Top Stories

The Quest for AP Integration
and Optimization

By Tom Walker

“No man is an island, entire of itself...any man’s death diminishes me,
because I am involved in mankind; and therefore never send to know for
whom the bell tolls; it tolls for thee.”

– John Donne (1572–1631),
Devotions Upon Emergent Occasions, Meditation XVII

What does John Donne’s famous observation that “no man is an island” have to do with trends in accounts payable processing? As it turns out, his observation applies to more than just people. For this discussion, it applies to invoices, as in “no invoice is an island, entire of itself.” Unfortunately, many companies treat each invoice that comes in as an island of information and as a result lose much of the broader context of what each invoice represents and where it fits.

When you think about it, an invoice is more than a document that needs to be processed. Typically, an invoice represents items or services that have been delivered as part of bigger projects involving dozen of vendors and hundreds of related invoices. At the same time, there are reams of supporting documents, change orders, email trails and other information associated with each invoice. So while each invoice may appear isolated on the surface, each one, large or small, is connected to a broader business context.

For the AP analyst, however, each invoice does look like an island and when everything matches up can be easily processed. The challenge – and what take up so much time and money – is the inevitable exception. Without insight into the broader business context about where the invoice fits, the analyst is handicapped to efficiently resolve the questions and make informed decisions. Similarly, project managers are unable to accurately see the big picture on projects without being able to see the full scope of activity.

As Art Sarno, a marketing executive in our Oracle Solutions Group, likes to point out to whoever will listen, the root of the problem is that paper continues to be stubbornly entrenched within AP departments. Over 85 percent of all incoming invoices continue to be paper-based. As a result, critical information is not collected, data is poorly organized, and systems are not well integrated. This results in inconsistent invoice validation, poor visibility into payables data, inability to adequately monitor
supplier performance, increased cost of invoice, and poor case management and optimization.

To tackle the problem, many organizations start by adopting a process-centric view rather than the typical transactional point of view. A key part of any AP process transformation is an aggressive move from paper to universal electronic invoice processing. Often, this takes shape as scanning paper-based invoices and then applying optical character recognition software to extract as much information as possible. Vendor self-service portals, vendor networks, electronic transfers and other Web-based solutions are gaining momentum as techniques for reducing the volume of paper moving back and forth.

Once the transition to nearly 100 percent electronic management of information is completed, organizations can turn their attention to fixing broken processes. It’s important to recognize the difference between process automation and process optimization. Organizations that focus on automation run the risk of having a really fast bad process. Very rarely does getting a bad process to go faster lead to significant gains. Instead, the place to start is to take a close look at process flows to ensure that they are well-designed and fully optimized. From there, automation can begin to deliver significant gains.

With AP running smoothly, how can companies circle back to the silos of information problem? For many organizations, an important part of the solution has proven to be a set of enterprise content services coupled with tight integration with transactional systems such as SAP or Oracle, according to my colleague Robert Bettenhauser who is frequently onsite counseling customers on AP integration projects. These services can pull together content from across the enterprise stored in multiple repositories and present it to the user in the context of a particular vendor, project or invoice.

In many cases, the information can be presented within an existing client application such as Microsoft Outlook, saving the need to launch a separate application window while reducing training costs. Content services also provide comprehensive search capabilities to help users quickly locate content across multiple systems. Integration with business intelligence tools further helps to increase the strategic importance of
AP and provides a means to continually streamline processes.

Companies are now looking to implement a comprehensive system of record in which every invoice is stored external to the business system – along with all business-critical documents – and maintained according to pre-defined rules to meet compliance and regulatory requirements. In so doing, invoices become not an island, but an integral part of the mainland. The result is an organization that can focus on delivering strategic, quantifiable improvements rather than fighting fires or tracking down missing bits of information. Fact is, it’s no fun being stranded on an island.

---

Tom Walker is a senior process architect and senior manager of SAP AP
Solutions at Open Text Corporation. He can be reached at 503-581-8012.

 

top of page