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AP Automation and SAP
An Industry Perspective and Lessons Learned in the SAP ERP market
Introduction
Ron Kelley
Principal and VP Business Development
“The problems we have today cannot be solved by thinking the way we thought when we created them” Albert Einstein
Premise
A Few of our Clients…
Agenda
Questions we will address today:
What factors are driving AP Automation initiatives?
How have companies benefited from automating AP?
Lessons learned – what works, what doesn’t and why?
Why isn’t everyone automating AP?
What are the common mistakes made in an AP Automation project?
How much AP Automation do we really need?
Examples from real SAP customers
AP Automation Defined
Extending and enhancing your ERP systems existing AP functionality with technology and business process change applied to the vendor payment cycle. Generally, moving away from a traditionally manual processing model for data entry and document management by incorporating technologies like optical character recognition (OCR) for invoice data capture, document imaging, workflow and companion technologies to transform the AP process into a more automated model.
Different perspectives and their implications to Accounts Payable
CEO “Our cost of capital and material costs are too high.”
CFO “My cost of accounts payables is not state-of-the-art and I have poor visibility to key metrics.” Financial Analyst
“Use of cash discounts is low, cost of capital is rising.”
Supplier “Doing business with that company is difficult as they are unable to tell when they pay their invoices.”
Accounting “We cannot say which invoices we have received across different departments and we have no control over the time-to-payment.”
Purchaser “We could lower the cost of goods if we could make systematic use of cash discounts.”
Accounts Payables “We spend up to 50% of our time chasing paper and responding to calls and emails from suppliers requesting status of invoice or complaining about late payment.”
Costs of capital, material, and processing accounts payable are too high
Lack of visibility to what invoices have been received, their current status and overall financial liability
Lack of control over the time-to-payment
Use of cash discounts is low
Spending up to 50% of time with paper chasing and/or responding to suppliers requesting payment status or complaining about late payment
Summary of Key Issues
“Gone are the days when a large part of the AP function was focused on entering data and processing payments. Now the focus is shifting to analysis and exception handling, which require higher-level problem-solving skills. The result is an AP function that is evolving to best benefit the ever-changing business culture it supports.”
9
The Changing Role of Accounts Payable
Source: “Are you ready for lean AP? 4 trends to watch in 2012” (IFO)
Challenges to AP Efficiency
Three main challenges identified by AP departments are:
Manual Data Entry Routing for Approval Resolving Errors/Exceptions
Source: IAPP-TAWPI 2010
Perceived Benefits
*IFO November 2011
The benefit is improved business outcomes
*Faster turnaround times *Improved reporting, visibility and control *Drive out costs (lower cost-per-transaction) Avoid duplicate payments Better support for segregation of duties Improved cash management/working capital/liquidity Unrecorded liabilities recognized sooner Prompt payment discounts/negotiate favorable terms No lost documents Improved audit support Fraud reduction Reduce backlog/smoother closings Better data to manage the business using KPI’s AP job satisfaction (from clerical to analytical role) Upgrade your work processes to be more agile while upgrading your
employees jobs Drive up predictability
*IFO November 2011
Lessons Learned
Why isn’t everyone automating AP?
If AP Automation has such great potential benefit, why isn’t every company jumping on board? Of those that have, what have they learned that we can benefit from?
Let’s look at some of the reasons our SAP prospects and clients have shared with us and review some of the lessons learned from their experiences.
Lessons learned in AP automation projects
1. Why do 3 out of 4 implementations take more
than 3 months to “go live”? 2. We want to select and implement a solution in 90
days – so send me a quote! 3. We installed a stand alone ECM and workflow
solution in AP and are disappointed in the results? 4. The vendor promised we could cut AP staff by
50% and that was not the case. 5. We want to use our existing enterprise-class ECM
solution for our AP process workflow – is that wise?
Lessons learned in AP automation projects
1. Why do 3 out of 4 AP automation projects take more than 3 months to “go live”? a. This is usually the result of incomplete planning
before beginning the project. Failure to do proper process mapping and design for the application before you search for solutions will protract the project and result in delays and scope creep.
SAP example #1
An electronics manufacturer released an RFP that outlined desired features/functions but included no solid business requirements to make the selection. Lesson learned: a solution was selected that had a slick user interface, appeared to be robust, however did not address the improved business outcomes that were expected, but not identified as a defined new business process. It was installed and then configured in multiple iterations over an 18 month timeframe – delivered late and at a high cost. The lesson here is prepare a business case that includes expected outcomes – not just features and functions.
2. We want to select and implement a solution in 90 days – so send me a quote! a. Automating AP is like any other business process
challenge. It begins with a problem diagnosis before prescribing a cure.
Lessons learned in AP automation projects
SAP customer example #2
A large retailer had money left over from their ERP upgrade that needed to be spent this quarter. They requested quotes from several vendors and chose a reseller of a well known solution who promised to put in a turn-key solution– without client resources. Lesson learned: shocker - vendors don’t always do the right thing! They were sold a promise that could not be delivered on without doing the upfront work and client participation. Be realistic about your project timeline and your resource requirements.
The workflow system is complex and supports a production process As with any business process, it requires full time ownership
3. We installed a stand alone ECM and workflow solution and are disappointed in the results? 1. SAP integration was not considered important and
also seemed too difficult for IT who did not want to add anything more to their workload. Having any document imaging capability seemed better than nothing.
Lessons learned in AP automation projects
SAP customer example #3
A property management firm in the Southeast installed a ECM/workflow solution that was not capable of connecting with their SAP system. Work was being duplicated in SAP and the ECM/workflow system creating inefficiencies, out of sync data and poor visibility to transactions. Lesson learned – choose a solution that can interface to your SAP system through standard, published interface methods. By using standards based integration, IT support can be minimized and upgrade challenges reduced.
4. The vendor promised we could cut AP staff by 50% and that was not the case.
a. We had a goal to eliminate 40-50% of AP staff as we rolled out the AP automation project. It did not materialize as promised by our vendor.
Lessons learned in AP automation projects
SAP customer example #4
A medical manufacturer implemented a solution with a vendor who assured them of 50% AP staff reduction in the first 6 months of operation. ROI for the project was based largely on that number. Actual results were less than 10% staff reduction. Lesson learned: don’t bank all of your ROI on staff reduction. Redeployment of team members to other departments or to higher level work in analysis, fraud detection and vendor relationships often add many other savings and can be measured in cost avoidance as volumes increase and staffing levels remain constant.
5. We want to use our existing enterprise-class ECM solution for our AP process workflow – is that wise?
a. We have made a huge investment in enterprise
document management from a major vendor and skills in house. It seems we have all the ECM capabilities we need for AP automation.
Lessons learned in AP automation projects
SAP customer example #5
Multinational life sciences company attempts to integrate SAP workflow and their existing corporate document management system as an AP automation solution. This as a 7 figure project failure. Lesson learned: document-centric ECM systems are not necessarily good transaction systems. Select a solution that meets the process centric nature of AP automation. One size does not fit all.
2 great tips from an SAP AP practitioner who has implemented multiple systems
1. Expect immediate benefits, but not all on day one
There is a learning curve with the process changes that automation brings It may take 6 months for full user absorption and acceptance of the new process
2. Fit the project implementation to your culture Define for your vendor whether it’s incremental improvement, renovate, re-invent Make sure the vendor can support your values and practices
Other common mistakes
made in failed projects
Lack of full commitment to process change from leadership
Failure to involve all affected people and business groups
Underestimating or understaffing your resources requirements
Failure to focus on the benefits (outcomes) from the process changes
AIIM study 2010
Barriers to getting underway
*IFO November 2011
Top 5 tips to get an AP Automation project started on the right track
1. Form a project team early on before you even begin to “vote” on a vendor choice
2. Develop a solid business case 3. Gather requirements from all the
stakeholders 4. Develop a scorecard for vendors that is
consistent with your requirements 5. Now you can begin to research potential
vendor partners
One slide project plan
More tips, techniques and lessons learned
Train your team to understand process change Follow a structured process for the project Ask tough questions – don’t assume Listen to people on the front line Automation alone is never the answer Keep all stakeholders informed
AP automation: not just all or nothing
Option #1 – KFI Only with
Workflow
Option #2 – Non-PO OCR
Option #3 – PO OCR
Summary Level
Option #4 – PO OCR
Detail Line Items
Key-from-image
Primary method of data entry
Also available as required
Also available as required
Also available as required
OCR scanning No Summary Summary Detail
Workflow Yes Yes Yes Yes
PO AutoMatch No No Subtotal Line level
AutoPost No Yes Yes Yes
Key benefit Rapid implementation
Reduced data entry with OCR plus
automated posting
Match exception handling
Virtual hands-free
*vouchering
Common benefits
to look for
Certified ERP integration Workflow approval Storage of documents and transaction history Document scanning and capture software Advanced reporting
Cost/benefit
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