It all Starts with the Invoice

It all Starts with the Invoice

Speakers

Mel StealsDirector of Invoice Automation SolutionsPNC Bank

Amy RushShared Services Controller

Courtney CatonFinance ManagerWestmoreland Coal Company

2015 ROCKY MOUNTAIN SUMMIT1

Agenda

• Why are invoices important?

• The basics of invoice processing

• Invoice automation

o Technology overview

o Company case study

• What’s Next?!


The Impact of an Invoice


Why should Treasury care about an Invoice?

• Opportunity cost of missing early pay discounts

• Lack of payables visibility before vouchering

– Accuracy of accruals and cash forecast

– Metrics to drive payment process improvement

• Vendor inquiries about payment status / timing

• Scalability of AP technology and staffing model

– Over-reliance on manual, paper-based processes1

– Synergies from acquisitions


1 2013 AFP Electronic Payments Survey

Common Procure to Payment Challenges


Invoice Automation Metrics


MetricsBest in Class

(20%)Average

(33%)All Others

(47%)Notes

Cost per Invoice less than $6.00 $14.21 $17.61 Fully loaded cost includes sorting the mail, routing invoices to the correct approver, researching accounts for general ledger distribution, identifying duplicate invoices, entering invoice details to ERP system and a myriad of other tasks to process invoices plus document storage.

Invoices Processed per Employee (per month) 4,814 2,308 1,408

In a manual A/P environment, teams spend time repeatedly resolving exceptions from the same sources instead of eliminating them.

Invoice Processing Cycle Time 3.7 days 12.4 days 17.1 days Measured from the time of invoice receipt to payment generated.

Invoice Exception Rate 8.0% 13.1% 16.4% Even a small reduction in the invoice exception rate has a substantial impact in productivity.

Total Percentage of Invoices Processed Using Straight-through Processing (STP)

50.3% 27.0% 12.3% STP refers to "touchless processing" wherein purchase order (PO) based invoices match all of the pre-configured business rules and can be processed without any human intervention and scheduled for payment.

Survey Demographics: 192 A/P Professionals represented as follows: 56% Large (revenue > $1 billion); 22% Middle Market (revenue between $250 million and $1 billion); 22% Small (revenue < $250 million)

Source: Ardent Partners, ePayables 2014: The Quest, published May 2014

ACCOUNTS PAYABLE (A/P) DEPARTMENT STATISTICS

Basics of Invoice Processing

Procure to Pay

(It actually all starts with the PO!)


Invoice Receipt


• Invoices are received through a variety of methods: Paper Document Based - postal service, fax, email; File Based - EDI, Flat File, XML, ERP Connectors, or Supplier Portal (PO Conversion and Data Entry)– 52% of invoices received in paper format, – 31% E-Invoice/portal/EDI, – 12% email, and – 5% fax1

• Automation and process determine entry point– Decentralized: invoices are received at field

locations, business units, subsidiaries, etc.– Centralized: invoices are received at a central

accounts payable or shared services group

1 Paystream Advisors Invoice Automation Adoption Benchmark 2013

2015 ROCKY MOUNTAIN SUMMIT

Key data elements to create a voucher:1. Vendor Name2. Vendor Number (Validation file)3. Invoice/Account #4. Invoice Date5. Amount 6. Tax7. Freight8. Gross Amount

Purchase Order Matching1. Valid PO # (Validation file)2. Line Item Detail3. Matching (Quantity, Price, Receipt)

Reference Matching:1. Valid data to initiate workflow:

a. Nameb. Zip Codec. Division

2. General Ledger Coding by Chart fielda. Company b. Department/Cost Centerc. Accountd. Additional (Property, tenants, common area

maintenance)

Data Capture

Voucher Creation

• Invoice Routing– PO invoices can be sent / routed to AP

for payment if all criteria are met

– Non-PO invoices or PO’s that don’t “match” must be GL coded and routed to various individuals for approval depending on the type of expense and dollar limits

– Invoices can be routed via mail, emailed, scanned, technology, etc.


• Payment Initiation– Entered into Payables system

(Vendors Payable)– Voucher is created for payment,

remittance advice, and payment is scheduled

– Reconcile payment based on payment type

– Reconcile end of month statement to Vendors Payable

Treasury Pioneers Partnering with Accounts Payable

Invoice Automation

Company Case Study


The Next Treasury Management Product Frontier: Invoice Automation


Order Materials or

Services

Receive Materials or

Services

Pay for Materials or

Services

Sell Finished Goods or Services

Collect Cash for Accounts Receivables

Invoice Automation• Purchase Order (PO)

Delivery / Conversion• e-Invoicing enabled by a

Global Network• Invoice Document Receipt

and Capture• Invoice Validation and

Enrichment • Invoice Archive, Matching,

Approval and Status via Order-to-Pay workflow

• Voucher Creation and Integrated Payment

Integrated Payment

Receivables

Cash Management

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Invoice Automation Best Practices


Step 1Centralized Invoice Receipt and Prep

Step 2Automated Data Capture and Enrichment

Step 4File Integration for Voucher Creation and Invoice Status

Step 3Invoice Archive with Configurable User Interface

AP User Interface Options Archive and Search Indexing and GL Coding PO and Contract Matching Straight Through Invoice Approval

Routing (no IT) Requisitioning Workflow Canned AP Reports with Export to

Spreadsheet Dynamic Discounting

Management Spend Analytics File import/export history with file

status monitoring

Buyer

Discount

Management

and Spend

Analytics

Reverse Lockbox Operations:Imaging and Key Repair

< - - - - - - - - - - - - - - - - Invoicing Continuum - - - - - - - - - ->

Continuous Straight Through Process Improvement

Bank Security Standards

Suppliers

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Common Objectives


• Achieve Best Practices for Accounts Payable processing cycle

• Eliminate manual, non-value added work

• Increase efficiencies; leveraging automation technology

• Enable self service; suppliers, associates, auditors, etc.

• Improve internal controls and security of confidential information

• Enable electronic payment strategies

A Transformative Coal Company


Key Points when project started

• Decentralized structure• Slow implementation of process improvement initiatives

• Potential M&A activity creates need for timely, easy integrations• Acquisitions could range from small, production operations to

large stand alone companies• Current A/P structure requires complete set up for each

acquisition with minimal opportunity for quick “plug in”

• Refinancing and/or additional financing opportunities create need for accurate cash forecasting and strongly encourage more automated process

Accounts Payable currently matched or processed at 7 different sites:

CorporateCorporate and Power Plant processing

Power PlantPO Matching in secondary system; sent to

Corporate for processingMine # 1

Mine # 1 matching and processing Mine # 2 processing

Mine # 3 Mine # 3 matching and processing

Manual requisition approvalMine # 4

Mine # 4 matching and processingMine # 5

Mine # 5 matching and processingMine # 6

Mine # 6 matching and processing

• A/P- entire process is decentralized and operating with autonomy

• Non 3-way match invoices are manually approved

• Imaging is utilized at the back end of the AP process for archival purposes

• JDE is the enterprise system used companywide, and processes are standardized

• Multiple users manage the vendor master list

• Limited visibility to volume of transactions and no companywide reporting in place

• Accrual process involves a manual procedure by physically going through un-processed invoices

At the Beginning…Locations


A Transformative Coal CompanyOverview of the AP Process

Alternatives Considered


# 1- Consolidate A/P to a centralized

internal shared services structure

# 2- Outsource entire A/P process to an external 3rd

party

# 3- Outsource front end of A/P

process to an external 3rd party and consolidate A/P to shared

services structure

# 4- Continue with existing

decentralized processing

locations but pursue process improvements

The Choice Made-# 3 Outsourced Front End and Processing with

Internal Shared Services Center

Invoices received at service provider

Scanned using Optical Character Recognition

Outsourced Front End Real Time

visibility to invoices as data capture occurs

Electronic routing for approval of non-3 way match invoices

Batch process to send invoices into ERP system for processing

Internal Service Center


Results


Clean Desks!

• Scanning now occurs during front-end of process

• Eliminated part-time personnel at multiple sites that scanned documents for archival purposes only

Eliminated redundant tasks

• Check runs, ACH processing, 1099s, Batch Approvals

• ERP upgrades or modifications testing now one site

• Audit requirements reduced with fewer sites to test

Improved Vendor File Controls

Consistent application of early pay discounts, Payment Cards, rebate programs

New acquisition - plug and play

Standardized, Semi-automated process for invoice accruals with reduced risk of errors

Clear visibility into cash requirements

What’s Next!?!

Advanced Supplier Collaboration


Supplier Collaboration link to E-Invoicing


Suppliers dataDirect integration

Country and customer

compliance

Archive

Suppliers BuyerPortal

Network invoicesDirect integration

• Three-Tier Hierarchical Validation

• PO Invoice Compliance to PO File

• Rule Based Invoice Data Enrichment

• Any to Any Mapping

• Electronic PO Delivery

• Invoice Status

• Global Support

• Multi-Lingual Support

Portal w/ Order Conversion

Procure to Pay Trend to Watch: Dynamic Discounting Growth


• Dynamic Discounting: arrangement between a buyer and supplier whereby payment for goods or services is made early in return for a reduced price or discount based on a sliding scale - earlier the payment, the greater the discount.

• Organizations use the technique to maximize supplier discounts captured by using their excess cash or financing capacity. Many suppliers seek early payment discounts because they gain access to capital at lower costs than alternative options.

• Third party funding solutions are emerging to fill the void when the buyer may not have sufficient funds to meet the early payment demand of their suppliers.

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Emerging Early Payment Option Continuum


Supplier Early Pay Options

Card Funded Buyer Funded SCF Funded

Distributed AP Negotiated DynamicNo Buyer Recourse

With Buyer Recourse

Tra

nsa

ctio

n S

ize

Numbers of Suppliers

Dynamic Discounting

P-Card

SCF

Buyer Objective: Extend terms generally while paying less for goods net of rebates or discounts.

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Contact Information

PNC BankMel Steals

Director of Invoice Automation Solutions

(412) [email protected]


Amy Rush(254) 747-1195

[email protected]

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Westmoreland Coal CompanyCourtney CatonFinance Manager

(720) [email protected]

Documents

It all Starts with the Invoice