentify goals

and requirements

Calculate ROI

Document the process & Activate


solution to match

your needs


8


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Step 1: Understand the AP environment

“I have to reduce labor

expenses associated with

routing paper documents,

manual faxing, manual

scanning and emailing of

documents“

“I can’t control what I can’t see!”

“I want to gain new levels of efficiencies

without adding personnel”

“Everything is

manual!”

“Allow AP staff and others to

focus on higher value and

more strategic activities. The

goal is to free up 50% of their

current time for this”

“I don’t want to do AP I want to

manage it”

“Cost of manually

processing, handling,

approving and paying a

paper invoice is $12.75”

“I want one throat to choke”

“I need to reduce my costs”

“Too many touches – can

reach 20 times”

“I may not know an invoice exists for days, weeks,

or months”

What We’re Hearing

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Business Challenges

• Increasing overhead and processing costs

• Volumes increasing, unable to add to staff

• Cash flow management

• Little or no audit trail

• Unable to shift staff focus to analysis and strategy

• Industry/Government regulations

10

Presenter

Presentation Notes

Based on previous solution designs, will apply to majority of AP departments. Goal here is to show that we understand what they’re dealing with and are familiar with their problems. Ask if they’re accepting emails? Printing emailed invoices? Cash flow – paying immediately, not taking advantage of terms

Manual AP Process Challenges

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• Paper-intensive processes are slow and error prone

• Manual checks and ACH processing

• Multiple payment files for check, ACH, card

• Missed discounts and/or payment dates

• Need for increased security in accessing information

• Lack of visibility to invoices and their current status

Presenter

Presentation Notes

Based on previous solution designs, will apply to majority of AP departments. Goal here is to show that we understand what they’re dealing with and are familiar with their problems. Ask if they’re accepting emails? Printing emailed invoices? Cash flow – paying immediately, not taking advantage of terms



solution to match

your needs


12


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Step 2: Identify your goals

Identify Goals And Requirements

• Process efficiencies– Streamline invoice receipt, approval workflow, and exception

handling– Provide automated audit trail to meet regulations– Reduce exception rates

• Cost savings/revenue improvement– Eliminate costly paper-based processes– Lower invoice processing and payment costs– Take full advantage of AP discount opportunities– Realize revenue opportunities from commercial card program

• Strategic impact– Utilize immediate access to information for timely and accurate

analysis– Increase controls and enforce regulatory compliance

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Becoming A Profit Center

• Develop a focused payment strategy– Reduce costs to labor, paper, postage and check writing

– Capture early payment discounts

– Maximize revenue opportunity with commercial card program

• Leverage multiple payment options effectively

• Utilize Supply Chain Finance

• Control DPO with automated payment program

• Off-load escheatment process

• Utilize staff to higher analytical capacity

• Maximize ROI of AP department

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solution to match

your needs


15


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Step 3: Map the process

Map The Current Process

• Why?– Provides a clear understanding of where

bottlenecks and slow downs occur, which can be targeted for efficiencies

– Identifies manual processes which can be automated and redirected to higher value tasks

– Shows all paper touch points which can be removed to reduce costs

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AP Process

17

Presenter

Presentation Notes

Do we still need to change formatting? Not much we can change with Visio, unless we change the color of the boxes.

Payment Process

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solution to match

your needs


19


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Step 4: Develop a payment strategy

Supplier

7: Payment and Detailed Remittance

PAYMENTS

WORKFLOW APPROVAL

INVOICE RECEIPT/

AUTOMATION

1: Order for goods or services

Buyer

Automated AP Solution Scenario

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How To Develop A Payment Strategy

• Identify which vendors fit best into which payment type

• Contact vendors to discuss payment terms and discounts

• Explore the use of Supply Chain Finance to free up available short term cash

• Utilize AP Automation to meet your invoice processing and payment goals

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Earn Revenue For Paying Your Bills

• Revenue generating card programs– Aka: AP Card, e-payables, Commercial Card– Use it to pay your invoices with a credit card– Earns revenue share, rebates, or rewards based on the

spend volume– Replaces paper checks

• Supply Chain Finance– Buy Now / Pay Later– Line of credit to pay vendors early to take advantage of

discount terms– Buyer maintains standard DPO; Supplier shortens DSO– Automated processing based on established discount

scale

22

Presenter

Presentation Notes

To intro the concept, don’t want to get to sales-y with this slide

1%

.5%

1.5%

% D

isco

unt

Days

2%

2010 30

Manual Approval

# of

Invo

ices

Automated Approval

60

3%

What Is Supply Chain Finance?

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Why the need?

• Companies wanting to capture discounts for early payment terms (i.e. 2/10 Net 30) but don’t have the short-term capital available

Analyze entire

supplier base

Identify the most value in the supply chain

Leverage different

payment types with Automation

Supply Chain Payment Optimization

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SmallestSupplier

LargestSupplier

Total AP Spend(Includes All Vendors)ACH & Check

Commercial Card

Supply Chain Finance

Total AP Spend

Presenter

Presentation Notes

Show better, Get complete spend file, with all vendors Analyze full supplier base and identify value in the supply chain Automation allows ability to leverage different payment types Maximize available value within payment strategy



solution to match

your needs


25


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Step 5: Identify the solution

Benefits Of Automation & The Cloud

• 25% are currently using some form of automation*– 46% are evaluating using an automated solution

• SaaS / ‘the Cloud’ solutions continue to rise– 26% in IT cost savings **– 62% of companies with cloud solutions improved bottom

line **– 68% of savings re-invested to improve product line,

services, offerings ** – Cloud computing will TRIPLE by 2016 *– No annual software maintenance– No/or little hardware to purchase and support – Lower cost and quicker to implement

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*Source: PayStream Advisors, Inc; * * 2013 Manchester Business School Study – commissioned by Rackspace

AP Process - Redefined

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Mailed invoices are captured

Emailed invoices are

captured

ValidY/N

Invoices grouped for

scanning

Valid Invoice/ Vendor

Confirmed

Electronic Invoice Posted

YES

NO

EDI Invoices

YES

Invoice reviewed and/or approved

NO

Invoice available on Network

Invoice enters workflow, routed to appropriate queue

Invoices Scanned and OCR

capture, Key Verification

PO Matching and Receiving

validation ApproveY/N

Denied Status

Client resolves

exception

What does this mean to me?• Automated entry of invoice information • Exception Invoices routed to proper workbasket for processing• Electronically route invoices for review/approval• Focus on exception and vendor analysis• No manual filing or retrieval• Complete audit trail

Automated Invoice Processing

Invoices staged in Payment

Cycle

Voucher File Transmitted to

Client

Invoice Report ApprovedBy Client

ACH, Card,

Wire, EDI

Paper check

Commerce Bank generates

Payment based upon Vendor Preference

ControlPay

Client generates Payment to

Commerce Bank

What To Look For In A Solution

• Complete purchase to reconciliation solution– Four phases:

• Capture and Process

• Workflow and Approval

• Payment (ACH, Card, Wire & Check)

• Reconciliation

• Implementation/Activation Plan• Security• Self-directed and Rules-based workflow• Integration with your ERP

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Step 6: Calculate ROI Document the process & Activate


solution to match

your needs


31


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

What Savings Are Available?

Hard cost savings

• Invoice processing costs

• Check writing costs

• Increased cash flow

• Business operating costs

• Infrastructure costs

• Compliance

– Lost documents

– Revenue Share

Soft cost savings

– Reallocation of personnel

– Increased productivity

– Improved vendor relationships

• Immediate access to information

• Faster internal communications

• Automated workflow

• Better decisions quicker

• Security & Disaster Recovery

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Presenter

Presentation Notes

Click – hard, click – soft, click - profit Hard Costs: Speak to: Check writing - checks, check machines/printing, postage, envelopes ($1 - $2 per) Increased cash flow: Vendor discounts, Improved terms Business operation costs – Paper, Scanning, Postage / Courier services (paper clips, photocopying charges, faxes, printers, Infrastructure costs - (on- and off-site storage and retrieval, filing cabinets, printers, etc) Compliance – HIPPA, SOX, SSAE 16 Lost documents (a lost document may cost as much as $150 to replace) Soft costs Increase in productivity… - measured by man hours saved not handling paper (standing at fax machine, looking for lost or misplaced files, etc.) Automated workflow – moving documents between locations / departments

What To Do With The Time Saved?

• Work with buyers and suppliers– Pricing, terms negotiation, payment strategies, grow revenue share– 5% reduction in COGS equates to a 22% increase in sales*

• Spend analysis– Accruals, cash requirements over time

• Maximize discounts– Value of 2/10 NET 30 term is equivalent to a 36% gross RoR

• Analyze cycle time– Which vendors are slow to be paid and why?– Where are discount opportunities being missed?– Where does the process break down?

• Focus on exceptions– Address and eliminate the root cause

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*Source: The Accounts Payable Network

Presenter

Presentation Notes

COGS = Cost of Goods Sold RoR = Rate of Return

ROI Overview

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Chosen solution $TBD

Includes: implementation fees, solution design, invoice transaction fees, user license fees, and managed services $TBD per invoice

Revenue Improvement $53,000

Includes: revenue share, pricing, terms $1.77 per invoice

Internal Cost Savings $221,662

Includes: accounts payable labor reallocation savings, annual copy/paper savings, and annual intangible savings $7.39 per invoice

Audit & Compliance Savings $9,668

Includes: post payment audits, escheatment/unclaimed property, and other miscellaneous post-audit fees $.32 per invoice

Summary Return On Investment

Cost of TBD automation solution $TBD

Total Internal Savings $231,330

Total Revenue Improvement $53,000

Net Value to client Year 1 $TBD

ROI 5 Year Cumulative Projection

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solution to match

your needs


36


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Step 7: Document & Activate

Documenting The Process

Why?

• Helps solidify your challenges, ideas, goals in one place

• Use as a tool to gain executive commitment

• Makes sure everyone is literally on the same page

• Describes the requirements and expected results

• Avoid surprises

How?

• An “Accounts Payable Analysis”

– Executive Summary

– Goals and Requirements

– Current Process

– Solution Overview

– Proposed Solution

– Benefits

– ROI

– Implementation Methodology

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Implementing A Solution

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Initiate & Plan

• Strategic vision

• Current process review

• Statement of goals & objectives

• Executive Sponsor meeting

• AP Analysis

Control & Execute

• Onsite workshop

• Revise AP Analysis

• Project plan• Payment

solution installation

• Integration & system conversion

• Status updates

Stabilize & Close

• User training• Project

launch• Project

summation• Ongoing

support• Post launch

recommend-ations & next steps

How did we get there? Document the process & Activate


solution to match

your needs


39


AP environment

Develop a

payment strategy


and requirements

Calculate ROI

Things To Keep In Mind

• Involve key users along with management

• Understand how things are done today

• Create clear, definable goals

• Look at the full process, not just an activity

• Developing a payment strategy is a process, it doesn’t happen all at once

• Identify the costs associated with current processes

• Accept change (change really can be good)

• Document your findings, your goals, requirements, etc.

• Plan, then review, then stick to the plan

• Take pride in what you accomplished!

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Presenter

Presentation Notes

Paperless projects are more than just technology Use the Solution Design to understand the problems, how to solve them and set goals Select a solution provider that can help you with a Solution Design Beware of those who say “you don’t really need this, just trust me” Project management is key to any implementation - be on top of it and make sure there is a methodology and a process in place DRIVE TO DEMO

Learn More

Kurt Wachtendorf, APSC, CDIA+

National Solution Consulting Manager

[email protected]

918-872-9082 – office

918-691-7911 – mobile

Richard Rosselot

Account Executive

[email protected]

951.245.8005 – office

951.285.0930 – mobile

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commercevantage.com

commercebank.com

creating a paperless & profitable ap department using ap ... kurt wachten… · benefits of...

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