AP Process Automation WP 2284450
AP Process Automation WP 2284450
NOVEMBER 2015
Executive Summary
As organizations seek to reduce costs and improve efficiency, paper-intensive processes such
as accounts payable (A/P) invoice processing are likely candidates for automation. At many
companies, A/P processes are still largely manual and paper-intensive. When the volume of
invoices increases, these manual procedures start to show their limitations. While some firms
have automated portions of the A/P process by receiving invoices electronically via electronic
data interchange (EDI), typically many manual validation and approval steps remain.
Companies wrestle with the challenges of receiving paper invoices and matching them against
purchase orders (POs) and general ledger (GL) coding. Lack of automation ultimately leads to
bigger business challenges associated with accruals for financial closing and lack of visibility
into corporate spending. Chief financial officers (CFOs) and corporate controllers need visibility
into the A/P process to improve cash management, simplify reconciliation, streamline accruals,
and produce more-accurate financial statements.
This paper explains how finance officers and line-of-business managers can transform
accounts payable processes through automation. Learn how your organization can:
Simplify exception processing when invoices arent matched to POs or arent coded correctly
cost for a company receiving hundreds, thousands, or even millions of invoices each year. These
statistics from Aberdeen are illustrated below.
Because of the unrelenting workload, many A/P users are overburdened and thus prone to making
errors during data entry. Invoices slip through the cracks in such manual processes. It also becomes
difficult to detect related payments. As a result, the A/P staff may fall behind, which causes the
company to lose opportunities for early payment discountsor be required to pay late penalties and
fees. Approximately 22 percent of vendors offer early payment discounts, but many organizations
arent organized enough to take advantage of them.2 In addition, manual A/P processes often lack
long-term storage, retention, and disposal policies mandated by state and federal regulations.
While A/P users wrestles with manual processes, financial officers dont get the necessary visibility into
corporate spend and hence cannot manage cash effectively. They dont know the complete extent of
corporate liabilities until the invoices are approved and entered into the enterprise systems of record.
With so many invoices outstanding and little visibility into their status, getting accurate information
about accruals becomes tedious, time-consuming, and difficult. Without accurate accrual reports and
limited visibility into spending and distribution, financial closing becomes tedious, expensive, and
vulnerable to auditsespecially SEC audits, during which auditors scrutinize accruals to verify financial
reports. The process gets even more difficult in the wake of an acquisition, when financial officers
must merge multiple financial systems or contend with more than one A/P process, yet still issue
unified quarterly statements to the SEC.
Assigning more people to handle manual A/P processes is not a viable or scalable solution to the
problem. To automate A/P activities in an orderly way, you need well-engineered business processes
2
ibid.
that integrate with established information systems such as Oracle E-Business Suite, Oracles JD
Edwards and PeopleSoft applications, SAP R/3, Microsoft Dynamics, and Infor (Lawson).
Most organizations receive invoices via many channels including mail, fax, e-mail, and EDI. Some of
these invoices are already in electronic form. However, most arrive as paper documents that must be
entered into the financial system, routed for approvals, matched against purchase orders or coded to
GL accounts, and filed. No matter how these invoices are received, typical A/P processes include a
familiar series of steps: capture the invoice, manually rekey the data, code the invoice against purchase
orders or GL accounts, route the invoice for approval, and issue payments against the invoice. This
basic cycle is illustrated below.
The essential ingredients of an automated workflow system for A/P invoice processing.
Automating invoice processing first starts with turning paper into business ready information.
Electronic capture technology can be used with a document scanner to scan paper invoicesor to
import faxed or e-mailed invoicesand convert them to electronic images. Optical character
recognition (OCR) technology minimizes manual tasks associated with indexing documents and
entering the data, typically eliminating 80 percent of all data entry. But extracting characters from a
document is only the first step. You must be able to make sense of the data. For example, an intelligent
document capture system can distinguish an invoice number and a PO number, look up that PO
number in the enterprise resource planning (ERP) system, and validate the invoice details against the
purchase request. This type of system also lets workers securely store, search, and retrieve documents,
as well as annotate the images before routing them around the organizationsaving time and avoiding
costly errors.
Ideally, these systems should permit you to classify each document as an invoice, correspondence,
credit memo, or other type of document, and then automatically extract header and line item
information for storage in the business systems of record. Each indexed field can be configured to
simplify searching later on. For example, the Purchase Order Number field can be linked to an
accounting database to return the vendor name associated with the PO number. This ensures data
integrity since the values entered in each field can be validated against data in the system, with
automatic line pairing between the invoices and purchase orders. You can ensure, for example, that a
supplier isnt charging more for the received goods than the unit price specified in the purchase order.
Once the electronic capture solution has extracted the correct information, it is stored in a content
management system along with an image of the original document. Authorized users can search for
these documents and view them online, either through a web browser or in the context of enterprise
applications. As invoices are archived they can be attached to workflows and retrieved through other
enterprise applications, such as the Oracle Payables user interface in Oracle E-Business Suite or
another ERP system. Workers can annotate the documents and route the revised images to other
workers, perhaps attaching an expense receipt or noting a line-item discrepancy. These automated
capture, extract, and index technologies save time and improve accuracy for all concerned.
Process and Manage
Once you have extracted and recognized the data, you need automated methods for processing the
invoice. This includes distinct processes for managing non-PO and PO invoices, GL coding, two-way
matching, and three-way matching. You also need automated methods to route the invoices for
approval, and to enter the data in the back-end A/P system, along with an image of the original
invoice.
Business process management and workflow technology automate manual tasks. These technologies
also improve visibility into individual work items and the overall performance of the A/P operation.
After invoices enter this systematic workflow, financial personnel can track the invoices to see who is
sending them, what the totals are, when they are due, who modified them, who approved them, when
they were approved, and the amount of the total liabilities. Every invoice follows this workflow and
there is a complete audit trail of all the steps. This enables workers to easily identify system and
approval bottlenecks, ensure that service-level agreements (SLAs) and discounts have been met, and
easily answer vendor and auditor inquiries.
Store and Access
An enterprise-class content management system can securely store any type of document from any
source, and then make these documents accessible on demand via enterprise applications or through a
simple web browser. Rather than having multiple paper copies of an invoice floating around, you can
have a single source of truth, with all invoice and image data stored online. All modifications and
annotations can be captured in the content management system. Security settings based on roles ensure
that items are only viewable by the appropriate parties at any point in time.
Such a system alleviates mistakes and makes invoice information instantly accessible to all authorized
users. Invoices can be retrieved at any time with a simple search function. POs and invoices are
matched in the system, along with references to pertinent transactions, which simplifies adjudication. It
is easy to search for entire documents or individual bits of data within those documents, such as a
certain vendor name, job, part, or city. This helps A/P users easily track each invoice in the workflow,
and it helps managers gauge performance and adherence to service-level agreements, such as ensuring
that invoices get paid on time. Users have a complete picture, with all documents, records, approvals,
transactions, and payments indexed and stored for easy access. Auditors love this level of detail. In
some cases, they can be given self-service access to view records in the system.
In most states, financial regulations generally require invoices to be stored for seven years. A complete
storage and access system lets you specify retention periods to make sure that records and images
automatically adhere to corporate retention policies, without human intervention. This is far superior
to storing invoices in filing cabinets or archiving boxes of documents offsite, which is expensive,
vulnerable to loss, and difficult to search and retrieve. Automating invoice storage and access not only
simplifies compliance activities, but also helps the organization avoid costly fines, simplify decisionmaking, and resolve account discrepancies in the future.
Integrate with Enterprise Resource Planning Systems
A/P automation is valuable, but true economies of scale come through integration with the underlying
enterprise business systems that drive the accounting process. You need to be able to extract the
relevant data from your A/P process and connect it with your chosen enterprise applications to speed
up invoice processing and get a better handle on your corporate spend and fluctuating cash position.
According to Aberdeen, companies that have connected their A/P and ERP solutions report straightthrough processing volumes more than twice that of other companies.3
A complete solution should be able to capture invoices from multiple channels, create and store
electronic images of those invoices, retrieve electronic copies from within the context of familiar
applications and work tasks, extract information from images to populate invoice fields, perform
account coding, automatically match invoices with purchase orders, and integrate the results into
enterprise applications and systems of record. Data entry chores are minimized, enterprise applications
contain more-accurate information, and account coding and matching tasks become more consistent.
Entering and manually processing more than 180,000 vendor invoices annually was time and labor intensive. With Oracle
WebCenter Imaging, we have automated and centralized invoice entry and processing at our corporate office, improving
productivity by 80 percent and reducing invoice processing cycle times by 84 percenta very important efficiency gain.
Terry Marshall, Vice President of Information Services, Texas Industries
TXI also streamlined accounting and purchasing activities by centralizing processes in one system that
provides relevant information to all production facilities. Customers can view and pay invoices and
track shipments via TXI Online, which has contributed to a reduction in days sales outstanding (DSO).
TXI expects to increase productivity by 80 percent and reduce invoice processing cycle times by 84
percentfrom 20 to 30 days to just 3 to 5 days. They have achieved a 25 percent reduction in paper
invoice storage costs now that invoices are captured digitally, and enabled a 50 percent reduction in
shipping costs since the company no longer has to send paper invoices between headquarters and
production facilities for approvals. TXI also expects a significant reduction in the risk of duplicate
processing through a more consistent process and detailed audit trail.
Oracle WebCenter Imaging enables users to scan, index, view, print, highlight, fax, annotate, and add
redactions to invoices
Oracle WebCenter Forms Recognition provides the OCR/ICR recognition engine that enables the
system to automatically recognize, categorize, and extract information from paper documents, forms,
faxes, and electronic documents
Oracle Business Process Management Suite (Oracle BPM Suite) creates cross-application business
processes that combine automated and human workflows
Oracle Business Activity Monitoring provides a customizable dashboard to improve visibility into
invoice and other financial business processes
Oracle WebCenter Content enables authorized users to easily retrieve documents and images within
the context of familiar information systemssuch as Oracle E-Business Suite, PeopleSoft, and other
enterprise applications
As part of an enterprise platform, Oracles A/P automation solutions integrate financials, content
management, and workflow capabilities into configurable solutions that can be tailored to the needs of
each customer. These integrated middleware solutions work together to enforce data integrity, optimize
A/P efficiency, and increase the security of sensitive financial data.
Conclusion
A digital business strategy creates value and revenue from digital assets by forging connections among
A/P departments are motivated to simplify the tedious cycle of processing invoices, from initial receipt
to final payment. Automating invoice processing reduces reliance on paper forms, faxes, and
documents. It also enables you to take advantage of dynamic discounting, accelerate payments, and
eliminate late-payment fees. Finally, it gives finance officers greater visibility into liabilities, cash
management, accruals, and financial close processes.
Reducing paper in financial processes can immediately impact your bottom line. By combining
document capture and imaging technology with advanced workflow capabilities, you can empower
A/P users and other knowledge workers to manage unstructured, unpredictable processes in a simple
and intuitive way. Automated processes not only save paper and reduce postal coststhey also
increase accuracy, helping to avoid costly errors and minimize risk.
A/P automation is a total solution enabled by key technologies. By correctly implementing and
integrating these technologies, astute companies can reduce process cycle times by more than 50
percent and save millions of dollars in operational costs.
Please visit oracle.com/webcenter and oracle.com/bpm to learn how Oracle WebCenter and Oracle
BPM Suite drive successful A/P automation solutions.
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Process Automation for Accounts Payable
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