Bringing powerful connections to your supply chain pays—and it’s not as complicated as you might think. Reach out to an Elemica consultant and see how you can start transforming your supply chain today.
January 5, 2022
Mary Ann Sanchez, Director, Global Enterprise Solutions, says:
Thanks for reaching out. Well, to address your last comment first, not everybody has invoice automation in place. Manual invoice creation, and trying to reconcile specificities such as product numbers by hand at scale, is still an everyday practice for a number of enterprises. A study by the APQC notes that an average of 58 percent of invoices generated from survey respondents are still created using some manual data entry. Top performers responding to the survey reported manually entering only around 42 percent of invoices by hand, while bottom performers manually entered as many as 77 percent of all invoices. So your situation actually is pretty normal—but that doesn’t mean it’s optimal.
To answer your larger question, what we do for clients like you in terms of accounts receivable optimization is enable digital information to be automatically shared in near-real time via invoice automation—not just across your Enterprise Resources Planning (ERP) software but across the external supply chain to trading partners. We make this automated invoice processing happen in a number of ways, depending on buyer type. For large customers with a lot of volume and value, for example, we might establish direct back-office connectivity using a supply chain automation platform allowing your ERP and A/R environments to exchange information directly. More modest, “long tail” buyers that represent small, infrequent purchases by many organizations usually don’t warrant that kind of effort. So for these, we might put into place a software system that extracts account and purchase data from key transaction documentation, digitizes that info and then uses it to populate your invoicing functionality.
What that means is when an invoice is created that the invoice you were working on for the last hour would have been automatically populated with buyer and transaction data. Instead of hand typing something like a product number, which will likely be completely different between trading partners, that information would have simply been imported from your trading partner’s environment or transaction documentation. Your job with respect to the invoice would then shift from population or reconciliation to quality control. Rather than entering data manually, you would merely review the populated data to make sure everything is in the right field and nothing was lost in translation. So this basically means a minute or two spent on each invoice, rather than however long you’re spending now fixing product numbers or other account or transaction information.
From a management standpoint, this sort of invoice automation processing system radically improves four different metrics: cycle time, error rate, cycle time to fix errors and resource utilization. Invoice cycle time often fractionalizes once this type of automation is put into place. You can see how things would speed up if every invoice typically took just a few minutes. There are far fewer errors, since even the best people aren’t as accurate as an automated system. And where there is an invoicing mistake, on average it can be resolved in three days versus five or seven for manually entered invoices. From a resource utilization standpoint, the cost of merely getting out accurate and timely invoices becomes much less intensive.
From a team standpoint, this makes life so much better—especially if you’re the person responsible for converting external product numbers into internal product numbers, or generating other invoice information manually. For departments forced to perform manual invoice entry, functional leadership see them as cost centers. You basically only get attention from management when something goes wrong—and it’s not the good kind of attention. Now you can manage by exception and also shift your focus to more value-added tasks, which will vary depending on the needs of your specific company or department. But it’s not unusual for Accounts Receivable departments, through smart automation, to spend around a tenth of the time doing what they used to do—then layer on other functions that help improve departmental profitability and job security for their team.
It might not feel like it when you’re grinding it out every day, but your job is an extremely important part of the order-to-cash cycle. It benefits all stakeholders, your customers included, when the organization can put tools like invoice automation into place that will help you do your job more effectively and efficiently. Invoice automation will help use your team’s time more effectively, slash the admin and cost associated with invoicing, reduce invoice compliance risk and help your company get paid just that much more quickly.
If you want to start the conversation around automating invoice processing for your team, a good place to start is by collecting a few weeks of baseline data surrounding KPIs for your department—if you don’t already have these metrics at hand. This means things like how many invoices you’re able to process in a given day, week, etc. and the error rate for invoice data entry mistakes. This requires some confidence and candor on your part, because you’re shining a light on your own limitations. But it’s in your best interest and the smart thing to do. Everyone should appreciate your efforts at improving departmental efficiency. Good luck!