Generate Cost Savings from Supplier Invoices

© 2011 Wellesley Information Services. All rights reserved.

Generate Cost Savings from Supplier Invoices: A Comprehensive Technique to Improve Your Purchase-to-Pay Platform Stéphane Haelterman eBaia

1

In This Session …

•  The SAP Invoice Management application is more than simply processing invoices and paying bills s  It is the foundation into gaining real-time visibility into costs and

supplier performance •  The SAP Invoice Management application by Open Text helps control

the invoice processing and helps A/P personnel simplify the creation, management, monitoring, and routing of invoices

•  You will learn setup a business case and SAP Invoice Management implementation best practice

2

What We’ll Cover …

•  Exploring invoice management – business case setup •  Identifying SAP Invoice Management features •  Examining OCR selection – What need to be considered •  Understanding swimlanes shopping •  Customizing tips for SAP Invoice Management •  Leveraging project organization •  Generating business intelligence from your invoices •  Wrap-up

3

Today’s Situation

•  70% of all invoices are received on paper and entered manually •  15% to 30% of all invoices are incorrect and require manual follow-up •  Many companies do not redesign their procurement processes and

are still receiving too many non-PO invoices •  Little support for new business models: outsourcing and shared

service center •  Invoice processing cost average: 12 EUR

4

Purchase To Pay Cycle

Procurement Procurement

Purch. req.

Determination of requirements 1

Payment processing 8 8

Vendor selection 3 3

2 Source determination 2

Goods receipt 6 6

Purch. ord. 10 20 30 Invoice verification 7 7

Invoice

? ?

PO monitoring 5 5 PO processing 4 4

Purchase order 10 20 30

Invoice verification 7

Payment processing 8

5

Challenges of Manual Invoice Processing

Issue Reason Impact on Corporation Compliance Manual, paper-based processes and

inadequate accounts payable (AP) process control

Limited reporting capability and negative internal and external audit reviews

Excessive cost per invoice Manual data entry, missed discounts, late fees, excessive labor, duplicates and errors, multiple follow-ups from suppliers

Decreased earnings

Limited visibility of liabilities Decentralized invoice receipts and processing

Inaccurate balance sheet and working capital

Difficulty in preparing accruals Too much time required to capture and record all purchases

Longer closing cycles

Inability to leverage early-payment discounts

Random follow-up from AP personnel and approvers, and no transparency of workload

Suboptimal use of working capital

Poor vendor relations Limited invoice status information, late payments, and slow response to inquiries

Higher prices, lower discounts, limited negotiation, and lower credit rating

6

High Level Traditional Process Map … And Associated Hurdles

Purchasing

Approvers

Accounting Department

Mail Room

Vendor

reject

pay

0101 1001 0011

remittance advice, check ...

approve invoice

approve

park invoice

invoice indexing

verify invoice

reject

MAIL

contact via phone, mail, fax

MAIL FAX

post and release invoice

Receive & distribute document

invoice

FAX

0101 0001

EDI MAIL

SCANNING

• Must distribute documents to all involved persons (when no scanning) • Many people in different departments are involved in processing a single invoice • No systematic process for handling exceptions • Documents are copied and stored several times in most organizations (when no scanning)

7

Common Goals for Accounts Payable •  Decrease cost-per-invoice (save money)

s  Reduce cost per invoice and grow volumes without adding people s  Consolidate into one central A/P processing center per country/BU s  Capture more early-pay discounts and eliminate duplicate payments

•  Become more efficient and effective s  Implement paperless processing (imaging) … when not already done. s  Standardize and automate follow-up and invoice issue escalation s  Move from doing busy work to analytical work and reduce errors

•  Increase visibility of liabilities s  Invoices not yet posted must be visible for accruals s  Provide metrics to review the entire A/P process s  Utilize metrics for root-cause analysis s  Provide information to support company and government control compliance

•  Improve the reputation of A/P (internal/external) s  Pay problem invoices on-time s  Streamline and automate communication with the organization s  Push invoice resolution responsibility to appropriate individuals

8

Soft and Hard Benefits

AP Strategic Issue Optimized / Automated Impact on Corporation Excessive Cost-Per-Invoice • Improve A/P and buyers staff

productivity by eliminating low value process steps (copying, e-mailing, fixing exceptions, work associated with duplicates, ..) • Reduce drastically exception resolution cycle time • Optimized process solution ensures all discounts are taken, payment duplicates are eliminated.

• Increased earnings • Enable significant staff redeployment toward more added value tasks (analysis for decision support, answering customer inquiries, collecting receivables , …)

Limited Visibility of Liabilities Status of digitized paper invoices and electronic invoices are immediately available from process metrics.

Provide early visibility to vendor issues

Number of Urgent payments Invoices are processed accurately and timely so that they are always paid when appropriate (cash management optimization)

Understand cash exposure for in-process & problem invoices

9

Process Optimization

AP Strategic Issue Optimized / Automated Impact on Corporation Difficulty in Preparing Accruals Centralized controlled invoice

processing assures that invoices not yet posted are visible for accruals

• Accruals are determined effortless through liability reporting • Enabling shorter closing cycles

Poor Vendor Relations • Late payments are eliminated. The “where is my money” calls are handled promptly. • With the utilization of the Vendor Self Service, they are eliminated. • Better visibility on vendor performance.

• Improved vendor relations. • Procurement can negotiate improved pricing and payment terms. • Credit ratings improved through on time payment.

Compliance - Inadequate Accounts Payable Process Control

Implement system-driven process based on pre-configured business rules (sytematic and standardized process)

Complete audit trail available

No visibility on P2P performance

Established KPI’s & extensive reporting available on the process

Drives accountability & enables continuous improvement .

Bottom line: Standardize and improve the business process on basis of best practices

10

Build a High-Level Business Case

•  High level valuation of Soft and Hard Benefits •  Identify Major project Costs

s  SAP licenses s  OCR licenses s  External Services

�  Project and Change Management §  SAP IM by OpenText implementation §  Alert & Cockpit Reporting

s  Infrastructure : �  Server for OCR �  Content Server for scanned invoices �  Scanners �  Second screen for A/P processor

s  Internal Man-power �  Business (Key users) �  IT (Corporate + BU)

•  Calculate ROI and Pay-back period

Provide Template for

data collection Collect Data

Analyze data

Prepare Business Case

Present Business Case Approve ?

Yes No

Propose Next Steps End

11

Value Stream Map Summary (Example)

ROI_Invoices.xls is available at the following location: http://www.ebaia.com/ROI_Invoices.xls

12

Payback (Example)

ROI_Invoices.xls is available at the following location: http://www.ebaia.com/ROI_Invoices.xls

•  What’s the value of Hard and Soft Benefits? s  No more vendor discounts lost or duplicate payment (if any!) s  Better relations with vendors (…leading to better negotiations, prices, credit ratings, ???) s  If no headcount reduction, redeployment of staff toward more added valued task (better payable follow-up, better

analysis for supporting decision making process such as Capex process or High Level Business Case preparation)

Valuation of Productivity gains, with and without restructuring costs for activities from Booking Invoices (F33) to Filling Paper (F38)

13

Key Success Factors •  Management support: Not just words but actual commitment and actions •  Proactive Change Management for addressing impact on organizational and individual

behavior s  Redeployment of staff toward more added value activities s  Staff reduction s  Inventory Procure-to-pay process change review…as systematic structure is applied

to processes which have been unstructured and less controlled previously s  Standardization of the approval and exception processes prior to implementing SAP

IM s  Project/blueprint sign off/approval required of each stakeholder

•  Active participation requested from all stakeholders s  Plant Materials Management s  Plant Controllers s  Key Non-Inventory Requisitioners s  Shared Services Purchasing s  Shared Services Accounts Payable s  Regional IT

14

Key Success Factors (cont.) •  Define specific expectations and target productivity for A/P staff

s  Number of days to process an invoice from receipt s  Average days an invoice is parked for resolution s  Invoices/FTE s  Monthly Reporting and insight at plant/location level about processing and vendor

issues s  % of overdue invoices

•  Vendor communication s  Effective and repeated communication s  Define specific guidelines and procedures the vendors must follow

•  Wise Project tactics s  Force the use of Purchase Orders! s  Select a world class OCR technology s  Dual Monitors provided to A/P Processors improve indexing speed & accuracy…and

user acceptance s  Prior clean-up the vendor data. Remove non-active and duplicate vendors. s  Conduct extensive user testing s  Training, training, training

15

Key Success Factors (cont.) •  Pilot : BU/plant location

s  Plant to provide high volume activity s  Small plant included to provide feedback on more exception oriented processing s  Centralized and decentralized plant purchasing organizations s  Seasoned SAP users s  Ease of training and communication s  Local project champion identified for implementation

•  Stagger projects by BU/Plants s  Improve probability of success s  Train low cost configuration/support resources as soon as possible s  Support after go-live

•  After go-live

s  Conduct metrics review meetings, s  Conduct refresher training, s  And periodically restate expectations to keep the process health

16

Implementation Approach •  Project Preparation

s  Planning s  Communication s  Kick-Off

•  Blueprint s  AS-IS workshops s  TO-BE workshops (swimlanes) s  Sign-Off

•  Realization s  Customizing s  Developments s  Unit Testing s  Vendor communication

•  Delivery s  Acceptance s  Physical Organisation s  Vendor communication

•  Final Preparation & Go-live •  Validation of Pilot •  Roll-outs

17



18

SAP Invoice Management – Features •  7 workflows

s  Document Process Workflow (from receiving the scanned invoice info until the invoice is parked/posted or the document is marked as obsolete or duplicates)

s  Parked PO invoice workflow (from the time a PO invoice is parked until the invoice is posted or deleted)

s  Non-PO parked invoice workflow (from the time a non-PO invoice is parked until the invoice is posted or deleted)

s  Web approval of parked invoice (from the time an invoice is sent for web approval action until approval is completed or invoice is fully rejected)

s  Blocked PO invoice workflow (from the time a PO invoice is blocked for payment until it is released or cancelled)

s  Blocked PO invoice header level action workflow (from the time that a blocked invoice is authorized for header level action until the action is completed or when AP sends back)

s  Vendor Self Service •  29 variants templates •  Country Specific

19

SAP Invoice Management – Features (cont.) •  Installation Check •  Document Processing

s  Document Types s  Process Types / Determination Sequence s  Business Tules

•  Duplicate Check •  OCR Mapping to Index •  Index Mapping to Invoice •  Pre and post dashboard processing •  PO Based Invoice •  PO Parking process •  Parking Reason •  Pre-processing •  Non PO processing •  Multi-level Invoice Approval •  Rejection Reasons •  Role Template maintenance •  Role / User management – template based •  Chart of Authority maintenance

20

SAP Invoice Management – Features (cont.) •  Index Screen configuration •  Invoice Processing Plugins using BADI’s and function modules •  Enhancements •  User process options configuration •  User Substitutes Management utility •  Workflow status, DP Document & Dashboard accessible from MIR4 and FB03 •  Reassignment of approval invoice items •  Release of invoice DB lock for approval •  Mail notifications •  Authorizations •  Web-based Approvals (webflow) configuration •  Rollout criteria

s  Allowed Plants s  Allowed Document Types

•  Detailed invoices analytics •  Test Utility •  Universal Worklist Integration •  End of month and year closing tools

21



22

OCR Selection – What Needs to be Considered •  Full-Text recognition •  Handwriting recognition •  Learning capabilities •  Line item recognition •  Customizing of business rules •  Legal details recognition •  Vendor multiple VAT recognition •  Use of a 1-time vendor •  Duplicates check •  Structured communication recognition •  Vendor bank accounts recognition •  Integration via IDoc, RFC, PI or EMBEDDED •  Allows multiple clients •  Good support and maintenance •  Pricing per invoice instead of per page

OCR can be outsourced!!!

SAP Crossgate

Unified Post

Certipost …

23



(MS Visio) Swimlanes is available at the following location: http://www.ebaia.com/swimlanes_vsd.zip

24

PO Invoices

25

Invalid Data Format/Invalid Invoice Format

26

Suspected Duplicate Invoice

27

Service Entry Required

28

Currency Mismatch/UOM Mismatch/Freight on Invoice

29

PO Is Not Released or Incomplete/Unable to Match PO Lines

30

Vendor Maintenance Required/Vendor mismatch

31

Tax Audit Required

32

Unable to Auto-Post the Invoice

33

Blocked for Payment Due to Price Difference

34

Blocked for Payment Due to Price Difference (cont.)

35

Blocked for Payment Due to Price Difference (cont.)

36

Tax Issues

37

Invalid Data Issues

38



Source code available at the following location: http://www.ebaia.com/source_code.zip

39

Roles

•  The first step in creating a role is to define a role s  Roles in SAP IM are based on product codes that are defined in

SAP IM s  The following product codes are available in SAP IM:

�  005: Document processing (DP) base product code �  LIX: LIV based product codes (both for PO-parking and PO-

blocking workflows) �  PIR: Product codes for NON-PO parking workflows

•  Every assignment is based on the product code/role combination s  For example, to create a role called buyer in a PO parking process,

create role buyer with product code LIX •  To maintain a role execute transaction /OPT/CP_9CX5

40

Roles (cont.)

•  You should limit the number of roles based on the swimlanes best practice to avoid too many steps delaying the payment

•  As the approval occurred at the purchase and if invoice match the purchase order, no more than the accountant should be involved

•  The major roles are: s  Indexer s  Accountant s  Purchaser s  Receiver s  Vendor Maintenance s  Tax Expert

Roles (cont.)

•  To maintain a role execute transaction /OPT/CP_9CX5

41

42

Roles (cont.)

•  Every VIM role is based on a role template. Templates determine the options that control how a role is resolved finally by the workflow runtime system

•  The following types of templates are available: s  Key determination (Static) s  Function module role s  SAP HR org structure (Semi Dynamic)

Roles (cont.)

•  To maintain a role template, execute transaction /opt/cp_9cx2

Use custom roles only using a function module as template type (copy from existing examples)

43

44

DP Document Types

Use custom DP document types only (copy from existing examples)

•  Should be limited to 2 document types by country/BU s  MM Invoices s  FI Invoices s  Down payments

•  Execute transaction /OPT/VIM_1CX1

45

DP Document Types (cont.)

•  DP document type process steps sequence

Custom step types always start with 9##

46

PO Line Determination

•  Execute transaction /n/OPT/SPRO •  Follow:

s  LiveLink VIM Configuration Document Processing External System Data (OCR/IDOC) Maintain PO Line Determination Procedures

•  Check Function: Optionally, use a custom function module here to determine the PO line number

47

Duplicate Check


Grp step Fieldname Description field 1 1 BLDAT Document Date in Document 1 1 LIFNR Vendor number 1 1 GROSS_AMOUNT Gross amount 1 1 XBLNR Reference Document Number

2 1 BLDAT Document Date in Document 2 1 LIFNR Vendor number 2 1 GROSS_AMOUNT Gross amount 2 1 XBLNR Reference Document Number

48

Process Options •  BDC Action

•  A BDC ID is executed if the user chooses this option. •  Referral

•  User can refer the work item to a target role for further processing. •  Class Method

•  At this point, this is not supported. •  Call Transaction

•  The system calls the transaction that is defined in the Transaction Code field.

•  Workflow Task •  The system calls a (sub) workflow or task before continuing the process.

Select Workflow Task to define any custom post processing steps for a given option.

•  Auto Action Required •  Select this check box to let the system try to post the document (create

SAP document) in background. The transaction that is called for posting depends on the process type configuration.

•  Recheck Proc Type •  Select this check box to let the system try to run the business rules as

defined. •  Confirm Check Rules

•  Select this check box to let the system try to get a confirmation from the user to rerun the business rules.

•  Confirm Execute •  Select this check box to let the system get a confirmation from the user to

execute the option. •  Confirm Completion

•  Select this check box to let the system get a confirmation from the user that

•  Document Status s  Select the status set for the document if the option is executed

successfully


49

Process Types

•  Execute the /OPT/VIM_8CX1 transaction •  Apply the selected swimlanes

50

Mapping External Data to SAP IM


51

PO Blocking Process Configuration

•  SAP Invoice Management provides functionality for managing blocked PO-invoices (based on MIRO transaction) and exceptions therein. Invoices are blocked if they show discrepancies, for example a price discrepancy, that prevent the invoice from posting.

•  The main processing concept involved in managing blocked PO invoices is the concept of “blocking reasons”. Blocking reasons define the overall processing of the invoice as required by the process swimlane. Unlike parking reasons, blocking reasons are fixed by SAP. The most important reasons are price block and quantity.

•  However, the use of MRBR “Release Blocked Invoices” is more efficient as it involves the Buyer only.

52



53

Which Invoice Fields Need to Be Recognized?

•  Country/BU VAT number •  Document type validation based on keywords (invoice, credit note, …) •  Vendor based on VAT number •  Vendor invoice number •  Blocking of documents with keywords like (pro forma, duplicata, …) •  Invoice reference (and date) in case of credit note •  Valid purchase order number •  Currency validation •  Gross amount exclusive VAT •  VAT amount •  Gross amount inclusive VAT •  Negative sign for credit note detection •  Co-contractor detection

54

Which Invoice Fields Need to Be Recognized? (cont.)

•  Detail lines extraction s  Item number s  Associated PO item number and PO number s  Vendor material number s  Your material number s  Item description s  Quantity s  Unit of measure s  Unit price s  Amount

•  Electronic invoice (separate process)

55

Physical Organization and Furnishings

•  Where to open mail •  Where to receive invoices •  Where to sort invoices •  Where to scan invoices •  Where to execute OCR validation •  Where to store paper invoices (if legally required) •  Barcode printer? •  Quality barcode type needed •  Scanner choice •  PC with 2 screens or a large screen

56

Communication

•  Recurrent Letter to all vendors: s  Where to send invoices s  Your company VAT number s  Vendor VAT number s  Vendor invoice/credit memo number s  Invoice reference number when credit memo s  PO number if no invoice lines s  PO number and item on every invoice line s  Specific business rules

•  Internal procedures

57



58

SAP IM Analytics

59

Cockpit – Workload by Employee

60

Cockpit – Exceptions Overview

61

Cockpit – Handler/Document View

62

Dashboard – Processing Cost by Invoice

63

Dashboard – Evolution of Invoices Handled

64

Dashboard – Monthly Handling Efficiency

65

Executive Dashboard (future reporting options)

66

Key Process Analytics Dashboard (future reporting options)

67

Key Process Analytics Dashboard (future reporting options)

68



69

5 Key Points to Take Home

•  Make use of the business case included resuming 10 years of successful invoice management implementations

•  Focus on the key success factors •  Speed up the SAP Invoice Management implementation thanks to the

customizing tips •  Limit the number of actors and actions by applying the SAP Invoice

Management swimlanes best practice in order to keep a good SLA •  Build relevant and useful analytics to help you reduce the invoice

processing cost

Resources •  SAP Invoice Management by OpenText

s  Whitepapers and brochures �  http://www.sap.com/solutions/solutionextensions/invoice-management/index.epx �  http://www.opentext.com/2/global/products/products-accounts-payable/products-opentext-vendor-invoice-management-for-

sap-ap.htm s  Swimlanes (MS Visio)

�  http://www.ebaia.com/swimlanes_vsd.zip s  Additional developments

�  http://www.ebaia.com/source_code.zip •  Invoice Management – recommended readings

s  The Invoice Reconciliation and Payment Benchmark Report �  http://www.anybill.com/system/files/Aberdeen%20IR%2526P%20Benchmark%20Report-jun06.pdf

s  The Strategic Response of Payables and Post Audit Recovery to Corporate Challenges �  http://www.apexanalytix.com/Downloads/Goods_and_Services/BVR_APPAR_JP_041105.pdf

s  New Accounts Payable Research Shows How Outsourcing and Automation Are Key Enablers to Success �  http://findarticles.com/p/articles/mi_pwwi/is_200701/ai_n17125651/

s  Accounts Payable: Strategies for Success – Outsoursing, Automating and Streamlining �  http://www.slideshare.net/nsprau/raapstrategiesforsuccessabvc3714

s  Accounts Payable Invoice Automation �  http://www.businessstrategy.com/LinkClick.aspx?fileticket=Q_SHtKoA800%3D&tabid=68

•  Tool for setting up your Business Case

s  http://www.ebaia.com/ROI_Invoices.xls

70

71

Your Turn!

How to contact me: Stéphane Haelterman

[email protected]

72

Disclaimer SAP, R/3, mySAP, mySAP.com, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor controlled by SAP.