It all Starts with the Invoice
Speakers
Mel StealsDirector of Invoice Automation SolutionsPNC Bank
Amy RushShared Services Controller
Courtney CatonFinance ManagerWestmoreland Coal Company
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Agenda
• Why are invoices important?
• The basics of invoice processing
• Invoice automation
o Technology overview
o Company case study
• What’s Next?!
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The Impact of an Invoice
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Why should Treasury care about an Invoice?
• Opportunity cost of missing early pay discounts
• Lack of payables visibility before vouchering
– Accuracy of accruals and cash forecast
– Metrics to drive payment process improvement
• Vendor inquiries about payment status / timing
• Scalability of AP technology and staffing model
– Over-reliance on manual, paper-based processes1
– Synergies from acquisitions
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1 2013 AFP Electronic Payments Survey
Common Procure to Payment Challenges
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Invoice Automation Metrics
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MetricsBest in Class
(20%)Average
(33%)All Others
(47%)Notes
Cost per Invoice less than $6.00 $14.21 $17.61 Fully loaded cost includes sorting the mail, routing invoices to the correct approver, researching accounts for general ledger distribution, identifying duplicate invoices, entering invoice details to ERP system and a myriad of other tasks to process invoices plus document storage.
Invoices Processed per Employee (per month) 4,814 2,308 1,408
In a manual A/P environment, teams spend time repeatedly resolving exceptions from the same sources instead of eliminating them.
Invoice Processing Cycle Time 3.7 days 12.4 days 17.1 days Measured from the time of invoice receipt to payment generated.
Invoice Exception Rate 8.0% 13.1% 16.4% Even a small reduction in the invoice exception rate has a substantial impact in productivity.
Total Percentage of Invoices Processed Using Straight-through Processing (STP)
50.3% 27.0% 12.3% STP refers to "touchless processing" wherein purchase order (PO) based invoices match all of the pre-configured business rules and can be processed without any human intervention and scheduled for payment.
Survey Demographics: 192 A/P Professionals represented as follows: 56% Large (revenue > $1 billion); 22% Middle Market (revenue between $250 million and $1 billion); 22% Small (revenue < $250 million)
Source: Ardent Partners, ePayables 2014: The Quest, published May 2014
ACCOUNTS PAYABLE (A/P) DEPARTMENT STATISTICS
Basics of Invoice Processing
Procure to Pay
(It actually all starts with the PO!)
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Invoice Receipt
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• Invoices are received through a variety of methods: Paper Document Based - postal service, fax, email; File Based - EDI, Flat File, XML, ERP Connectors, or Supplier Portal (PO Conversion and Data Entry)– 52% of invoices received in paper format, – 31% E-Invoice/portal/EDI, – 12% email, and – 5% fax1
• Automation and process determine entry point– Decentralized: invoices are received at field
locations, business units, subsidiaries, etc.– Centralized: invoices are received at a central
accounts payable or shared services group
1 Paystream Advisors Invoice Automation Adoption Benchmark 2013
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Key data elements to create a voucher:1. Vendor Name2. Vendor Number (Validation file)3. Invoice/Account #4. Invoice Date5. Amount 6. Tax7. Freight8. Gross Amount
Purchase Order Matching1. Valid PO # (Validation file)2. Line Item Detail3. Matching (Quantity, Price, Receipt)
Reference Matching:1. Valid data to initiate workflow:
a. Nameb. Zip Codec. Division
2. General Ledger Coding by Chart fielda. Company b. Department/Cost Centerc. Accountd. Additional (Property, tenants, common area
maintenance)
Data Capture
Voucher Creation
• Invoice Routing– PO invoices can be sent / routed to AP
for payment if all criteria are met
– Non-PO invoices or PO’s that don’t “match” must be GL coded and routed to various individuals for approval depending on the type of expense and dollar limits
– Invoices can be routed via mail, emailed, scanned, technology, etc.
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• Payment Initiation– Entered into Payables system
(Vendors Payable)– Voucher is created for payment,
remittance advice, and payment is scheduled
– Reconcile payment based on payment type
– Reconcile end of month statement to Vendors Payable
Treasury Pioneers Partnering with Accounts Payable
Invoice Automation
Company Case Study
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The Next Treasury Management Product Frontier: Invoice Automation
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Order Materials or
Services
Receive Materials or
Services
Pay for Materials or
Services
Sell Finished Goods or Services
Collect Cash for Accounts Receivables
Invoice Automation• Purchase Order (PO)
Delivery / Conversion• e-Invoicing enabled by a
Global Network• Invoice Document Receipt
and Capture• Invoice Validation and
Enrichment • Invoice Archive, Matching,
Approval and Status via Order-to-Pay workflow
• Voucher Creation and Integrated Payment
Integrated Payment
Receivables
Cash Management
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Invoice Automation Best Practices
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Step 1Centralized Invoice Receipt and Prep
Step 2Automated Data Capture and Enrichment
Step 4File Integration for Voucher Creation and Invoice Status
Step 3Invoice Archive with Configurable User Interface
AP User Interface Options Archive and Search Indexing and GL Coding PO and Contract Matching Straight Through Invoice Approval
Routing (no IT) Requisitioning Workflow Canned AP Reports with Export to
Spreadsheet Dynamic Discounting
Management Spend Analytics File import/export history with file
status monitoring
Buyer
Discount
Management
and Spend
Analytics
Reverse Lockbox Operations:Imaging and Key Repair
< - - - - - - - - - - - - - - - - Invoicing Continuum - - - - - - - - - ->
Continuous Straight Through Process Improvement
Bank Security Standards
Suppliers
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Common Objectives
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• Achieve Best Practices for Accounts Payable processing cycle
• Eliminate manual, non-value added work
• Increase efficiencies; leveraging automation technology
• Enable self service; suppliers, associates, auditors, etc.
• Improve internal controls and security of confidential information
• Enable electronic payment strategies
A Transformative Coal Company
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Key Points when project started
• Decentralized structure• Slow implementation of process improvement initiatives
• Potential M&A activity creates need for timely, easy integrations• Acquisitions could range from small, production operations to
large stand alone companies• Current A/P structure requires complete set up for each
acquisition with minimal opportunity for quick “plug in”
• Refinancing and/or additional financing opportunities create need for accurate cash forecasting and strongly encourage more automated process
Accounts Payable currently matched or processed at 7 different sites:
CorporateCorporate and Power Plant processing
Power PlantPO Matching in secondary system; sent to
Corporate for processingMine # 1
Mine # 1 matching and processing Mine # 2 processing
Mine # 3 Mine # 3 matching and processing
Manual requisition approvalMine # 4
Mine # 4 matching and processingMine # 5
Mine # 5 matching and processingMine # 6
Mine # 6 matching and processing
• A/P- entire process is decentralized and operating with autonomy
• Non 3-way match invoices are manually approved
• Imaging is utilized at the back end of the AP process for archival purposes
• JDE is the enterprise system used companywide, and processes are standardized
• Multiple users manage the vendor master list
• Limited visibility to volume of transactions and no companywide reporting in place
• Accrual process involves a manual procedure by physically going through un-processed invoices
At the Beginning…Locations
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A Transformative Coal CompanyOverview of the AP Process
Alternatives Considered
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# 1- Consolidate A/P to a centralized
internal shared services structure
# 2- Outsource entire A/P process to an external 3rd
party
# 3- Outsource front end of A/P
process to an external 3rd party and consolidate A/P to shared
services structure
# 4- Continue with existing
decentralized processing
locations but pursue process improvements
The Choice Made-# 3 Outsourced Front End and Processing with
Internal Shared Services Center
Invoices received at service provider
Scanned using Optical Character Recognition
Outsourced Front End Real Time
visibility to invoices as data capture occurs
Electronic routing for approval of non-3 way match invoices
Batch process to send invoices into ERP system for processing
Internal Service Center
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Results
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Clean Desks!
• Scanning now occurs during front-end of process
• Eliminated part-time personnel at multiple sites that scanned documents for archival purposes only
Eliminated redundant tasks
• Check runs, ACH processing, 1099s, Batch Approvals
• ERP upgrades or modifications testing now one site
• Audit requirements reduced with fewer sites to test
Improved Vendor File Controls
Consistent application of early pay discounts, Payment Cards, rebate programs
New acquisition - plug and play
Standardized, Semi-automated process for invoice accruals with reduced risk of errors
Clear visibility into cash requirements
What’s Next!?!
Advanced Supplier Collaboration
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Supplier Collaboration link to E-Invoicing
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Suppliers dataDirect integration
Country and customer
compliance
Archive
Suppliers BuyerPortal
Network invoicesDirect integration
• Three-Tier Hierarchical Validation
• PO Invoice Compliance to PO File
• Rule Based Invoice Data Enrichment
• Any to Any Mapping
• Electronic PO Delivery
• Invoice Status
• Global Support
• Multi-Lingual Support
Portal w/ Order Conversion
Procure to Pay Trend to Watch: Dynamic Discounting Growth
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• Dynamic Discounting: arrangement between a buyer and supplier whereby payment for goods or services is made early in return for a reduced price or discount based on a sliding scale - earlier the payment, the greater the discount.
• Organizations use the technique to maximize supplier discounts captured by using their excess cash or financing capacity. Many suppliers seek early payment discounts because they gain access to capital at lower costs than alternative options.
• Third party funding solutions are emerging to fill the void when the buyer may not have sufficient funds to meet the early payment demand of their suppliers.
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Emerging Early Payment Option Continuum
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Supplier Early Pay Options
Card Funded Buyer Funded SCF Funded
Distributed AP Negotiated DynamicNo Buyer Recourse
With Buyer Recourse
Tra
nsa
ctio
n S
ize
Numbers of Suppliers
Dynamic Discounting
P-Card
SCF
Buyer Objective: Extend terms generally while paying less for goods net of rebates or discounts.
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Contact Information
PNC BankMel Steals
Director of Invoice Automation Solutions
(412) [email protected]
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Amy Rush(254) 747-1195
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Westmoreland Coal CompanyCourtney CatonFinance Manager
(720) [email protected]