An End to-End Invoice Automation Famework

Table of Contents
Introduction .............................................................................................................................................. 3
The Invoice Cycle, Major Costs, and Pain Points ......................................................................... 4
Major Costs ........................................................................................................................................... 5
Pain Points ............................................................................................................................................ 6
The State of Invoice Automation....................................................................................................... 7
A Promise Unfilled ............................................................................................................................. 7
A Melting Pot of Technologies ....................................................................................................... 9
The Fatal Flaws ................................................................................................................................ 10
Connectivity.................................................................................................................................. 10
Supplier Resistance ................................................................................................................... 10
ROI .................................................................................................................................................... 10
A Framework for End-to-End Invoice Automation ................................................................ 11
Key Capabilities ............................................................................................................................... 11
Multi-Channel Invoice Receipt and Delivery ................................................................... 11
Central Archive ............................................................................................................................ 12
Data Integration and Validation ........................................................................................... 12
AP & ERP Integration ................................................................................................................ 12
Supply Chain Finance Support .............................................................................................. 13
Benefits ............................................................................................................................................... 13
Cost Savings .................................................................................................................................. 13
Value Generation ........................................................................................................................ 14
Best Practices ........................................................................................................................................ 16
Executive Support ........................................................................................................................... 16
Augment the Existing Infrastructure ....................................................................................... 16
Allow Sufficient Time for Process Re-engineering............................................................. 17
Think from the Users’ Perspective ........................................................................................... 17
Have Readily Available Quick Reference and Training Materials ................................ 17
System Integration Comes First ................................................................................................ 17
Don’t Forget the Financing .......................................................................................................... 18
Definitely Don’t Forget the Supplier ........................................................................................ 18
Use Workflow Prioritization and Reminders ....................................................................... 18
Measure and Improve ................................................................................................................... 18
Case Study ............................................................................................................................................... 20
Conclusion .............................................................................................................................................. 21
Appendix A: e-Invoice Technologies ............................................................................................ 22
Appendix B: A Trio of Torments ................................................................................................... 25
References .............................................................................................................................................. 26

© Nipendo 2013. All Rights Reserved.

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Introduction

A detailed
investigation will
turn up a large
number of costs
that can be
significantly
reduced with endto-end invoice
automation, as
well as a number
of pain points that
can be essentially
cured.

Invoice Automation is, simply put, the automation of the invoice
cycle, or at least as much of the invoice cycle that can be
automated. Approvals, exception management, and supplier
inquiries will still require human intervention, but a good Endto-End Invoice Automation solution will automate error catching
and correction, automate approvals for exception-free invoices
under the threshold, facilitate online collaboration with
suppliers to rectify discrepancies, and provide a supplier a selfservice portal to answer common questions. As such, an end-toend invoice automation solution will provide many benefits.
What are the benefits that end-to-end invoice automation will
provide?
Before we can answer this question, we first have to dive into the
invoice cycle, identify the major costs, and expose the major pain
points. Once we have done this, we will see that invoice
processing costs, which can approach an average of $38.77 in
laggard organizations according to a 2011 Aberdeen study, are
high primarily due to data entry and error correction costs; that
processing times can reach as much as 30 days if the process is
mostly manual; and that supplier inquiries and lost invoices can
be even more costly.
A detailed investigation will turn up a large number of costs that
can be significantly reduced with end-to-end invoice automation,
as well as a number of pain points that can be essentially cured.
Lost invoices become a thing of the past when each invoice is
automatically processed and associated with the supplier,
retrieval times drop from an average of 2 to 10 days to 2 to 10
seconds, and the number of supplier inquiries decreases
substantially when they are able to view the current status of
their invoices in a self-service supplier portal. And these
benefits are just the tip of the iceberg.
In this paper ̶ after we review the invoice cycle, major costs, and
pain points; and after we review the state of Invoice Automation
today, which will include a discussion of the major technologies
and fatal flaws ̶ we will put forward the required framework for
end-to-end invoice automation, outline the benefits it will bring,
and provide 10 best practices for success.


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The Invoice Cycle, Major Costs, and
Pain Points
This section covers the typical invoice cycle, the major cost
components, and the big pain points. While invoice management
sounds like a relatively simple process, it’s more involved than
one might think, especially in a large organization with a lot of
process overhead.
The typical (paper) invoice cycle consists of at least the following
6 steps:
1. Receipt
The invoice is received, either by mail or fax, and routed to
Accounts Payable.
2. Manual Data Entry
An Accounts Payable (AP) clerk manually enters the invoice
data.
3. PO / Goods Receipt Validation
The AP clerk attempts to match the invoice to a purchase
order (PO) or goods receipt to verify validity, and if a PO or
goods receipt is found, the clerk attaches the PO or goods
receipt to the invoice (and fills in any missing data).
4. Approval Routing
The invoice is routed to an individual who has signing
authority, usually through intra-company mail.
5. Review and Filing of Approved Invoices
When the invoice is returned with an approval, a payment
authorization is created and the original is filed somewhere
in the stacks.
6. Payment
When the controller gives final authorization for payment,
the invoice is paid.


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Major Costs
There are a large number of costs associated with paper
invoices, which can reach, on average, as much as $40 to process
in the U.S. and €30 in Europe. These costs include, but are not
limited to:
1. Data Entry Costs
Data entry can account for 75% of overhead in an Accounts
Payable department.
2. Error Correction Costs
One in five invoices has errors or missing data. Trying to
identify the errors or missing data using a manual process on
paper invoices is very costly. A 2010 Forrester study found
that each paper invoice error (and a paper invoice scanned
and delivered as a PDF is still a paper invoice) costs a
company an average of $53.50 to rectify.
3. Costs Associated with Answering (Supplier) Inquiries
AP departments that use manual methods that revolve
around paper invoices spend 22% more time responding to
invoice inquiries than AP departments that use automated
processes on e-Invoices.
4. Lost Document Replacement Costs
The cost to locate a lost invoice can reach $120. The cost to
replace a lost invoice (in human capital) can reach $220.
5. Opportunity Costs from Lost Discounts
The typical invoice cycle in a company that uses manual
methods based on paper invoices can reach 33 days, on
average. Considering that many early payment discounts
expire within 30 days, the opportunity costs add up.


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Pain Points
Trying to identify particular paint points in a manual e-Invoicing
process is, in some ways, an exercise in futility as every step of
the process is painful. However, some steps are much more
painful than others. Specifically:
1. Data Entry
Not only can this take up to 75% of an AP’s department time,
but manual data entry is ripe with errors, which increases
the chance of misplacement of invoices, overpayment,
duplicate payment, and even fraudulent payments.
2. PO / Goods Receipt Validation and m-way match
It can be hard to locate the associated goods receipt and PO
and even harder to do good, detailed, matching against all
invoices. The situation is complicated by the fact that one in
five invoices has missing or bad data, making data validation
even harder. As a result, less than 10% of invoices are
thoroughly checked and (up to) 90% of errors slip through.
This is why audit recovery is still a thriving business.
3. Approval Routing
Who should get the invoice? Always sending the invoice to
the Director of Procurement or to a Department Head sounds
good in theory, but they are typically the busiest personnel
and slowest to respond. Invoices should be routed to the
lowest person on the food chain with the approval authority,
and then routed up the chain if that person is unavailable, but
the amount of time to figure that out for every invoice
typically means that only a few people get a lot of invoices,
which causes processing delays.
4. Long-Term Storage
If the organization gets tens of thousands of invoices a year,
which have to be stored for at least seven years for audit
purposes, where does it put them all? What if the
organization gets hundreds of thousands, or millions, of
invoices a year? A single 4-drawer filing cabinet is going to
hold at most ten thousand, and that’s assuming they are only
one page invoices. In reality, a large company is going to fill
six or more filing cabinets a year with invoices alone! It’s not
long before the organization has filled a room just with
invoices, and not much longer before boxes filled with
invoices are taking up significant space in the warehouse.
Need an invoice from two years ago? Good luck!

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The State of Invoice Automation
Invoice Automation is, simply put, the automation of the invoice
cycle, or at least as much of the invoice cycle that can be
automated. Approvals, exception management, and supplier
inquiries will still require human intervention, but a good Endto-End Invoice Automation solution will automate error catching
and correction, automate approvals for exception-free invoices
under the threshold. It will also facilitate online collaboration
with suppliers and provide a supplier a self-service portal where
they can get answers to common questions and rectify
discrepancies on the fly.

A Promise Unfilled
The state of
Invoice and AP
Automation today
is pretty dismal.

Despite the recent appearance on the market of some modern
solutions that can revolutionize invoice management and
automation at even the largest Fortune 500 and Global 3000
companies, the state of Invoice and AP Automation today is
pretty dismal. The 2012 AP Automation Survey Report found
that nine in ten organizations still deal with paper invoices and
that 90% of invoices are paper-based in half of the organizations
that responded. Why is this? To begin with, the market is highly
fragmented and the technologies used by suppliers are diverse.
Then, there is a lack of commonly agreed-upon technological
standards and a complex array of global tax legislation to deal
with. Above all, there is the fact that historically, the majority of
e-Invoicing solutions did not deliver.
Just how bad is the situation? Aberdeen’s 2012 study of 180
organizations, reported in AP Invoice Management in a
Networked Economy, found that laggard organizations, which
represent the bottom 30% of organizations, require an average
of 16.3 days to process an invoice from receipt to approval. The
good news: this is a significant improvement over their 2009
study on E-Payables: Invoice Receipt and Workflow that found
laggard organizations required an average of 32.9 days to
process an invoice. The bad news: it’s still a very large amount of
time, especially if an organization wants the opportunity to take
advantage of early payment or dynamic discounting.
These lengthy processing times are extremely costly. A 2010
Forrester study found that the average cost of processing a
paper invoice was $30, compared to $3.50 for an electronic one;


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a 2011 Quocirca study estimated the cost of processing an
invoice at £18, which is roughly $30, compared to the £2 ($3.00)
it cost for an electronic one; the 2011 Aberdeen report on
Invoicing and Workflow found that it cost laggard organizations
as much as $38.77 to process a single invoice. In comparison,
best-in-class organizations, which heavily used Invoice
Automation, had an average processing cost of $3.09.

It’s important to
understand where
traditional eInvoicing solutions
fall short in order
to make a good
decision when
selecting a modern
Invoice
Automation
solution.

And the situation in much of Europe is even worse. Quocirca’s
2011 study reported that more than 90% of the 30 billion
invoices sent every year in Europe are paper. The costs
associated with so much paper are considerable. A 2010
Deutsche Bank Research publication suggested that e-Invoicing
in Europe could yield savings of up to €250 billion per year. In
addition, it takes 12 million trees to supply all of the paper
required for the paper invoices generated in Europe alone!
Then there are the issues that most organizations are
experiencing with rebates, variable discounting, and supply
chain finance. Many p-Card programs and suppliers offer
rebates when certain dollar or volume thresholds are met, which
most organizations fail to capture because p-Card statements
don’t provide the item level detail necessary to detect when a
rebate threshold has been reached. Many suppliers offer
(variable) early payment discounts if an invoice is paid early, but
by the time a paper invoice gets in the system and reconciled, it’s
often too late. Suppliers can often only take advantage of supply
chain financing once the invoice has been accepted and
approved. As a result, these suppliers take a financial hit every
day they wait for this approval, which eventually gets passed
back to the buyer in cost increases. As discussed in Appendix B,
each of these issues could be resolved with a good End-to-End
Invoice Automation solution.
End-to-End Invoice Automation, supporting a number of
processes, consists of and is supported by multiple technologies.
This remainder of this section will overview these technologies,
explain some of the related processes, and explore some of the
weaknesses in traditional e-Invoicing technologies. It’s
important to understand where traditional e-Invoicing solutions
fall short in order to make a good decision when selecting a
modern Invoice Automation solution.


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A Melting Pot of Technologies
A large number of technologies can be used in the
implementation of Invoice Automation. This section summarizes
the most common ones, which are detailed in Appendix A.
The majority of existing technology solutions tend to focus on
catalog management and supplier integration. There are
traditional catalog and punch-out solutions that allow a buyer to
select products (and even services) using consumer-style
shopping carts (on supplier sites); supplier networks that allow
a buyer to find a supplier and products (and services) of interest;
EDI/XML technologies for automated delivery of purchase
orders, invoices, and receipts; supplier portals that allow the
supplier to input invoices and catalog information directly into
the buyer’s e-Procurement platform; (I-)OCR technology that
allows a buyer to scan supplier invoices in paper/PDF format
and extract the relevant data directly into their e-Procurement
system; and print-to-platform technologies that allow a supplier
to print an invoice into a buyer’s e-Procurement system if they
are using SaaS.
In addition to these core technologies there are also p-Cards that
allow a buyer to procure goods and services on the company
charge card and which provide the organization’s AP department
with an accurate list of payments made to suppliers; e-payment
technologies (including ACH, Wire, and secure AP integrations to
online payment services); and spend analysis solutions that
allow a Procurement department to dive into spend. Finally, in
the support of these technologies, there sophisticated data
stores, automated data matching products, and dashboard
solutions may also be required.


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The Fatal Flaws
The primary weaknesses with most Invoice Automation
solutions today fall into the following three categories:

Connectivity

As many eInvoicing efforts in
the past required
them to acquire
YAT (yet-anothertool), there is
serious pushback
from many
suppliers at the
mere mention of eInvoicing.

In the world of e-Invoicing, there aren’t many standards. The big
ones, and we say this almost sarcastically due to the low rates of
adoption, are EDI (Electronic Data Interchange) and CXML
(Commerce eXtensible Markup Language). However, very few
procurement platforms and e-Invoicing solutions support either
of these formats (or standards). In addition, many e-Invoicing
solutions use proprietary formats that are only available to
buying organizations that use instances of those particular eInvoicing solutions and to the suppliers that (pay to) take part in
their supplier networks. As a result, there are buying
organizations waiting for the flood of e-Invoices that never
arrive, as only a few suppliers have solutions that can deliver eInvoices in the supported format.

Supplier Resistance
If the e-Invoicing solution requires a supplier to join another
network, acquire (and pay for) another piece of technology, or
add one more exception to their invoicing process, the supplier
is going to resist. It’s not efficient to follow a different invoicing
process for every customer, and as many e-Invoicing efforts in
the past required them to acquire YAT (yet-another-tool), there
is serious pushback from many suppliers at the mere mention of
e-Invoicing.

ROI
Historically, Invoice Automation projects have promised
significant returns, but delivered few. This is primarily due to
the fact that most of the promised savings depend on tactical
workforce reduction, which doesn’t happen unless the average
manpower effort required per invoice can be reduced. In order
for the average manpower effort to decrease significantly, eInvoices have to reach the point where the manual process is
removed from 80-90% of the invoices received. Since most eInvoicing platforms were restricted in the format of invoices
they could accept, which resulted in supplier resistance, most
organizations didn’t reach the threshold required to see the
promised ROI.

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A Framework for End-to-End
Invoice Automation
The framework for end-to-end invoice automation is
surprisingly simple, especially considering that most of the
technology for invoice processing, approval, and archival already
exists in organizational ERP and AP systems. The primary
elements that are missing are support for multi-channel invoice
delivery and receipt and support for the capture, tracking,
processing, and integration of all of the related data elements
from purchase order (PO), to the invoice, and through the goods
receipt and (e-)payment.

Key Capabilities
In order to be effective, an End-to-End Invoice Automation
framework requires a few key elements; namely, multi-channel
invoice delivery and receipt, a central invoice archive, data
integration and validation, and AP and ERP integration. In
addition, it must also support supply chain finance efforts, either
by enabling the organization to offer and take advantage of early
payment discounts or by integrating with supply chain finance
solutions that support factoring and/or other forms of supplier
financing.

Multi-Channel Invoice Receipt and Delivery
Depending on the technical sophistication of the supplier,
invoices could be paper, e-paper, open EDI or CXML, or in a

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proprietary platform format. These invoices could come in by
mail, fax, e-mail attachment, FTP, web portal, or direct
transmission to the e-Invoicing platform. A proper framework
needs to be able to deal with all formats and all delivery
methods. Paper invoices need to be scanned, and scans, whether
done manually, received through e-Fax, or extracted from e-mail
attachments, need to be put through (I) OCR. Web portal
submissions need to populate the e-Invoice system in a native
format, and direct transmissions need to be converted to the
native e-Invoice system format.

Central Archive
All invoices need to be stored in a central archive, in the native
format and the original format in which they were received. If
the central archive does not permit storing the invoice in the
native format, exceptions, errors, and disputes cannot be dealt
with properly as the individual tasked with resolution will not be
able to refer to the original documents.

Data Integration and Validation
In order for an
Invoice
Automation
solution to be truly
effective, it has to
integrate data
from all
documents related
to the invoice.

One of the biggest costs in invoice processing is error correction
and one of the biggest pain points is purchase order and goods
receipt validation and m-way matching. In order for an Invoice
Automation solution to be truly effective, it has to integrate data
from all documents related to the invoice, including purchase
orders, goods receipts, contracts, and e-Payments and validate
that the invoice matches the appropriate documents. Without
this data integration, it is next to impossible to do m-way
matching, identify missing or bad data, fill in the missing data
elements, and identify the line items or amounts that need to be
reconciled with the supplier.

AP & ERP Integration
Efficiency and cost savings come from automating as much of the
invoicing process as possible. For this to occur, data entry needs
to be minimized. In an average organization, the bulk of data
entry occurs at two choke points in the process. The first choke
point is when a paper invoice is received and the invoice has to
be entered into the invoice management system. The second
choke point is when the invoice needs to be entered into the ERP
system for long-term archiving and into the AP system for
payment. An effective Invoice Automation solution therefore

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must be integrated with the AP and ERP systems of the
enterprise.

Supply Chain Finance Support
A good e-Invoicing solution not only lowers costs, but provides
value to the organization beyond the operational cost savings it
delivers. One of the values a good e-Invoicing solution can
deliver is the ability to tap into Supply Chain Finance (SCF)
solutions due to the ready availability of invoice, supplier, and
buyer data that can be used in early payment / dynamic
discounting programs and factoring.

Benefits
The benefits of End-to-End Invoice Automation fall into two
categories: cost savings and value generation.

Cost Savings

75% of the
resources in most
AP departments
are spent on
manual data
entry, validation,
and reconciliation.

The primary, immediate benefit that will materialize when an
organization achieves 80% to 90% invoice automation is an 80%
to 90% decrease in the average cost to process an invoice, and
thus an 80% to 90% savings overall on invoice processing costs.
In addition, it will allow the organization to increase processing
volumes without adding staff.
One of the big reasons for the level of savings that will be
achieved is the fact that 75% of the resources in most AP
departments are spent on manual data entry, validation, and
reconciliation. Take out the manual processes, take out the
biggest cost.
However, the benefits don’t end with direct cost savings.


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Value Generation
End-to-End Invoice Automation will also deliver the following
benefits:
Significantly Reduced Overpayments
Given that most recovery audit service providers claim that they
can recover approximately 1 million for every 1 billion spent by
an organization, it’s a safe bet that an average organization is
overspending by at least 0.1% every year as a result of invoice
errors, duplicate invoices, and duplicate payments. Given that
most recovery audit providers limit themselves to the 20% of
suppliers that constitute 80% of spend, this estimate is probably
on the low side. This doesn’t count the fraudulent invoices that
get paid and are never caught because the organization doesn’t
have the processes in place to validate all invoices.
Significantly Higher Capture Rates on Early Payment /
Dynamic Discounts
If an invoice gets in the system the day it is sent, the organization
will be able to take advantage of any and all early payment /
dynamic discounts associated with the invoice. If the invoice,
which has a sliding, dynamic, discount over the first 30 days,
does not get into the system for 16 days, as is the case in many
organizations that still rely primarily on manual methods, over
half of the discount opportunity is lost.

With End-to-End
Invoice
Automation,
organizations can
gain close to 100%
spend visibility.

More Spend Under Management
Many organizations struggle to increase their spend under
management, primarily because they have poor spend visibility.
With End-to-End Invoice Automation, organizations can capture
almost every single invoice and gain close to 100% spend
visibility.
12% Savings on Organizational Spend
Multiple studies have concluded that an organization that can
employ advanced sourcing strategies – such as detailed cost
modeling, spend analysis, and decision optimization – will save
an average of 12% across its (e-) Sourcing projects. What these
studies don’t always make clear is that this is only possible if an
organization has deep and full visibility into its spend. This
visibility requires 90% or better spend under management, and


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this in turn requires an organization to have a modern Invoice
Automation solution that provides visibility to complete invoice
details, not just the totals stored in the AP system.


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Best Practices
This section presents the top ten best practices that go a long
way towards making an End-to-End Invoice Automation project
a success.

Executive Support

Augmenting the
existing
infrastructure
allows an
organization to
achieve end-to-end
invoice
automation faster
and at a lowercost than
replacing the
infrastructure.

An Invoice Automation project will require process and
technological change in the organization, which, like all change,
is likely to meet with some resistance. Therefore, public (and
vocal) executive support is a key element of success and should
be secured before the project is announced.

Augment the Existing Infrastructure
While many-a-vendor may spin a good yarn about how
successful your organization will be if it implements the vendor’s
end-to-end Procure-to-Pay framework (which includes RFX,
Purchase Order Management, e-Invoicing, e-Payment, and
Supply Network / Finance Network Integration), the reality is
that big-bang projects like this, which require replacing a
number of existing technology solutions and revamping all of
your Procurement processes, typically end in big bangs. Some of
the costliest supply chain disasters in history, which have
resulted in the bankruptcy of billion dollar companies, were a
result of overambitious technology infrastructure projects.
Most organizations have a decent (if not great) ERP system that
can serve as an archive, have one or more Business Intelligence
(BI) tools, have a good AP system as part of their accounting
system, and have some form of Procurement / Sourcing solution
that meets most of their basic needs. All they are typically
missing is an End-to-End Invoicing Automation solution that can
accept invoices in whatever format the (majority of the) supply
base uses and push them into existing organizational systems for
processing and payment using an intelligent workflow.
Augmenting the existing infrastructure allows an organization to
achieve end-to-end invoice automation faster and at a lower-cost
than replacing the infrastructure.


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Allow Sufficient Time for Process Reengineering
Nothing happens overnight, especially when success requires
buy-in from not only a number of organizational stakeholders (in
AP and Procurement) but a large supply base that typically does
not like solutions being pushed on them, even if such a solution is
one that actually makes the supplier’s life easier. Time will be
needed to refine the process, get buy-in, implement the new
technology, work the kinks out of the new project, and, most
importantly, onboard the suppliers that account for 80% to 90%
of the organization’s invoices.

Think from the Users’ Perspective
Some Procurement systems will only be used by a few Senior
Buyers or Analysts. If the systems work for these users, then
there isn’t much to worry about from a usability perspective.
Invoice Automation is not one of those systems. It has to work
for Procurement, for Accounts Payable, and for the Suppliers’
Accounts Receivable departments. With respect to the functions
that each of these users have to perform on a regular basis, the
workflow should be obvious. If it’s not easy to use by the people
who have to use the system everyday, there will be pushback.

Have Readily Available Quick Reference and
Training Materials
Given the complexity of today’s systems, it’s almost impossible to
make every function easy and obvious to use for every user.
Accessing the customization option on the monthly report, for
example. That might be an option off of the bottom sub-menu
that a user hardly ever accesses. For every regular task there
should be quick reference materials for experienced users and
detailed training for new users. This goes a long way towards
quelling pushback and concerns from users who see that the
Procurement team thought about their needs before selecting a
system.

System Integration Comes First
While it might be tempting to acquire a web-based SaaS einvoice solution and get started right away, it’s important to
remember that the ROI comes from automation of the full cycle,
which includes receipt, approval, payment (through the AP), and

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permanent storage (in the ERP). If Procurement doesn’t
integrate with the AP and ERP systems before the e-Invoicing
solution comes on-line, there will still be manual data entry into
the AP and ERP systems, which will keep in place the laborious
process and the errors that come with it.

Don’t Forget the Financing
e-Invoicing saves manpower and reduces errors that lead to
duplicate payments, over-payments, and fraudulent payments,
but the direct, measurable, immediate savings are limited to the
operational efficiencies that e-Invoicing produces. If the
organization can achieve 80%+ straight-through processing, the
ROI is good, but if not, the ROI is limited. The ROI multiplies
once financing is added into the mix, using the efficiencies
created by e-Invoicing to take advantage of early payment
discounts, dynamic discounting, and factoring.

The success of eInvoicing depends
on supplier buy-in.
Make sure the
platform provides
the supplier with a
plethora of options
to submit eInvoices.

Definitely Don’t Forget the Supplier
The success of e-Invoicing depends on supplier buy-in. Make
sure the platform provides the supplier with a plethora of
options to submit e-Invoices, that the portal the suppliers use to
make inquiries is extremely easy to use, and that time is
allocated to help the supplier onboard.

Use Workflow Prioritization and Reminders
Even if the bulk of e-Invoice processing is automated, there may
still be a workflow that needs to be followed for exceptions. Any
invoice over a certain threshold, even if it matches 100% against
a contract, may need to be approved by someone. Someone is
going to have to make an early payment / dynamic discounting
decision. A system that prioritizes a user’s workflow to ensure
that invoices with discount opportunities get processed first and
that orders tasks by priorities will maximize success. Also,
studies have found that systems that sending out automated email reminders have 19% faster processing times.

Measure and Improve
We all know that what gets measured gets managed; more
importantly, what gets managed gets improved. Organizations
that are best-in-class in Invoice Automation are 156% more
likely to measure AP performance at least monthly.


18 |

Furthermore, companies that measure monthly or more are far
more successful in achieving Days Payable Outstanding (DPO)
targets, with a variance of only 0.9% vs. the average of 17.5%.


19 |

Case Study
Clalit Healthcare Services, the world’s second largest HMO
operating 1,400 clinics, 14 hospitals, 400-plus pharmacies, and
over 800 other medical facilities, transformed its heavilymanual, time-consuming, and error-prone invoice management
process into one that is fast and virtually error- free using
Nipendo’s Supplier Cloud platform.

If an organization
as large as Clalit
can go fully
automated, any
organization can
do it.

Considering that Clalit, with an annual purchasing volume of
over $2.5 Billion US, receives over 2 Million invoices a year
(which required over 30 Million sheets of paper) and required
1,500 employees in the Procurement and A/P functions to
process these invoices, this was a huge success for Clalit.
In addition, the invoice validation rules found that as a result of
recent changes in tax rates, many suppliers were entering
incorrect rates. The system identified errors in over 1,000
invoices totaling more than $12 Million. These errors were
captured by Nipendo’s validation rules and resolved by the
suppliers, saving Clalit hundreds of thousands of dollars in
overcharges as well as many hundreds of working hours of
reviewing the invoices and fixing these errors manually.
If an organization as large as Clalit can go fully automated (and
free up hundreds of employees for more strategic tasks), any
organization can do it.
More details can be found by downloading the complete Clalit
case study from the Nipendo website.


20 |

Conclusion
After reviewing the invoice cycle and its associated costs and
pain points, we moved on to a discussion of Invoice Automation
and found that, despite the recent appearance on the market of
some modern solutions that can revolutionize invoice
management and automation at even the largest Fortune 500
and Global 3000 companies, the state of Invoice and AP
Automation today is pretty dismal, with 90% of invoices being
paper-based in half of the organizations that responded to the
2012 AP Automation Survey Report.
Digging deeper, we discovered that laggard organizations had to
spend as much as $38.77 to process a single invoice, took up to
33 days to process that invoice, had to spend an average of
$53.50 to rectify any errors that were discovered on the invoice,
and, if the invoice was lost, had to spend up to $220 to replace
the invoice. We also discovered that most Accounts Payable
organizations were buried under mountains of paper, were able
to thoroughly validate at most 10% of invoices that passed
through the organization, and spent three quarters of their time
on data entry.
Why is the situation so dire? A number of reasons. The market
is highly fragmented, the technology used by suppliers is diverse,
there is a lack of commonly agreed upon technological
standards, there is a complex array of global tax legislation to
deal with, and most of the technologies don't deliver on the
promises they make.
However, despite the confusion, there is a framework for end-toend invoice automation based on multi-channel invoice delivery
and support for the capture, tracking, processing, and
integration of all of the related data elements from the purchase
order (PO), to the invoice, and through the goods receipt and (e)Payment. If this framework is properly implemented, a number
of benefits will materialize. In particular, once the organization
achieves 80% to 90% invoice automation, the organization will
see significant savings on overall invoice processing costs. This
benefit alone makes it all worthwhile. The decreased storage
costs, the automatic identification of taxation errors, and the
ability to refocus a large number of AP staff on more strategic
tasks is just icing on the cake.


21 |

Appendix A: e-Invoice Technologies
p-Card
p-Card, short for purchasing card, is a form of company charge card that allows
goods and services to be procured without following the typical purchasing process
of the company. The advantages of a p-Card are that purchases can be quick and
easy and the organization gets a summary of who was paid what, but the
disadvantages are that controls are limited (in that a buyer can purchase anything
up to her limit) and documentation on what was bought is even more limited still –
as all the AP department sees is a payment to a supplier.

EDI/XML
EDI, short for Electronic Document Interchange, and XML, short for eXtensible
Markup Language, are two methods of data encoding that can be used to deliver
invoices electronically to an organization that is setup to accept invoices in those
formats, provided that both parties agree on a proper invoice structure as both
technologies are capable of supporting many invoice formats. The advantage of
these technologies is that if both parties employ solutions that support the same
invoice format and delivery over one of these technologies, the organization has a
true invoicing solution, but the reality is that many formats are proprietary or
adopted by only a few solutions.

(I) OCR
OCR, which is short for Optical Character Recognition, and I-OCR, short for
Intelligent Optical Character Recognition, are technologies that are employed to
scan invoices and convert them to electronic invoice equivalents. In the case of IOCR, the technology also tries to validate header data elements of the invoice so that
it can be matched to a supplier or account, and, if possible, a purchase order, goods
receipt, or even a contract. The advantage of OCR is that paper invoices can be
scanned and processed electronically. The disadvantage is that while a good
solution can properly convert up to 99% of invoices, some invoices, which use
unusual formats or which are missing data, will not be properly parsed and if the
solution believes enough data is extracted, the AP clerk will not be alerted to any
exceptions that need to be manually processed.


22 |

Catalogs
On-line catalogs allow a buyer to select products or services they need from a
corporate catalog solution that is populated with approved products at approved
prices. The primary advantage of such a solution is that it can automatically
generate a purchase order for the seller and an invoice for the buyer that contains
all of the relevant data and correct, approved values. The primary disadvantage is
that the catalog needs to be maintained, or the data will not be up to date and
invoices and POs will be generated with wrong amounts, discontinued products, and
so on.

Supplier Portals
A supplier portal is generally implemented as a supplier self-service solution where
they can submit, or create, electronic invoices for the buyer, inquire about the status
of existing invoices and payments, communicate with the buyer, and initiate
disputes over the web. The advantage of such a platform is that a web-savvy
supplier has a free platform that they can use to create e-Invoices, check the status,
and communicate with the buyer. The disadvantage is that every supplier portal is
different and a supplier that supplies hundreds of buyers needs to learn hundreds of
systems in order to achieve the advantages of e-Invoicing.

Print-to-Platform
A print-to-platform solution, which is one of the newer solution offerings in the eInvoicing space and only offered by a handful of vendors, is a plug-in that runs
natively on an end user’s machine and allows the end user to print invoices direct to
a SaaS-based (Software as a Service) platform that will direct them to the
appropriate buyer instance. Just like an end user can download an open source
print-to-PDF solution, such as PDFCreator on Sourceforge, install it, and print to PDF
from any Word Processor on her machine, this solution will let the end user print
from any invoice generation tool to the SaaS-based platform. If the Print-toPlatform solution prints to a platform used by a large number of buyer
organizations, it saves the supplier organization a lot of time and headaches.

Indexed Searchable Archive
What’s preferable? One thousand filing cabinets or one hard drive? If an invoice,
which is mostly text data, takes 100K, then 1G is enough to store 10,000 invoices –
which would take one filing cabinet to store. Today’s consumer hard drives can
hold 3 TB, and can easily store one thousand filing cabinets worth of invoices with
lots of room to spare for indexing for fast retrieval. This is the advantage of a good
archival solution – an organization eliminates the warehouse and replaces it with a
hard drive, and three backups at three different locations. Plus, retrieval times are
reduced from two to ten days to two to ten seconds.


23 |

Supplier Network
A supplier network is an online network that allows an organization to discover,
connect, collaborate, and do business with existing and new suppliers that can meet
its needs. The advantages usually relate to supplier discovery and quick exchange of
electronic documents. The disadvantages typically relate to the fees to use the
network and send payments.

e-Payments
e-Payments is short for electronic payments and generally refers to ACH
(Automated Clearing-House), wire, or other forms of electronic payment. An
advanced e-Payment solution will integrate with a banking solution to automatically
send e-Payments upon approval. The primary advantage is that, provided the ePayment solution also integrates with the AP solution, payments are automatically
scheduled and delivered upon approval, and payment confirmations automatically
downloaded from the bank. The disadvantages are typically the high cost of such a
solution and the limited number of banking systems and AP systems supported.

Automated Data Matching
Automated data matching tools, commonly used in conjunction with (I) OCR
solutions, try to match invoices to purchase orders to goods receipts to contracts
automatically to properly classify and validate invoices before they are routed for
approval, or, depending on organizational workflow rules, automatically paid if they
are below a threshold and not detected to have any errors or exceptions that need to
be manually dealt with. The advantages of such a solution is that they increase
automation and throughput and decrease the number of overpayments, duplicate
payments, and fraudulent payments while decreasing the amount of invoices that
need to be manually reviewed and corrected.

Dashboards
Dashboards summarize the current status of organizational processes. They are
customized to display one or more metrics on the current state of the process(es)
they are designed to monitor, display the current status of active projects, and
summarize current action items for the current user. The primary advantage is that
the dashboard gives a quick snapshot into the current status of an e-Invoicing
initiative. The primary disadvantage is that the dashboard gives a quick snapshot
into the current status of an e-Invoicing initiative. If the dashboard indicates that all
of the metrics are within the green, the user might be lulled into a false sense of
security and not realize that a 20% improvement would yield 40% more
opportunities for early payment discounts, that everything is green because a
misconfiguration resulted in the import of bad benchmark data and the organization
is actually doing worse than its peers, or that performance has been decreasing for
the last three months.

24 |

Appendix B: A Trio of Torments
Invoice Automation supports more than just the delivery, receipt, processing and
payment of invoices – it also supports a number of value-add processes that include
those described in this section. However, these value-added processes cannot be
taken advantage of unless the solution is a true Invoice Automation solution that is
properly integrated with the organization’s e-Procurement process. So while there
are significant savings to be had, most organizations agonize about how they are
going to capture them.

Rebates
Many p-Card programs and suppliers offer rebates on certain purchases when
certain dollar or volume thresholds are met. An e-Invoicing solution that captures
all of the historical transactions with a supplier can automatically detect when a
rebate condition has been satisfied and apply a rebate to the invoice or submit a
refund request to a supplier, depending on the rebate conditions.

Variable Discounting
Not only do some suppliers offer early payment discounts, some suppliers offer
early payment discounts on a sliding scale depending on how early a buying
organization wants to pay. With e-Invoicing, buying organizations can not only take
full advantage of variable discounting as the invoice is in the system day one, but the
organization can optimize the best time to pay – which is a function of discount, cash
on hand, other obligations, and other cost-saving opportunities.

Supply Chain Finance
e-Invoicing puts suppliers in a better position to take advantage of Supply Chain
Finance offerings. The second a supplier’s e-Invoicing solution is notified that an
invoice has been received and accepted by the buying organization, it can push the
invoice to a factoring platform to get offers for immediate cash for operations. If the
invoice is with a buying organization with a good credit rating, chances are the
supplier can get better financing then it can from the local bank that might charge
20% or more for short-term financing. This is also a win for a buying organization
that can’t pay early as lower supplier costs translate into lower buyer costs.


25 |

References
2012 AP Automation Study
The Institute of Financial Operations, May 2012
e-Invoicing Ready for Prime Time
Quocirca, July 2011
Invoicing and Workflow: Integrating Process Automation to Enhance Performance
Scott Pezza, Aberdeen Group, May 2011
AP Invoice Management in a Networked Economy
Scott Pezza & William Jan, Aberdeen Group, May 2012
Advanced Data Capture - Invoice Automation for Lawson Accounts Payable
RPI Consultants, 2009
Basware Invoice Automation
Basware, 2013
Invoice Processing Best Practices
Institute of Finance and Management, 2011
The future of e-invoicing
Tieto, Volume 3, Issue 2, 2009
e-Invoicing-Final Step of an Efficient Invoicing Process
Deutsche Bank Research, May 3, 2010
E-Payables: Invoice Receipt and Workflow
Christopher J. Dwyer & Andrew Bartolini, Aberdeen Group, May 2009
Invoice Processing with Intelligent Capture & Exchange
Kofax, 2008
Applying best practices for secure, automated electronic invoicing
Adobe, 2008
Invoice & Workflow Automation Adoption Benchmarking Survey Report
PayStream Advisors, Q3 2012
Invoice and Workflow Automation
PayStream, Q2 2013
Overcoming the Top Pitfalls of Manual Invoice Processing
AnyDoc Software, 2010
The Business Value of e-Invoicing
Sterling Commerce, 2010

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