Scanning invoices in an attempt to reduce procurement effort is like ordering a faster fax machine because your current model is too slow. Why not get rid of the fax machine?
Recently in an anonymous worldwide survey of Infor SunSystems iPOS procurement users, 70% of respondents answered they would adopt invoice scanning to save effort every month for Accounts Payable. In comparison, this same question rated the introduction of punch out into the AP function at only 29%.
Scanning invoices fascinates me as the organisation will still have a piece of paper-turned-digital. Really? Why would organisations not look to remove paper? In Sydney we now have an extra lane on the M2 expressway. All it appears to have done is move the traffic jam further down the road. So we now get to go faster to a traffic jam!
For me scanning invoices is all about the organisation locking in fixed cost. The better option surely is to reduce, or hopefully remove, paper. By dealing with suppliers electronically you reduce the number of data process errors, you let the machines do the work and your organisation does not lock in digital paper. Research on the web presents the cost of processing a paper invoice in the range of $10 – $24. Just assuming you can convert 100 paper invoices to electronic, at $15 per invoice that represents a saving of $18,000 pa. It’s the gift that keeps on giving.
A few years ago I visited an organisation that was implementing iPOS. As part of change management, each day this organisation placed the percentage first time match of invoices on a pillar just outside the CEO’s office. Everyone now knew what he thought was important. The day before my visit a major supplier’s CEO had visited as his organisation was not prepared to amend their electronic invoices to record the correct PO number, it truncated the last 3 digits. This error prevented the organisation achieving its KPI. As it was not able to be addressed at lower levels, the issue was escalated to CEO level. The buying organisations point was simple, if the suppliers invoice had the correct PO number the matching process was electronic, when it was an error it cost £10 per invoice. The demand was simple, correct your system or we have to change supplier. The supplier changed their system forthwith. The iPOS user locked in a higher level of efficiency; a gift that continues giving.
Although the discussion about replacing paper invoices tends to be punch out versus invoice scanning, there are other approaches that can be considered. The potential saving of $18,000 per 100 paper invoices should be a strong driver to seek other ways of locking in cost reduction and more effective procurement function. If punch out is not possible then there is the option of using EDI gateways, however the feasibility of this depends on the industry.
Another option is to present the invoices in XML format. This is a relatively easy option for your suppliers to adopt. In the EU there is a big drive for governments to only receive electronic invoices. This is good news as this becomes a general approach worldwide.
In some industries we have seen the adoption of other approaches to remove paper. One such approach is that if you can’t provide it in electronic form, you, the supplier, will need to enter the invoice. The other approach we have seen is where contractors and service providers self-bill. Once the contractor goes onto the organisation’s portal and confirms delivery of the service against the PO, the system auto-generates the ‘invoice’ and the supplier is paid.
There is money in those hills of paper invoices. With some effort I believe your organisation can lock in lower costs for this year, next year and beyond.
You can read more about Professional Advantage and iPOS here.
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