Tuesday, March 17, 2009

Implementing SAP e-Invoicing

In these times of economic uncertainty, there are still many reasons a company may want to implement e-Invoicing processes, both inbound and outbound, with their SAP system. Let's start out discussing why a company might want to consider implementing e-Invoices.

  • Reduced paper costs
  • Reduced printing costs
  • Reduced handling costs
  • Reduced postal costs
  • Reduced DSO - (days sales outstanding) outbound e-Invoicing
  • More environmentally friendly (Go Green)
  • Compliance with regional tax authorities
  • Reduced payment processing costs
  • Reduced data entry costs (entering payment information from paper)
  • Reduced data entry errors
  • Reduced billing disputes
  • Reduced paper storage

How does a company implement e-Invoicing with their customers? Let's lay-out a plan:

  1. The company must notify their customers that they want to implement an electronic invoice process and get their agreement. This is typically done via a letter and/or email sent to the accounts payable department of your customer.
  2. The notice should request that the customer read and agree to the terms of the online agreement form, and then register to participate.
  3. Once the online form is completed and the customer agrees to accept invoices electronically, the agreement should be automatically emailed to the customer for printing and safe keeping.
  4. The online registration form often includes a survey of the customer's EDI (electronic data interchange) or B2B capabilities. Can your customer exchange EDI or other B2B data formats, or do they want to exchange invoice information only via email or a web portal?
  5. Once your customer is ready an email should be sent to them with a link to a secure website where they can login and view current and past archived invoices. This reduces the customer support and accounts payable workload. This portal should allow the company to see when the invoice was read and/or downloaded. Unread invoices should be flagged and the company alerted that more customer training may be necessary.
  6. e-Invoices often involve a digital signature that is compliant with tax authority regulations and it must be archived. The length of time that electronic invoices must be archived differs widely depending on local regulations. It is often from 5-10 years.
  7. If your customer is a high volume customer and can support EDI or other B2B data exchanges then the portal may be useful to check on the status of invoices, but a fully automated B2B process may be more efficient.
  8. The portal should provide both you and your customers the ability to verify the integrity of the digital signature. This linked blog article highlights some of the costs and benefits, but let's address some of the issues here.

Large companies often receive tens of thousands of paper invoices monthly. These must be received in a mail room, opened, organized and moved to the appropriate processing centers where the invoices are manually read and the data entered into the accounting system. Many large companies receive invoices in dozens of different locations where this process is repeated. The manual processing of invoices can be a huge expense. The range of costs can be from $18/invoice to $2/invoice dependent on the level of automation and optimization.

  • Unprocessed paper invoices prevent management visibility into the true state of liabilities.
  • The longer it takes to process an invoice, the more customer service and accounts payable issues arise.
  • Unprocessed or slow processing of supplier invoices may prevent companies from realizing early payment discounts that may be offered by suppliers. This article details business process challenges that often need to be corrected before the full value of electronic invoices and accounts payable optimization measures can be realized.

There are several key areas that I would suggest looking at when considering how to optimize the accounts payable processes in a large company:

  • Consider the consolidation of disparate software systems into one ERP
  • Define and implement formal invoice approval work flows. Preferably automated work flows.
  • Consolidate management of invoice receipt into shared service centers
  • Implement a scanning/OCR solution to lift data from paper invoices quicker and more accurately, or outsource to a invoice processing managed service provider.
  • Implement an automated invoice approval work flow engine
  • Convert paper invoices to electronic invoices by implementing EDI, Supplier Web Portals or other B2B strategies.
  • Implement an electronic payment system

SAP has recently announced an agreement with Open Text to resell their Vendor Invoice Management work flow and archiving software. Companies like BancTec provide OCR/Scanning and AP Master work flow software as a managed service.

EDI, B2B, Cloud Computing and Business Process Automation - http://b2b-bpo.blogspot.com/

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