Purchase to Payment Optimization

Automating Vendor Invoice Posting

Dan Furbush, President, ScerIS Informatics

Opportunities exist within the accounts payable process to make significant strides towards process optimization and the resultant cost savings. As an organization evolves, its A/P process can become complex, with constantly growing intricacy as new vendors and internal controls are added. With expansion, inefficiencies like the manual entry of data become more pronounced. Resources are stretched as they’re tied to the exponential growth of administrative tasks, such as matching transactional documents with existing files, manually entering invoice line items into the host application, and monitoring the approval process as invoices travel from office to office.

Skilled and specialized personnel are sometimes relegated to tasks that essentially involve managing files while mitigating the risk of losing an invoice. Add interruptions such as rush check requests and high priority inquiries, and the A/P group may appear unresponsive, beset by old business processes.

Purchase to Payment Optimization

Smaller organizations may manage these challenges, but as the process grows, these challenges can easily become costly problems. One answer is an A/P process optimization strategy, centered on the investments already made in systems and skilled personnel. By leveraging existing host system capabilities with automation systems and well-engineered procedures, A/P professionals can be freed from non-specialized tasks like data entry while best-practice procedures enhance internal controls and minimize operational risk. In the process of designing an automated workflow, an organization can eliminate redundancies, increase control through enhanced process visibility, and create significant improvements to audit and reporting capabilities.

One of the most effective steps in any A/P process optimization strategy is the automation of vendor invoice processing and posting. A best practices example of such automation is D&H Distributing Company, a Pennsylvania-based distributor of computer and consumer electronics. D&H implemented a ScerIS solution for A/P automation in preparation for significant growth within its accounts payable department.

The Automated Accounts Payable of
D&H Distributing Company

An invoice is received via fax, mail, or e-mail. Digital images are created as replacements for physical invoices; faxed and e-mailed invoices are never printed unless a paper copy is requested.

For merchandise invoices:

  • Information from the invoice is extracted through adaptive recognition technologies that, once familiar with a document’s format, extract text or handwriting from the page and store the information digitally. That information immediately becomes available in the system, and the invoice is automatically validated as an allowable invoice that has not already been paid.
  • Invoice line item details are matched to purchase order and receiver line items, and variances are automatically resolved by cross-referencing several sources of information.
  • Once any rules violations are reconciled, the invoice is released to the image repository and posted into the host accounting system.

For expense invoices:

  • Intelligent rules-based processing sends each invoice to the appropriate person’s work queue for approval. Any logical process can be replicated through these rules in order to automate the approval workflow. There is no need to choose a recipient for a document or find out the next step in a procedure as the system will ensure the correct next step is taken.
  • Once approved, the invoice and any required coding is routed electronically to A/P and posted into the host system.

The invoice, along with a record of all actions, is archived in a secure repository and automatically linked to related records. The invoice can be instantaneously accessed by A/P staff through electronic file folders or by searching for key elements of data in the repository.

D&H had seven full time employees entering data and managing files for the A/P process. Merchandise and expense payments were processed through a manual workflow and stored in file cabinets that dotted the landscape of the D&H corporate offices. The data entry requirements were growing and the company needed a new automated process.

The new process was implemented in 2006. The results have been a headcount reduction of 50%, with those employees reassigned to value-add activities such as vendor relations or other areas of the company. The company has also experienced double-digit annual growth without the addition of FTE’s (full-time employees), a cost avoidance strategy that is estimated at over $100,000 per year in salaries and benefits. Soft cost benefits such as better internal controls, ability to respond to vendor inquiries, and distributed access to business-critical documents are impossible to quantify but the overall impression is that this is a big “win” for all involved.

D&H initiated the new system with its five largest vendors. The adaptive recognition technologies worked well out-of-the-box, but in some cases needed to be enhanced with scripts that further defined data elements from difficult layouts—a minimal effort that produced superior results. Setting up additional vendors took about as long as keying in the information in the old process. Once the system had learned the variables of a vendor’s invoice layout and any necessary business rules were applied, it began requiring almost no time to verify and post invoices.

At present, D&H has transitioned all of its vendors to the automated system. The workflow has grown to include more than 340 different vendors. Despite this growth, D&H today has only two dedicated FTE’s who manage incoming invoices. The five other staff members previously dedicated to managing these invoices have been reallocated to other A/P processes. The two remaining in this process are now dedicated to managing a best practices system where they control the process rather than being controlled by the tasks.

The investment required for this automation acts in concert with D&H’s enterprise resource planning (ERP) system and leverages the investments they have already made. Requests made to A/P for rush payments or research do not interrupt the ongoing A/P process because they are now handled from a desktop, using point and click functions. The file cabinets that were a major part of the D&H corporate office landscape are now gone, and information is now centralized in a secure and easily backed-up system. D&H prepared properly for growth and implemented a solution that allowed it to create a best practices environment for accounts payable.

About the Author

Dan Furbush

President

Dan Furbish is the President of ScerIS Informatics, the Business and Government Practice at ScerIS, Inc. and is an expert in business process optimization with over 20 years of experience. In addition to his executive role, Dan acts as a subject-matter expert for Accounts Payable Automation Solutions for ScerIS. He earned a bachelor’s degree from the University of Massachusetts in Boston and has many years of experience in business technology hardware and software.

About ScerIS, Inc.

ScerIS delivers solutions focused on business process optimization. Since its founding in 1993, ScerIS has grown to include professional services, software development, outsourced services, and a wide array of applications to serve many industries. The company’s core products serve as the underpinnings to hundreds of solutions that save time, reduce expense, and improve process effectiveness. More information can be found at www.sceris.com.

About D&H Distributing Company

D&H Distributing is one of North America's oldest and largest wholesale distributors of computer and consumer electronics products, with a 90-year history serving as a trusted advisor to the channel. The company's multi-market expertise, dedicated account reps, attention to service, and ongoing educational programs reflect an historic commitment to its customer base. This level of all-around support enables D&H resellers and dealers to become pioneers of the newly-converged technological landscape, encompassing opportunities in the IT, SMB, and digital home arenas.

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One of the most effective steps in any A/P process optimization strategy is the automation of vendor invoice processing and posting.



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