einv Electronic Invoice Management Your Passport to Paperfree Accounts Payable Featuring: PowerTrack

Transcription

1 WHITE PAPER einv Electronic Your Passport to Paperfree Accounts Payable Featuring: PowerTrack Q2 2009

2 Table of Contents Table of Contents Introduction...,... A Case for Automation... Electronic Invoicing Universe... Eight Building Blocks of IADM New AP Automation Paradigm Environmental Impact of E-Invoicing E-Invoicing from the Supplier Perspective What You Should Do Now! PowerTrack s Solution Selecting an einv Solution Evaluating the Vendors Conclusion About PayStream Advisors, Inc

3 Introduction Report Highlights Key issues addressed in this report are: Why organizations care about electronic invoicing solutions; What your peers are doing to optimize their accounts payable operations; The different forms of e-invoicing and what benefits they deliver; Who the key players are in this market and what solutions they offer; and How your organization can go about selecting the solution that best fits your needs. Introduction The idea of a paperless corporate America has filled the heads of futurists ever since information technology began to make big strides in the 1970s. Many people looked ahead to the year 2000 and theorized that by then businesses would exchange information in a fully electronic manner. The evolution and wide acceptance of the Internet further validated this theory. However, this has not come to pass in the business-to-business (B2B) landscape, particularly in the accounts payable (AP) world. No one ever imagined that removing paper from the AP process would be more challenging that putting a man on the moon, but all is not lost. While most organizations can only dream about being 100 percent paperless, certain innovations in technology show that this dream can be achieved. Automation solutions that enable trading partners, buyers, suppliers and banks, to seamlessly exchange transaction-related information and funds are indelibly changing the invoicing and payables landscape. A new crop of electronic invoice networks are making significant inroads into reducing inefficiencies and driving costs out of companies financial operations through the elimination of paper. These new technologies have been given further impetus by the fact that the AP department is no longer considered just a cost center. Innovative financial managers are now recognizing AP automation as an area offering tremendous potential to generate bottom-line improvements with processing acceleration and discount management abilities, better ability to monitor and manage spend, strengthen working capital positions, and build stronger trading relationships. Research by PayStream analysts suggests that these forces have done wonders to raise the profile of electronic invoicing solutions, which are now viewed as not only an avenue to lower costs but also as having the potential to contribute toward improving discounts from suppliers. The logic behind this is simple. Electronic invoices eliminate paper processing times including mail latency and desk float. With faster approval times, finance managers have a greater ability not only to take existing discounts but to create new ones. Given this interest in e-invoicing solutions, PayStream has developed this Technology Insight Series report titled Electronic : Your Passport to Paperfree Accounts Payable for those organizations that have an active interest in e-invoicing but need help identifying appropriate strategies, vendors and solutions. The report provides an in-depth overview of e-invoicing solutions and their benefits, and profiles nine leading vendors in this space. Electronic is one of many reports in our corporate research library, including these other titles: Dynamic Payables Discounting & Supply Chain Finance: A Buyer s Guide to Working Capital Solutions Optical Character Recognition: Imaging & Data Capture for AP Accounts Payable Outsourcing: Leveraging the Experience and Expertise of a Third Party Provider 1

4 Pain Points Impact of Automation in Accounts Payable Average time taken to process an invoice - date of invoice receipt to approval - is 23 days. Best-in-class companies that have automated invoice receipt and workflow have been able to slash this time frame to as little as five days. A Case for Automation Inefficiencies in the Current State of Accounts Payable Automation of the physical supply chain has delivered tangible benefits according to PayStream s numerous case studies. Our research reveals that, however, these effects have barely trickled into organizations financial supply chain, which is still plagued by an over-reliance on people and paper-based processes. This is especially true as it pertains to invoice receipt and settlement of payables and spend visibility. Given the historical lack of innovation in this arena, today s buyers and suppliers are experiencing a number of problems that prevents the optimization of AP processing: Manual & Inefficient Processes: The purchase-to-pay process has long suffered from the inefficiencies inherent to manual, paper-based processes including the lack of visibility and control over financial transactions, unavailability of timely information and high processing costs. Lengthy Processing Cycles: A long invoice receipt-to-pay cycle, which for many companies is well over 20 days, and a high occurrence of exceptions result in increased processing costs and an inability to capture early payment discounts offered by suppliers. High Cost of Financing: Uncertainty around the timing and amount of approved payments compels suppliers to maintain excess cash as a hedge, which leads to an unnecessary increase in working capital. Furthermore, suppliers who have to rely on high-cost financing methods like factoring or asset-based lending, pass on these costs to buyers. Lack of Spend Visibility: Tracking and managing supplier spend and usage becomes a gargantuan task when dealing with large amounts of paper. The lack of visibility limits organizations ability to consolidate spend, negotiate favorable pricing agreements and bulk discounts with high volume suppliers. Table 1 BUYER AND SUPPLIER PAIN POINTS IN THE PROCURE-TO- PAY CYCLE Buyer Pain Inability to extend payment terms and increase Days Payable Outstanding (DPO) High number of inquiries, disputes and exceptions tie up valuable AP resources High cost of printing and mailing paper checks, stop payments and loss from check fraud Suppliers high cost of capital translates to incremental cost of goods and services for buyers Supplier Pain Lack of visibility and uncertainty around payments hinders cashflow forecasting efforts Need to maintain excess hedge as a cash against uncertainty increases working capital tied up in the order-to-cash cycle Limited access to capital leads to reliance on expensive financing options like factoring and asset-based lending Lack of visibility into invoice and payment status forces suppliers to constantly inquire with the AP Help Desk 2

5 PayStream Surveys PayStream Benchmarking Survey Says! PayStream conducted two benchmarking surveys around AP automation in the last quarter of An Electronic Invoicing Adoption Survey and an Imaging and Workflow Automation Adoption Survey. Each of these surveys was taken by more than 300 AP and procurement professionals and provides valuable insights into the adoption of invoice imaging, automated workflow, electronic invoicing and discount management solutions. Complimentary benchmarking reports can be downloaded from our website at Both of the surveys highlighted that the front-end of the invoicing process, namely around invoice receipt, data entry and exception management, caused the most heartburn to AP staff. Figure 1 PAIN POINTS IN AP OPERATIONS We asked respondents to rate the pain associated with these activities on a scale of 1 to 5, where 5 is the highest. Results are a weighted average of all responses. Inability to accurately forecast liabilities Lost or missing invoices Lack of visibility across invoice-to-pay process Routing of invoices for approval Resolving errors and exceptions Manual data entry The surveys also questioned respondents about their companies financial automation goals for the year Increasing electronic invoicing emerged as the most popular option with a majority of companies (48 percent) stating that this was the top priority on their 2009 automation plan. Figure 2 TOP FINANCIAL AUTOMATION GOALS FOR 2009 Increasing electronic invoicing emerged as the top priority for this year. Outsource portions of AP process 8% ERP application upgrade Automate payment processing Implement invoice imaging Approval workflow for invoices Increase electronic invoicing 23% 27% 34% 36% 48% 3

6 Percentage of s by Delivery Method Electronic Why Automate? Benefits of E-Invoicing Reduce processing costs; Increase efficiency and productivity; Compress invoice receipt-to-pay cycle; Reduce errors and accelerate discrepancy resolution; Minimize fraud and duplicate invoices; Increase early payment discount capture; Strengthen vendor relations; Improve cashflow forecasting abilities; and Improved visibility and control. Building a Case for Electronic Invoicing A paradigm shift is clearly underway as organizations strive to address the shortcomings in the financial supply chain. To address these issues, savvy organizations are exploring innovative means to leverage automation. Not surprisingly, accounts payable automation, specifically around electronic invoicing, automated workflow and dynamic discounting, is emerging as one of the key components of the financial supply chain strategy. While the adoption of electronic invoicing is still mostly limited to larger companies, we are evidencing this trend trickling downward to small and medium sized companies for the following reasons: The evolution of hosted and Software-as-a-Service (SaaS) models have significantly lowered the upfront cost of implementing AP automation solutions and reduced the hassle of maintaining them. Realizing that removing paper from AP can be accomplished via a series of small steps - not a big bang - companies are leveraging and upgrading previous investments in AP technologies. The convergence of electronic invoicing and front-end invoice imaging presents organizations with a single, comprehensive solution that can manage both paper and electronic invoices through a common process. Value added-services delivered by e-invoicing solution providers around supplier recruitment have enabled buyer organizations to bring suppliers onboard faster. Dynamic discounting and supply chain finance capabilities offered by e-invoice networks deliver tremendous strategic benefits around working capital improvements. Due to these factors, the adoption of electronic invoicing solutions is on the rise. According to research from PayStream Advisors, the number of electronic invoices traded within the US will overtake paper invoices by Figure 3 GROWTH IN THE USE OF ELECTRONIC INVOICING Electronic invoices include EDI invoices as well as those traded over a B2B invoice network. 70% 60% 50% 40% 30% 20% 10% 0% Paper s Electronic s

7 einv Universe Electronic Invoicing Universe Electronic invoicing solutions streamline the invoice receipt-to-pay cycle by enabling organizations to electronically exchange purchase orders and invoices, use sophisticated workflow tools for approval processing and make electronic settlement against approved invoices. Supplier Recruitment & Enrollment: Recruitment activities typically start with supplier segmentation analysis and identifying those vendors to target first for onboarding. Solution providers add value to the equation by leveraging proven best practices to develop various activation campaigns , phone and direct mail for different supplier groups. The solution offers functionality to allow suppliers to enroll themselves by logging into the application to provide bank account and registration information. Alternatively, buyers can manually enter supplier information or import information from their ERP or AP systems. Generation & Delivery: E-invoicing solutions facilitate the exchange of invoices between buyers and suppliers by providing several methods to accomplish this (PO flip, blank e-forms, standard templates, extracting template from buyers ERP systems, etc.). Solution providers offer more advanced file connections via EDI, XML, CSV etc. for high volume suppliers or those that prefer a more hands-free approach. Some solution providers also offer options to handle paper invoices. Each invoice, whether submitted electronically or manually, is typically converted into a common document type for querying and filtering. Exception Handling: Validation of invoices is a critical step to ensure that only clean invoices are viewed by the AP department. s are routinely checked for duplicity and mathematical integrity. An additional layer of validation is provided by checking invoices against a set of buyer defined criteria. This process identifies Figure 4 ELECTRONIC INVOICING UNIVERSE Electronic invoicing solutions improve the invoice receiptto-payment cycle by streamlining how organizations receive and approve invoices and make payments. Payment Processing Reporting & Analysis Supplier Recruitment/ Enrollment Generation/ Delivery Exception Handling Workflow/ Dispute 5

8 einv Universe errors and exceptions in the invoices proactively at the time of invoice submission and notifies the infringing party to correct those errors before the invoice can be accepted and routed. These validation rules and tolerance levels can be configured and changed, as needed. Workflow & Dispute : This is the process that buyers follow to sort, route, review, dispute and approve invoices for payment. E-invoicing solutions support multiple levels of approval routing and include the ability to configure reminders and escalation procedures. If no action is taken on pending tasks in a specified period of time, the systems also allow buyers and suppliers to investigate and collaboratively resolve disputes and exceptions. The solutions support configurations that dictate a manual or automated workflow process for approval, dispute resolution, escalation procedures and authorization protocols. Payment Processing: The steps that buyers take to initiate, post and execute payment, including preparation, processing and submission of the payment file to the bank. Most solutions offer multiple payment options and allow buyers to configure payment types at the supplier level. This stage also includes integration with and posting of the payments to buyers ERP and accounting systems. Some solutions also offer dynamic payables discounting functionality allowing buyers to configure multiple discount schemes and enabling suppliers to discount all or any of their receivables at any time, up to the maturity date. Reporting & Analytics: This includes the ability of the solution to generate standard and custom queries and reports and provide visibility across transactions to buyers and suppliers. The solutions also provide comprehensive audit trails of all actions taken within the system and vendor self-service options. Recent advancements in analytical capabilities allow managers to examine spend at various levels, including: type of expense, employee, department and region. This wealth of information gleaned form the procure-to-pay process, can not only be used to comply with regulatory requirements but also to provide valuable business intelligence for strategic spend analysis. Figure 5 ELECTRONIC INVOICING AND ELECTRONIC PAYMENTS PROCESS FLOWS Electronic invoicing solutions provide robust functionality from invoice delivery to payment processing and vendor self-service. Web Portal Submission Direct ERP Integration Validation Document Scanning/OCR Generation/ Delivery Approval Workflow Workflow Configuration Routing & Review Alerts/Notifications Reminders & Escalation or Line Item Level Attachments/Comments Workflow for Resolution Collaborative Interface Exception/ Dispute Handling Discount/ Payment Discount Scheme Configuration Payment Initiation Multiple Payment Types Remittance Process Monitoring Search & Retrieval /Supplier Reports Discount Reporting & Analysis 6

9 Key Insights! Key to AP Automation Success A solid framework, which bridges accounts payable, procurement, supply chain and finance functions, is the key ingredient to the success of any AP automation initiative. Eight Building Blocks to IADM AP automation including Automation and Discount (IADM)- initiatives need a framework to ensure that programs are approached on a strategic basis, which bridges the supply chain, accounts payable and finance functions. PayStream s analysts have introduced such a framework to help enterprises implement integrated IADM and maximize its benefits. To achieve the long-term value of IADM, organizations need to adopt a strategy involving both procurement and finance and therefore initiatives should be approached at an enterprise level. Our most recent research shows that many enterprises are still implementing electronic invoicing or stand alone discount management or supply chain finance programs, and not truly integrated projects. So far, only a limited number of enterprises have stepped up to this challenge and are implementing what PayStream Advisors calls integrated IADM optimization. However, this number is steadily rising, as corporate enterprises begin to achieve benefits in their first attempts at IADM and realize what really needs to be done. Based on in-house research, PayStream estimates that: Nearly 30 percent of surveyed enterprises have plans that would fit the integrated IADM description. Approximately 50 percent of those are planning a Level I approach (not integrated). Figure 6 EIGHT BUILDING BLOCKS OF INVOICE AUTOMATION AND DISCOUNT MANAGEMENT A strategic framework required for the success of your invoice and discount management initiatives. 7

10 Key Insights! Less than 20 percent are planning an integrated approach, which brings together buyer/supplier collaboration with electronic invoicing. More than 15 percent are considering global initiatives to inject third party financing into their supply chains. Integrating invoice automation and advanced finance tools such as dynamic discount management or supply chain finance is not easy. It requires a multidisciplinary vision and leadership to drive a focus on unleashing working capital from the trade invoices and receivables; otherwise it will remain fragmented. It involves difficult changes to processes, and involvement of external organizations, namely suppliers, that can make implementation difficult. Further, organizational and cultural barriers that exist between supply chain, procurement and finance managers make clear thinking on IADM difficult. On the other hand, though the technology support seems easy, that is not always the case. Technology staff must grapple with the challenges of getting invoices approved faster, multi-channel alignment, and systems integration. Even if the CFO accepts the need for enterprise-level IADM, the quarterly demands of procurement and working capital targets, especially in delicate economic conditions, make IADM one of the most important challenges facing the finance organization, but not the most urgent for the CFO. This typically results in a focus on tactical quick wins until conditions are better. The main reason enterprises are not implementing integrated IADM is an inability to see the big picture and understand what is involved. Just as a map helps you understand the context of your journey (the roads you need to navigate and alternative routes), so the PayStream IADM framework helps enterprises make decisions about the best route and objectives for their situation. Following an analysis of several large corporate enterprises, PayStream Advisors has created a IADM framework, or map, called The Eight Building Blocks of Automation and Discount (See Table 2) to help enterprises see the big picture, make their business cases and plan their implementation. TABLE 2: EIGHT BUILDING BLOCKS OF INVOICE AUTOMATION AND DISCOUNT MANAGEMENT 1. Purchase-to-Pay Vision a. Leadership and senior management buy-in b. Cross-functional alignment and support c. Clear understanding of the value proposition 2. Purchase-to-Pay Strategy a. Clear and concise objectives and goals b. Multi-year automation roadmap c. Documented metrics to measure progress 3. Supplier Interaction a. Defining buyer-supplier collaboration goals b. Vendor segmentation and adoption planning c. Supplier communication and recruitment strategy 8

11 Key Insights! d. Payment and discount terms configuration e. Incentives/penalties to drive supplier behavior 4. Culture and Change a. Inter-departmental collaboration and shared risk/goals b. IT resource allocation and training c. Incentive compensation based on goals achieved d. Cash management flexibility 5. Process a. Enhanced invoice visibility and accurate accruals b. Cash conversion cycle and DPO goals c. Improving processing efficiencies and accelerating approval cycles 6. Purchase-to-Pay Information a. Identifying efficiency metrics that need to be improved b. Leveraging external benchmarking data c. Visibility across transactions and access to data dashboards 7. Automation Technology a. Front-end imaging and approval workflow solutions b. Electronic invoice submission and receipt applications c. Automated workflow and dispute resolution d. Seamless integration with ERP and accounting systems 8. Value-Added Services a. Multiple delivery models including hosted and SaaS b. Supplier recruitment and on-boarding c. Availability of third party credit and financing The above framework can be used for internal education and debate in developing the IADM vision and strategies. It can then be the basis of an assessment of the enterprise s current and required capabilities, to help understand its current position and future strategy. 9

12 New AP Paradigm The New AP Automation Paradigm Until recently, automation efforts in the accounts payable area were focused on the operational benefits that technology delivers - primarily cost containment and increased processing efficiencies. Today, innovative AP automation solutions are available to meet organizations strategic objectives by offering solutions, which unlock significant value from the financial supply chain. Different Stages of AP Automation Increasingly organizations are recognizing that the transition from manual and expensive paper-based processes to more efficient and cost-effective straight through processing can be achieved through multiple small steps rather than a big bang initiative. The first step towards this goal lies in removing paper. Figure 7 outlines the various stages of automation that an organization can experience in its quest to transition from mere tactical benefits to more strategic objectives. PayStream believes that the first two stages of this paradigm revolve around the operational benefits of automation. During these stages, organizations are focused on centralizing their invoice management processes and leveraging document scanning to compress the time it takes for invoices to enter the approval workflow. A significant number of companies are currently in the third stage of automation where they are leveraging electronic means to receive invoices as well as employing advanced data capture technologies to extract invoice information from paper invoices. Furthermore, these organizations are utilizing automated matching and approval and collaborative online dispute resolution functionalities offered by innovative vendors in this space. Another trend PayStream has identified in the accounts payable automation space is outsourcing certain AP tasks. Stages of AP Automation Figure 7 DIFFERENT STAGES OF AP AUTOMATION Organizations are recognizing AP automation as an area offering tremendous potential for achieving tactical and strategic objectives. Level of Automation 1 - Centralized - Scan s - Manual Indexing - Manual Approval 2 - OCR & Key From Image - Online Matching - Approval Workflow - Automated Reports 3 - Outsourced Data Capture - PO Flip - Automated Matching - Online Dispute Resolution 4-100% Electronic s - Supplier Self Service - Supplier OnBoarding - Integrated Purchase-to-Pay Processing Cost Per 10

13 New AP Paradigm Finally, a few technology savvy organizations have moved to the fourth stage of automation, where they have eliminated paper to a significant extent and are primarily receiving invoices via electronic means. These innovative buyer organizations have also considerably reduced the number of invoices flowing through the approval workflow process and are relying heavily on straight-through-processing (STP) to manage clean invoices, which are invoices that do not have any errors or those that meet certain pre-determined criteria. While there is no doubt that a significant benefit companies derive while they move from the first stage to the fourth stage of automation is lower processing costs, the greatest value for organizations lies in the more strategic benefits automation delivers, namely: increased supply chain visibility, improved working capital requirements and better trading partner relationships. Defining Dynamic Payables Discounting Solutions DPD solutions are dynamic in more ways than one. They Allow suppliers to control the timing of payments; Calculate discount fees and payment amounts dynamically based on the number of days remaining until the due date; Provide the ability to dynamically capture discounts as the working capital needs dictate, rather than having to negotiate discounts in advance; Allow trading partners to tap into an alternative source of working capital with the use of third party creditors who pay early on behalf of the buyer. Drive to Enhance Discount Capture One of the major drivers for AP automation has been senior management s emphasis on improving visibility of payment liabilities. This has come to bear along with a strong push toward increasing discount capture from suppliers. The enemy of efficient AP processing and working capital visibility, however, is paper. Research from PayStream shows that the average invoice cycle time is 23 days from receipt to approval, with best-in-class companies completing this cycle in five days. Emerging web-based solutions that address the existing inefficiencies are gaining popularity by offering advanced functionality around supplier on-boarding, working capital management, straight-through-processing and vendor self-service. Supplier Onboarding The biggest barrier hindering electronic invoicing initiatives is supplier adoption. Persuading suppliers to change their processes to align with buyers needs is a costly and time-consuming process, and success depends largely on the buyers ability to present a compelling value proposition to thier suppliers. Many buyers have failed to effectively communicate the value of AP automation initiatives to their suppliers, and as a result, struggled to generate the results they expected from implementing e-invoicing solutions. In order to ensure the success of their AP automation efforts, buyer organizations need to be more proactive in demonstrating the value proposition of electronic invoicing and settlement to their supplier base. Given this scenario, technology providers that deliver supplier onboarding services in conjunction with the technology itself are gaining strong traction in the market. Working Capital The concepts of Dynamic Payables Discounting (DPD) and Supply Chain Finance (SCF) have become hot topics within electronic invoicing circles. By providing an incentive to suppliers for early settlement, these working capital solutions serve the cash management needs of buyers and suppliers alike. While discounts have been traditionally driven by suppliers as an incentive for securing early payment, enhanced visibility into invoice status is turning the tables and enabling buyer organizations to proactively propose early settlement discounts to suppliers. With third-party financing, buyers can extend their payment terms through the injection of third-party capital without adversely affecting supplier relations. Conversely, suppliers gain additional cash liquidity and stronger balance sheet positions. These solutions also mitigate the uncertainty surrounding payment timing and amount, allowing for superior cash flow forecasting capabilities for suppliers. 11

14 New AP Paradigm Value of Supplier Networks over Portals Support many-tomany relationships between multiple buyers and suppliers; Straight-Through Processing Straight-through processing, (STP) or touchless processing, facilitates the automatic payment of clean invoices. This allows organizations to enhance discount capture as well as frees up buyers and AP staff to spend more time on managing exceptions and accelerating dispute resolution with suppliers. STP includes: Validation of invoices, at the time of submission, based on pre-configured business rules and tolerance levels to correct any errors or exceptions before the invoice even reaches AP and the clock starts ticking. Automated three-way matching of purchase orders, invoices and good receipt documents, so that invoices can immediately be scheduled for payment. Some companies even allow a two-way matching success (PO and invoice) to trigger the payment for a small set of trusted suppliers. Automatic approval of or fewer levels of approval for certain non-po invoices, especially when it comes to small dollar invoices or invoices from suppliers with whom buyers have a long and strategic relationship. Suppliers that come on-board can immediately start transacting with other buyers on the network; and Suppliers can easily bring invoice and payment information into their back-end systems without having to install multiple software packages. Vendor Self-Service Through the integration of self-service supplier portals, electronic invoicing solutions can truly drive collaboration between buyers and suppliers. They accelerate the exchange of information between trading partners and provide improved visibility and control over financial transactions. Suppliers ability to upload, view and track invoices in real-time as they make their way through a buyer s workflow process, strengthens the control they have over their receivables processes. Suppliers receive notification immediately upon completion of the buyers invoice approval process, allowing them to monitor and assess their receivables in real-time. For the buyer, this translates into a reduction in resources required to resolve discrepancies and respond to inquiries. Both buyers and sellers receive payment data and remittance detail electronically facilitating reconciliation of payables and receivables. Electronic Settlement Payables Discounting Table 3 BENEFITS OF INVOICE AUTOMATION AND DISCOUNT MANAGEMENT Increases the ability to make timely payment and reduces the incidence of late payment fees and penalties Lowers processing costs by removing the need for printing and mailing checks and the incidence of fraud Supplier notification and vendor selfservice options reduce the number of supplier inquiries and exceptions Online search and retrieval tools aid in payment verification and collaborative dispute resolution Aids in compliance with Sarbanes-Oxley and other regulatory requirements Provides a low cost financing alternative to suppliers and an additional income stream to buyers Enhanced visibility into the timing and amount of payments aids in superior cash flow forecasting capability for buyers and suppliers alike Delivers better cash liquidity and stronger balance sheet positions for suppliers without their having to rely on high cost financing alternatives Buyers can extend their payment terms; Suppliers can accelerate their cash conversion cycles 12

15 Key Insights! Environmental Impact of E-Invoicing When it was originally invented in 105 AD, paper was a precious product. Today, we just cannot imagine a world without paper. From the contents of our mailboxes to the currency in our wallets, from the rolls we use to clean our kitchen counters to the card boxes in which we get our cereal, paper is never far from the picture. And neither are our efforts to protect the environment by reducing paper usage. While we are consciously seeking ways to reduce the impact on the environment - recycling, using renewable sources of energy and reducing waste - we cannot ignore the number of paper invoices corporate America generates each year. Here is some food for thought: The United States alone consumes more than 82 million tons of paper each year. Though the U.S. has only 5 percent of the world s population, it consumes 33 percent of the global paper production. Businesses within the U.S trade in excess of 13 billion invoices annually, which accounts for more than 25 billion pieces of paper that are floating around offices each year. s are responsible for 10 percent of all trees cut down worldwide and creating paper invoices uses as much electricity each year as the consumption of 20 million households. A year s worth of invoices take up as much landfill space as 10 football fields each stacked more than 100 feet deep with paper. The case for electronic invoicing has already been made in terms of time and cost savings. But the environmental impact of e-invoicing is not insignificant either. Migrating even 50 percent of our current paper invoice volume over to electronic documents can deliver the following benefits: Getting rid of 12 billion pieces of paper means saving almost one million trees and 240,000 tons of paper every year. Slashing paper invoicing by half also translates to reducing our carbon dioxide (CO2) footprint by almost 250,000 tons. It is clear that, in addition to the monetary savings that e-invoicng brings, there are a number of environmental benefits as well. So make your corporate mantra Go Green, Save Green. Assumptions: 1 million invoices = 133 trees 1 million invoices = 36 tons of carbon dioxide (CO2) footprint 1 tree = 9,000 pieces of paper 1 million invoices = 20 tons of paper 13

16 Supplier Perspective E-Invoicing from the Supplier Perspective The buyer side of electronic invoicing and its associated benefits have been covered in-depth in this and other reports. However, a lot of education is still required in understanding the value proposition to suppliers from adopting electronic invoice management solutions. Given that one of the biggest barriers to e-invoicing and payments is supplier adoption, rather the lack thereof, it is critical to look at e- invoicing from the supplier perspective. Suppliers who have jumped onboard the electronic bandwagon have reaped a number of tangible benefits from automating the invoice presentment and payment process. While they vary with the type of solution implemented and functionality being used, here are some common benefits of e-invoicing to suppliers: Increased Efficiencies: Significant time is saved when employees do not have to print paper invoices and mail them to their customers, freeing up accounts receivable staff to focus on more value-added activities like collections and customer relations. Lower Costs: Reduction in labor, material and postage costs are common with all e-invoicing solutions. Our research reveals that suppliers who adopt electronic invoicing can slash their invoice management costs by more than 50 percent. Error Reduction: Validation rules configured into e-invoices solutions flag errors at the time of submission itself and prompt suppliers to correct them, reducing the number of exception invoices downstream. Faster Settlement: Electronic invoicing compresses the invoice processing and approval cycle on the buyer side. This, combined with electronic payments, will ensure that suppliers are paid on time, or even early in some cases. Improved Visibility: Suppliers have real-time access to invoices and payment status from a standard Web browser, reducing the number of calls and s to AP Help Desks. Better Cashflow Forecasting: Automating invoice processing and payments reduces the uncertainties around payments. Consistency around payment timing means that suppliers have enhanced ability to perform cashflow forecasting. No More Reprint Requests: Electronic invoicing solutions drastically reduce the number of lost and missing invoices, which means that reprint requests from buyers will virtually be zero. Quicker Dispute Resolution: Suppliers now have the ability to view disputed invoices at any time and provide supporting/backup documentation, as needed, making dispute resolution a collaborative process as well as accelerating resolution. Decrease Days Sales Outstanding: Dynamic discounting and supply chain finance capabilities available as part of e-invoicing solutions allow suppliers to decrease days sales outstanding (DSO) without adversely affecting customer relations. Access to Cheaper Capital: Dynamic discounting delivers financing at more attractive rates to suppliers than factoring or asset based lending. 14

17 Key Insights! Find out your PIQ advisors.com/ content.cfm?id=728 What You Should Do Now! There is a strong business case for Automation: The clearly definable benefits electronic invoicing solutions offer provide a compelling case for consideration, especially given the tangible ROI for both small and large organizations. Taking the next step: Getting rid of the paper can be an intimidating task. A first step for many organizations is determining just how efficiently they manage their invoice-to-pay cycles. The Paper Quotient (PIQ), a score developed by PayStream from a standardized survey that represents dependency on paper in accounts payable, is fairly representative of processing efficiency. An organization s PIQ is determined by dividing the percent of electronic invoices (whether EDI, invoice network, p-card, or conversion of paper invoices by automated data capture) by the average number of approval days, from invoice receipt to approval, as shown in Table 3. PayStream counsels its clients to work towards a PIQ ratio of three or higher, either by increasing electronic invoice receipt to drive efficiency or accelerating processing speed to improve organizational effectiveness. Table 4 CALCULATING YOUR PAPER INVOICE QUOTIENT PERCENTAGE OF ELECTRONIC INVOICES APPROVAL TIME (NUMBER OF DAYS FROM INVOICE RECEIPT TO APPROVAL) 10% 24% 40% PAPER INVOICE QUOTIENT Don t fall behind: Companies that rely on traditional invoicing, payment and financing practices, which are burdened by many inefficient, manual tasks, will find themselves at a competitive disadvantage to companies that have automated this process. Automated companies can better manage their spend and vendor relations at all levels. Lots of qualified choices, but many options can be confusing: Our analysis of qualified solution providers revealed a surprising array of relatively easy-to-implement and feature-rich tools. When considering an invoice management solution, most companies should first evaluate their existing IT infrastructure against the business landscape in which they operate. Leveraging existing assets is prudent if they include the necessary expertise, features and technology to achieve the desired results. Supplementing existing processes and technology with best-of-breed or bolt-on applications, can provide significant benefits while also serving as a bridge to a fully integrated and comprehensive invoice management solution set 15

18 Solution Profile PowerTrack Overview PowerTrack is an online payment network for commercial and governmental organizations that delivers advanced payment solutions for invoices as well as for specialized expense categories. PowerTrack was founded in 1997, by U.S. Bank, as a direct response to customer requests for payment standardization and automation. PowerTrack is currently offered by U.S. Bank s Payment Services group. U.S. Bank, a global leader in commercial payment services, is the sixth largest bank in the United States. Its payment solutions and services, including the PowerTrack Network, are resold by more than 5,000 financial institutions. The PowerTrack Network, introduced in 1998, is actively marketed in both North America and Europe and provides general payables and receivables solutions as well as offerings for specialized payments such as freight, utilities, telecom and global trade payments. PowerTrack processes volumes in excess of $19 billion USD on behalf of its clients annually with more than 40,000 individual users accessing the system. As a wholly-owned subsidiary of a federally regulated financial institution, PowerTrack is required to comply with all governmental regulations for the financial industry, including FDIC, OCC, OFAC, FINSEN, and others. With PowerTrack, organizations can automate any part of their payment process by selecting from three key components invoice processing, payments, and financing or combine them to create an end-to-end solution to automate the entire accounts payable process. The PowerTrack Network provides a common platform not only for buyers and sellers to interact with each other, but for financial institutions to distribute collaborative payment and financing capabilities to their customers as well. The Founded 1997 Headquarters Minneapolis, MN Employees 700+ Table 12 POWERTRACK COMPANY AND SOLUTION INFORMATION 2008 Revenues Total Customers Transactions Processed Industry Segments Key Accounts Awards/Recognition Partners Average Implementation As a publically traded company, U.S. Bancorp does not provide revenue or expense information at the individual business line level. U.S. Bancorp s annual revenue for 2008 was $14.6B 300+ buyers Audited and paid more than 175 million invoices valued at $19+ billion in 2008 Retail, Consumer, Government, Manufacturing, Pharmaceutical, Specialty Chemical, Automotive, Logistics Best Buy, Rite Aid, Raytheon, Honeywell, Sunoco, Honda, Siemens, Bayer, Novartis, Polo, U.S. Department of Defense Selected as one of the World s 50 Safest Banks by Global Finance Magazine Schneider National 60 to 90 days 16

19 Solution Profile financing functionality gives buyers the ability to extend days payable outstanding (DPO) and suppliers the option to reduce days sales outstanding (DSO). PowerTrack Network PowerTrack is an internet-based payment solution, delivered through a hosted, Software-as-a-Service (Saas) model. In addition to receiving, processing, and loading invoices, PowerTrack presents and validates invoices and line item detail electronically, manages workflow and approvals, and pays suppliers via multiple currencies and settlement mechanisms. PowerTrack seamlessly integrates with all of the leading ERP software packages, as well as many proprietary enterprise systems. Supplier Enablement PowerTrack currently supports more than 20,000 suppliers on its network, which features an easy enrollment process. PowerTrack s seller enrollment staff works closely with buyers to develop and distribute supplier communications, which convey the solution s capabilities and communicate the solution s value proposition to suppliers. In order to get suppliers onboarded quickly and familiarize them with the PowerTrack solution, the team also provides training and setup assistance, prior to going live on the network. Electronic Invoicing s can be submitted to PowerTrack via standard EDI transaction sets, XML file delivery, flat files, Excel files, and data entry in the system, including flipping a purchase order to create an invoice. Additionally, suppliers can also send their invoices in paper format hard copy, fax and included. PowerTrack has a processing center which takes on the onus of accepting these paper invoices and converting them into electronic format. For suppliers that have not been enrolled, PowerTrack can set up and begin paying these sellers without requiring electronic integration. Through this process, clients are insulated from the manual work required for data conversion, but realize the benefit of consistent and queryable invoice data immediately. PowerTrack shines in the area of invoice validation and pre-payment audit, which extends well beyond checking for mathematical integrity and duplicate invoices. PowerTrack categorizes its data validations into two groups syntax validation and data content validation. Syntax validation is automatically performed on every transaction set received by and sent from PowerTrack. Data content validation uses customer-defined and configurable rules to evaluate data and perform the work associated with the rule. Validation includes checking for approved vendors, contract price, services not ordered/received, previously billed, incomplete documentation, and other items. In addition, reference documents can be added for future audit purposes. Exceptions are routed for review and also generate notifications. Approval & Disputes PowerTrack s robust data validation capabilities enable clients to automate more of the invoice approval process. Transactions can be manually approved or configured for automatic approval according to the buyer-defined business rules, which enables them to automate most transactions and focus their attention on the remaining exceptions. s can be routed to one or multiple users, depending upon how many levels of approval are needed. Client business rules determine who can approve and at what level/dollar amount and the application tracks all approval actions and authority levels. Another strength of the PowerTrack Network is that it not only automates the approval process, but also mandates compliance with corporate 17

20 Solution Profile policies and provides a detailed audit trail. PowerTrack s collaborative workspace ensures that buyers and suppliers are viewing identical transaction detail and status on their respective screens in real-time to resolve exceptions. An invoice that does not pass automated audit rules will be tagged and visible immediately in Audit Exception status to both parties. Either buyer or seller with appropriate permissions can drill into the transaction and review line item exceptions PowerTrack has identified and resolve the disputed items. PowerTrack s Managed Services staff will also facilitate communications between buyers and sellers to resolve issues. Payment Given that PowerTrack has its roots in U.S. Bank, it sets itself apart with its global payment processing capabilities. PowerTrack supports multiple payment methods ACH, wire, check, p-card and global ACH and currently makes payments to 45 countries in 15 currencies. PowerTrack submits a payment file directly to local banking partners in each geographic region. These banks process the payments, eliminating additional effort and expense for customers. Detailed remittance information, which helps users improve reconciliation and reduce disputes, is also delivered in a number of formats paper, ACH/CTX, EDI and through the portal. At this time U.S. Bank does not allow dynamic discounting at the transaction level, but it does offer buyers and suppliers other financing options. Buyer financing options are available, which enable buyers to extend their DPO. Leveraging this mechanism, buyers can use U.S. Bank funds to pay suppliers early and repay PowerTrack based on financing terms. On the hand, suppliers who are interested in reducing DSO can contract for early payment with PowerTrack. The company s objective is to help all trading partners optimize their working capital requirements. Reporting & Analytics PowerTrack s reporting and data analysis capabilities include a variety of standard operational, payment, and supply chain reports which are available online as part of the network s service offerings. Users also have access to standard report views that can be manipulated with easy-to-use cubes functionality, while more advanced customers can use query tools to develop ad hoc reports. Cubes provide clients with easy access to data views without the hassle of requiring in-depth expertise in databases or data analysis. PowerTrack captures over 500 discrete data elements for each transaction, which can be included in reports and downloaded to third-party applications via Excel or comma delimited files. Implementation & Pricing A typical PowerTrack implementation lasts between 60 and 90 days and is dependent upon client resource availability, solution complexity and the level of vendor connectivity needed. However, PowerTrack can begin paying all suppliers immediately without the need to onboard suppliers first. PowerTrack uses a transaction-based model, with fees based on services provided for processing, payment, and financing. The application is offered via a SaaS delivery model, with continuous upgrades and enhancements. PowerTrack does not use versioning. The company provides multi-tiered account support, including product and relationship managers and customer and technical support. 18

21 Solution Selection Selecting an einv Solution Every solution profiled in this report is designed to help buyers and suppliers move their invoicing and payment related activities from a paper environment to an electronic one. Suppliers seek to streamline and accelerate the order-to-cash process, while buyers want to transform the procure-to-pay cycle. However, not every solution provides equal functionality for suppliers and buyers to achieve these goals, so financial managers should understand the differences between the various electronic invoicing (einv) solutions currently available. E-Invoicing, Payments or More? Where to start? is one of the first questions to ask when investigating accounts payable automation. Accounts payable professionals must decide whether a tightly focused or a comprehensive end-to-end solution would better meet their needs. PayStream analysts suggest that technology buyers should keep the following factors in mind when making this decision: Financial Automation Goals: Organizations that have been slow to adopt other financial automation technologies but want to take an incremental step forward should consider adopting just e-invoicing as a starting point. Organizations that are more comfortable with technology and want to accelerate the pace of improvement in their invoice receipt-to-pay cycle should think about an application that delivers full circle procure-to-pay functionality. Adoption Readiness: Every organization does not stand an equal chance of succeeding with automation initiatives. Differences in culture, financial resources, human capital and the level of senior management support mean that certain organizations are more likely to succeed. Organizations investigating AP automation should determine how their organization stacks up in each of these areas before determining what solution to implement. Process Complexity: AP professionals should consider the number of suppliers and invoice formats they receive, as well as their overall invoice volume and the complexity of their average invoice when evaluating einv solutions. The structure of their AP operation (i.e. decentralized vs. centralized) and the steps required to process, approve, and pay invoices are also critical and will have a direct bearing on the choice of solution. Accounts Payable Department Size: Large organizations can focus on the process improvements and resulting ROI an investment in einv will deliver, regardless of the number of staff that are performing invoice and payment processing activities. However, small and mid-sized organizations do not always have that luxury. In these cases, firms looking to automate the AP process should look for vendors that deliver a foundational solution, or one specifically targeted to their needs. Accounting Software Infrastructure: ERP and accounting systems deliver varying levels of functionality around invoice and payment management. One of the key reasons a market has developed for best-of-breed einv solutions is the lack of sophisticated workflow and dispute resolution capabilities offered by ERP and accounting software. A major consideration for determining an organization s selection of an einv solution should be the process gaps or system weaknesses that are inherent to the AP or ERP software currently in use. 19