optimizing invoice processing with open text vim whitepaper

8/16/2019 Optimizing Invoice Processing With Open Text VIM Whitepaper

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Market Offering:Cross Industry

Package(s):SAP, OpenText

Authors:Kalie Porterfield, Anirudh Damani

Date: April 15, 2014

Optimizing Invoice

Processing with OpenTextVIM


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National SAP Eminence whitepaper

Contents

Executive Summary 1

Business Challenges in AP Processes 2

OpenText Vendor Invoice Management Overview 4

Meeting AP Process Challenges with VIM 6

Business Benefits of Implementing VIM 16

AP Process Optimization Solution Summary 18


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Executive Summary

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Executive Summary

Invoice processing is a time, labor, and cost-intensive process for many companies due toinefficient, manual processes. These inefficiencies can have negative implications such aslate payments, missed discounts, duplicate payment, excessive costs, and poor vendorrelationships. OpenText Vendor Invoice Management (VIM) was designed through apartnership between OpenText and SAP, and its seamless integration with products fromboth companies makes it a holistic solution for AP process optimization. VIM streamlines APinvoice processing activities by automating data capture, invoice approval and invoiceexception routing. In addition, it provides holistic visibility to invoice processing through avariety of standard reports and dashboards.

Using VIM to optimize invoice processing activities benefits not only the AP department, butall parties involved in the Procure-to-Pay cycle. Reducing time, manual effort, and cost of

invoice processing can mitigate end-user pain points, facilitate better supplier relationships,and decrease the cost of doing business.


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Business Challenges in AP Processes

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The AP processes addressed in this whitepaper include invoice receipt and indexing,document processing, approval workflow, exception handling, and posting payment tovendors. These processes fall at the end of the Procure to Pay Cycle, but their executionaffects components from requisition – e.g. a buyers ability to procure products with low pricesand advantageous terms – through receipt – e.g. matching of goods receipt or service entrysheet to the invoice . Well designed, automated processes can help keep the procurementcycle running smoothly, while inefficient AP processes yield challenges and pain points feltthroughout the organization.

High-level challenges associated with the AP process can be segmented to 3 areas:

Process, Organizational, and Technology challenges in Accounts Payable filter down to painpoints for the individuals that execute invoice processing tasks on a daily basis. The keyroles/departments involved in AP Processes include management, the accounts payableteam, buyers, and suppliers.

Process Based

•Long invoice turnaround time

•Late payments, missed cash discounts

•Large amounts of manual activity

•Process Scalability

Organizational

•High cost per invoice

•Supplier dissatisfaction

•Resistance from suppliers to negotiate better terms and pricing

TechnologySystem

•Duplicate invoice entries and/or payments

•Risk of non-compliance (SOX)

•Poor communication between AP and other parts of the organization

•Low visibility to volumes, throughput, and bottlenecks


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Role Typical Pain Point

Management

· Managing invoice processing cost

· Need for reports to identify invoice issues and bottlenecks

· Invoice processing targets not met

Buyers

· Resolving invoice exceptions is not a core responsibility

· Problem invoice resolution is a manually intensive process

· Negotiating with suppliers is more difficult with late payments

AccountsPayable Team

· Manual invoice indexing is time consuming and cumbersome

· Resolving exception invoices is manually intensive and reduces throughpu

· Invoice approval processes

·

Processes that are paper-based are frustrating and can cause rework

Suppliers

· Late payments affect cash flow

· Customer’s often cannot provide visibility to invoice status or expectedpayment date

· Reluctance to provide better terms/pricing when payments are not timely

For many companies, the challenges and pain points associated with Accounts Payable processescan be traced to the manually intensive nature of many key activities, as well as their executionoutside of the system. These manual activities include:

Ø invoice data input

Ø problem invoice resolution routing between parties

Ø invoice approval re-routing due to transition/termination/paid time off

Ø intra-company requests for additional information or input for invoice resolution

Ø vendor communication for updates and additional information

Ø invoice status monitoring and update reports, etc.

As such there is a business need for companies to streamline their Accounts Payable processesusing a technology-enabled solution that reduces the number of manual invoice touches, efficientlyand automatically routes the invoice through approval/resolution processes, and provides convenientvisibility to the entire process.


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OpenText Vendor Invoice Management Overview

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OpenText Vendor Invoice Management

Overview

OpenText is an industry leader in Enterprise Content Management products with an SAP partnershipthat spans over 20 years. OpenText Vendor Invoice Management (VIM) is business solution thatleverages the capabilities of both companies to streamline and optimize a business’ AP processes.The end goal of a VIM implementation is to move the business from outdated AP processes toindustry best practices with a “plug and play” solution.

Core VIM Workflow

The core VIM workflow and document processing capabilities sit between document archiving andOptical Character Recognition (OCR) solutions on the front end and the payment processes in SAP

on the back end. There are 3 main components: Exceptions handling, approval workflows, andreporting and analytics.

OCR data capture and core VIM document processing capabilities work together to reduce manualeffort required to execute invoice processing by conducting the process in the system. This includesOCR data capture, automated or facilitated routing of exception invoices for resolution, andautomated, hierarchical routing of invoices that require approval. Bringing these processes into thesystem provides the data needed for complete visibility and traceability of the AP process for analysisand/or reporting.


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OpenText Vendor Invoice Management Overview

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To illustrate these concepts in practice, consider the following scenarios:

Scenario Pre-VIM Implementation Post-VIM Implementation

AP Clerkreceives an

invoice

Paper or electronic invoice isreceived and distributed to the AP

clerk. The AP Clerk manually keysin all invoice data.

Paper invoices are received andscanned, electronic invoices are passed

through to the OCR component. TheOCR component captures, and validatesthe data before archiving it and using it topopulate the fields in the invoiceprocessing document

An invoicehas missinginformation

The individual processing theinvoice must park or hold theinvoice to seek out the correctperson to provide missinginformation. There is no visibilityto communication as it is outside

of the system. When a resolutionis reached the processor willreturn to the invoice to populatethe information.

If the individual processing the invoicetries to move forward with missinginformation VIM will intervene and routethe invoice to the appropriate businessrole for resolution. The individualprocessing the invoice also has the

option to refer the invoice to a businessrole at any time. The resolution process ishighly visible and traceable because it isconducted in the system.

A Non-POInvoiceRequires

Approval

Customized workflow needs to bedeveloped within SAP for properrouting of invoices based on theorganizational policies. The

workflow can be complex andrequires maintenance.

VIM triggers the approval workflow forNon-PO invoices and automaticallyroutes the invoice to the appropriaterequestor. After the requestor approves

the invoice the system determines if asecond approver is needed. If so the

invoice is automatically routed to theappropriate individual. All approversreceive notifications when they areassigned open approval work items.

An individualwants to see

the status ofan exceptioninvoice

The individual can go into theinvoice itself to see if action has

been taken or must seek out theindividual responsible for resolvingthe invoice. The business mayalso decide to have a custom

report created.

The individual accesses their VIM Analytics report to see the status of the

invoice, the current workflow agent, andaging statistics for the invoice.


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Meeting AP Process Challenges with VIM

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Meeting AP Process Challenges with

VIM

OpenText VIM streamlines AP processes with automated data capture, invoice exception handling,and approval workflows and providing visibility and traceability through reporting and analytics. Thesections below detail the solutions in each of these core areas.

Invoice Data Capture

Optical character recognition can be used in AP processes to extract invoice header and line item

data from a digitized invoice image such as an emailed .pdf or a scan of a paper invoice. VIM itselfdoes not have an OCR component; instead it relies on either OpenText Invoice Capture Center (ICC)or third party OCR component software. The data capture process using an OCR component

includes data recognition, validation, manual intervention if needed, data transfer to an invoiceprocessing document, and data archiving.

The OpenText-specific OCR component user interface, ICC, allows the business to extract and

validate data from paper or electronic invoice images on the front end of the process. This reducesmanual effort associated with invoice indexing, and provides data validation to prevent issues later inthe process. If there are any issues capturing data (the system is unable to read certain fields, theinvoice data capture is not complete, etc.) the user is prompted to intervene; this ensures dataindexing completeness.

ICC uses OpenText Capture Document Reader and an Invoice Knowledge Base to capture andinterpret the information on the invoice image. The Knowledge Base comes trained on samples ofinvoices from thousands of global vendors allowing the Document Reader to recognize 70% of


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invoice header fields on average. ICC also has the capability to learn new fields using Adaptive ReadTechnology (ART) which is a training mode that can be executed by a VIM administrator.

Once the data is captured the fields are validated against ECC master data. For example, ICC maycheck that the vendor number captured exists in the system, or that the PO number captured has thecorrect number of characters. Invoices that have missing or invalid information are flagged asexceptions and routed to an appropriate user for resolution. The user enters/corrects the data and re-

submits the invoice for validation.

Once the data is captured and validated, it is archived in a content repository along with the invoiceimage itself. A standard interface between VIM and the OCR engine brings the captured data into theVIM invoice processing document. Alternatively, the user can key in the invoice information manually.The invoice processing document in VIM is called a Document Processing (DP) Document, and itprovides the user with an interface similar to standard SAP. The view below is referred to as the indexscreen, and contains the invoice data.


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.

Note that the DP document is NOT the same as an invoice document in SAP; rather the SAP invoiceis created from the DP document.

Exceptions Handling

After data is captured, VIM performs a duplicate check for the invoice that is far more robust thanstandard SAP ECC. A duplicate is flagged when a set of invoice field values match those of anexisting invoice document; this set of fields can be configured to meet the businesses needs and maybe adjusted over time if, for example, too many false duplicates are identified. If a suspected

duplicate is identified, a work item notification is sent to the SAP inbox of a duplicate analyst for

review and actioning as needed.

Once the duplicate check is performed, the DP document is processed according to a set of business

rules. Business rules in this context refer to either specific invoice handling procedures (such asparking of invoices with a certain characteristic) or invoice data exception handling procedures (suchas incomplete invoice data). VIM leverages SAP workflow to define 47 standard business rules,

although additional rules may be added as needed. Business rules can be executed from the user’sVIM Dashboard for a particular DP document as seen below.


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If invoice data exceptions are flagged, the DP document is automatically routed to the appropriateactor based on the exception reason and the transactional data in the invoice. The appropriate actorreceives a notification of this open work item to their SAP inbox. They can click on the item to openup the DP document directly.

This invoice may be worked and rerouted based on configurable role resolution in VIM until theexception is resolved. Returning to the dashboard image above, the tax expert may want to refer theDP document to vendor maintenance for resolution in which case he/she would click ‘Refer’ in theappropriate line.

The exception routing and resolution process is summarized in the process flow diagram below.


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Business rules such as vendor data or tax data maintenance can also be configured to trigger parkingworkflow. This workflow is configured separately from PO or Non-PO workflow, but follows the same

logic for exception resolution.

When the DP document is fully resolved an attempt can be made to post it in SAP ECC. If the invoiceis blocked for payment, ECC invoice management rules are triggered along with VIM blockedworkflow. In this case, ECC and VIM work in tandem to provide automatic routing using VIM, visibilityto the invoice in both systems, and payment in ECC.

Invoice Approval Workflow

Invoice approval workflows for both PO and Non-PO invoices are can be configured within OpenText

VIM’s highly customizable invoice approval (IAP) workflow process. Invoice approval identification

and routing is housed in separate subworkflow process from invoice exceptions discussed above andcan be triggered based on the type of DP document (PO or Non-PO) or for specific parking reasons.In addition, approvals can be configured to take place at either at the line item and/or header level.

Using standard VIM configuration invoice approval workflow for PO invoices, if required, is single-level and the approver is the requestor from the PO. This is true whether the workflow is triggered bythe DP document type or a parking reason that requires approval. If the business requires multi-levelPO invoice approvals it can be achieved using custom developments.

Non-PO approval workflow, on the other hand, is multi-level using standard VIM configuration. VIM’sNon-PO approval workflow is level based; individuals are assigned to a particular level in the approvalhierarchy and each level has an assigned approval limit. When an invoice is approved by a first level

approver, the system will check their approval limit and determine if additional approvals are needed.This first level approver is the requestor, and the appropriate individual is determined by either theChart of Authority (COA) data or the email address on the invoice based on configuration. Thesecond level approver, if needed, is determined by company code, approval level, and cost objectassignment based on COA settings. Once the approver has been identified, a notification of open

work item is sent to their SAP inbox – this is true for both PO and Non-PO invoice approvers.


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Clicking on the open item brings the approver directly to the invoice approval screen. From thisscreen they choose whether they will enter the accounting information (if it is a Non PO invoice) and

whether to 1. Approve 2. Reject or 3. Refer the invoice approval to another individual for additionalinformation. If the invoice is referred, the referee will add comments/additional information and referthe invoice back to the approver.

If the invoice is approved by all required parties, the system will either auto-post or route the invoiceback to the AP team based on configuration. If the invoice is rejected it is either routed back to the

previous approver or the approval workflow is cancelled; this is also controlled by configuration. Theinvoice approval workflow is summarized in the diagram below for the former case where the

document is routed backwards rather than being cancelled.

Two other notable functions of VIM invoice approval workflow are the abilities to approve invoices viaa web portal and to delegate approval responsibilities for termination/transition/paid time off.

For web approval the user logs into the SAP portal with their user ID and password and views therequired approval and coding screens much like they would in VIM. A user may also delegate theirapproval responsibilities to another individual via the portal which his can be used for time off or role


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transition. The user must select a delegate with the same authorizations and create effective start andend dates. During the effective dates invoice approval notifications are sent directly to the delegates

inbox and an audit log shows that the delegate approved the invoice on behalf of the originalapprover. The same functionality can be implemented using a t-code in the VIM system itself.

Reporting and Analytics

Execution of AP processes within the VIM system provides a data log that allows for robust, standardreports. The VIM Analytics report helps the user manage and track their open AP work items, theremainder are for management-level visibility and process-level analysis. The metadata used in thesereports is also structured for easy export to SAP BI if the business requires reporting capabilitiesoutsides standard VIM.

A brief explanation and an example output for each standard report is given below.

VIM Analytics

VIM analytics dashboard has two different views: document view and workflow view. Like many SAPECC reports, both of these views can be manipulated in the system, have ALV view capabilities, andcan be exported to various file formats.

The VIM document view gives users indexed data information such as company code, vendornumber, requisitioner ID, and purchasing group for all VIM documents (PO, Non PO, Credit Memo) inthe search criteria. There are 52 available fields in the VIM analytics document view and the report

can be grouped by characteristics such as company, document status, document type, date, month,exception reason, vendor, or workflow status.

For a detailed view of a specific document, the user can select the line and click the ‘Dashboard’

button or view the SAP invoice document by clicking on the document number. In addition the usercan view a particular invoice image or print a copy of the document from the VIM analytics screen.

The VIM Analytics workflow view provides detailed information on the selected document’s exceptionor approval workflow status such as current agent, work item ID, and processing status. This view

looks and functions very similarly to the VIM analytics document view save that the field selection forthe report is geared toward workflow monitoring.


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Exception Analysis

The exception analysis report details all exception work items grouped by exception type, company

code, or vendor. It allows the user to monitor exception frequency, pinpoint vendors or companieswith the most exceptions, total the amount of invoice liability affected by exceptions, and view theaverage processing and wait times for each type of exception. A list of work items with exceptions isalso accessible from this screen with a double click.

Productivity Report

The productivity report shows the productivity of users or roles and the activities executed by theseusers or roles. The report gives an overview of processing time (total and average) and wait times(average), allows for a comparison of productivity between two time periods, gives a snapshot in ofin process items by user or role, and enables analysis of the number of touches per invoice for a useror role. The report also allows the user to drill down to documents processed by or being processedby a user or role.


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Aging Report

The aging report show aging data for documents in process in VIM. This report shows a summary ofin process document age and allows for drill down capabilities from the report screen.

Key Process Analytics

The key process analytics report functions as an executive dashboard that highlights key managerialKPI’s. This report summarizes total liabilities, processed / in process documents, VIM invoices per

channel, first pass invoice rate (invoices that are processed with no exceptions), most frequentexceptions, and top vendors by purchase amount. These process statistics are contained inconfigurable blocks that can be customized to the business’ needs.


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Summary Report

The summary report provides summary statistics for all invoices in the selection criteria that candisplayed in various hierarchies (much like a pivot table).


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Business Benefits of Implementing VIM

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The benefits of implementing OpenText VIM include optimization of AP processing activities, thefinancial impact of this process optimization, and integration with SAP ECC.

Process Optimization and Reporting Capability

Integration of VIM core processes, OpenText data archiving, and OCR data capture with SAP ECCworks to optimize Accounts Payable processes that are often manually intensive, time consuming,and costly. Process improvement benefits of VIM implementation can be seen throughout invoicedata entry, invoice processing and approval workflow, exceptions handling, and compliance andreporting.


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Financial Impact

Although the financial benefits of AP Process optimization with VIM will vary from business tobusiness, the financial benefits can be significant. The table below shows the estimated financialimpact of VIM and OCR implementation provided by OpenText for a processing rate of 500,000invoices per year.

SAP Integration

VIM is designed to work with SAP from both a technical and user experience perspective, facilitatinga smooth technical implementation and user acceptance process. Key integration points include:

· The VIM core processes exist entirely within the SAP landscape

· VIM works with ECC workflows, and is developed using ABAP and SAP technologiessuch as the development workbench, function groups, dialogue programs, businessobjects, workflow definitions, roles, customizing tables, etc.

· VIM uses SAP master and transactional data for data validation, approvals, anddocument creation

From an end-user perspective, the VIM user interface looks and feels very similar to SAP ECC. Fromthe use of t-codes to access screens to the report manipulation capabilities VIM operates in anidentical manner to ECC. The same similarity exists for customizing and administrative activities forsystem setup and maintenance.


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AP Process Optimization Solution Summary

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AP Process Optimization Solution

Summary

This whitepaper defines AP Process optimization as a business need and justifies why OpenText VIMis an excellent solution for clients using SAP ECC.

OpenText VIM is a scalable, SAP-centric solution to optimize AP processes. VIM is built to be apreconfigured solution, and the highly customizable core processes and built in interfaces on the frontend of VIM – for OCR – and the back end – for ECC facilitate a smoother, quicker implementation.

Using VIM to optimize invoice processing activities benefits not only the AP department, but allparties involved in the PTP cycle. Reducing time, manual effort, and cost of invoice processing canmitigate end-user pain points, facilitate better supplier relationships, and decrease the cost of doing

business. In addition to increasing invoice processing efficiency, VIM also provides detailed visibilityand tractability to AP processes for enhanced monitoring, internal reporting, and compliance

capabilities.

VIM’s integration with SAP ECC, process automation capabilities, and potential financial impact make

it a holistic AP processes solution.

optimizing invoice processing with open text vim whitepaper

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