maximizing value with more ap automation · to maximize efficiencies and cost savings,...

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June 2016

Maximizing Value with More AP Automation

Integrating Electronic Purchase Orders and Automated Price Compliance with

Your eInvoicing Solution

Introduction With the technology boom and introduction of cloud-based services, all oil and gas companies recognize the benefits of eliminating paper. Paperless engagement means less errors, pre-validation of information, quick delivery of invoices for review and approval, and automatic integration with back-end systems.

Although many companies have adopted electronic invoicing, excessive resources are still required for invoice review. Also, cost control and spend analysis are still limited with outdated and error-ridden data. There are definitely more opportunities to create greater efficiencies and cost savings.

So what can you do to maximize the efficiencies with your company’s current accounts payable technology? Some of the best-in-class companies aren’t backing off of technology investments. They are, in fact, automating more of their procure-to-pay workflows.

Through this paper, we will explore how your company can automate more of their procure-to-pay workflow to enhance productivity, cost savings, and visibility. Specifically, this paper covers the benefits of integrating electronic invoicing with electronic purchase orders and automated price compliance.

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Why eInvoicing Isn’t Enough Today, oil and gas companies are struggling to maintain their competitive edge when their strategic priorities are hindered with wasted resources that have to deal with high invoice exception rates, error-prone information and payments, lack of visibility, and delays in P2P workflow.

Electronic invoicing is an effective way to eliminate paper and reduce the delivery time between suppliers and buyers, but with today’s economy, electronic invoicing alone just isn’t enough. Analysts suggest that now is the time to invest in more technology to offset and prepare for the effects of the economy.

To maximize efficiencies and cost savings, best-in-class companies are automating more of their P2P workflows, including purchase order matching and contract compliance.

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What More Can You AutomateBest-in-class companies are automating more of their basic accounts payable functions to not only increase staff productivity but to better evaluate current cash positions and optimize savings.

The speed and cost of invoice processing depends on the accuracy of invoice information and the level of process automation. Automating the PO and price compliance portion of your P2P workflow will result in drastic improvements. Business rules can be used to automatically validate, match invoice information against other data, process the invoice straight-through, or route to specific areas for review.

Purchase Orders

The ability to match invoices to purchase orders and contracts acts as a check-and-balance for ensuring that the billing for services is accurate. With automated 2 or 3 way matching, the system can confirm invoice information accuracy allowing payment to go out on time. Alternatively, the system can flag inaccurate or missing information and instantly notify staff that the invoice requires manual review. This automation increases the number of straight-through invoices being processed, leaving more time for staff to deal with exceptions. With automated alerts and notifications, employees can be notified and resolve issues in a more timely fashion.

Contract Management

Lack of contract compliance leads to some of the highest error rates, biggest disconnects and largest dollar amounts slipping through the cracks. Price compliance is a priority especially in times where pricing can be very dynamic, but it can be very time-consuming and complex. The more contracts and suppliers you have, the more unique contractual terms and exceptions you have to track. If you fail to account for those exceptions, it creates additional delays for validation, not to mention problems with under- and over-billing.


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The best performing procurement teams are forward-thinking with 40% of them being more likely to automate their contract management processes.1 Staff save time on creating, approving, and matching contracts to invoices. Electronic contracts facilitate automated price compliance, a task that can steal several hours of labor that should be devoted to higher value work.

With an automated process, you can enter terms and exceptions for every contract and transaction. The system can distinguish differences between suppliers, identify matching failures, and flag potential issues before they become problems. Also, it becomes much easier to identify profit and loss and isolate contracts that should be renegotiated. Improve contract compliance and reduce maverick spend and contract leakage.

1 Ardent Partners, “The Best-in-Class Approach to Contract Management”, October 2015

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Value of Automating MoreBy investing more, the value of your company increases. The value of accounts payable increases as it optimizes working capital. AP helps create procurement efficiencies and drives better spend management while also minimizes supplier risk.

Cost Savings - More Electronic Invoices

When your P2P process is further streamlined with electronic purchase orders, digitized contracts, and automated workflow, you are enabling suppliers to efficiently submit more electronic invoices. With a greater percentage of invoices processed electronically, the average cost per invoice decreases. Best-in-class companies have achieved an average electronic invoice cost of $2.20. 2 Companies at near 100% electronic invoices can experience even greater cost savings by focusing on the amount of time spent manually managing invoices.

Research shows that 49% of the time, invoices are disputed due to incorrect or missing purchase order references.3 Increasing the percentage of electronic invoices reduces the need for data entry as well as manual PO and contract validation and matching. Straight-through invoice processing, makes invoice approvals more efficient and greatly increases the number of invoices processed per FTE, thereby reducing operational costs. Seventy percent of leading companies implement workflow automation; approximately, 50% of their invoices to be processed straight-through allowing AP staff to focus on exceptions.2

Cost Savings - More Realized Discounts

As much as 80% of discount opportunities are missed because it often takes weeks to code, verify, and approve invoices. Automated reconciliation of purchase order information and pricing will decrease the time it takes to approve and pay invoices. Faster payments result in better supplier relationships, increased invoice volume, and more discount opportunities.

2 Ardent Partners, “ePayables 2013: AP’s New Dawn”, May 2013 3 Hoffelder, K., “Why Firms Don’t Pay Their Invoices”, www.cfo.com, July 2013

Automating PO validation will reduce your invoice dispute rate to roughly 5%.

How many of your electronic invoices require manual review? Imagine if all your straight forward invoices were reviewed and approved with no human intervention.

Decrease your average invoice approval time by up to 80%, from 17 to 3 days.

With workflow automation, leading companies process 38% more invoices per FTE per month.

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http://www.cfo.com/

Cost Savings – Increased Compliance

Lack of contract compliance has resulted in, on average, $4.6 million in contract leakage per billion in spend. By standardizing, automating, and linking sourcing and contracting, best-in-class companies report 35% greater on-contract spend and 15% more transactions that are compliant with contracts. 4

Cost & Productivity Savings – Less Paper

Apart from the benefit of automated matching and workflow routing, electronic POs and contracts share some of the same benefits as paperless invoices. They can be generated error-free in less time that it would take to manually produce paper documents. Electronic POs, for instance, save up to 31% of the average cost of a manually produced PO.5 Electronic documents also facilitate automatic routing for faster delivery as well as improved visibility and collaboration between stakeholders.

Optimized Working Capital – More Visibility

Working capital is optimized through your AP department’s ability to provide visibility and access to accurate information. A centralized platform increases visibility of PO, contract, and invoice data for quicker exception handling, better decision making, and increased supplier engagement.

• Accounts payable staff can react to exceptions and approve invoicesmore quickly to take advantage of early pay discounts.

• Increased visibility allows finance executives with decision makingto improve cash flow and cash management.

• A supplier self-service features provides full visibility of invoicestatus, meaning more positive relationships and less calls to your APdepartment.

In today’s economy, accounts payable has evolved into a function that provides more than just administrative tasks. Optimizing accounts payable processes also help companies achieve their strategic objectives.

4 Ardent Partners, “The Best-in-Class Approach to Contract Management”, October 2015 5 Aberdeen Group, “Achieve Business Agility Through E-Invoicing and Other Key AP Automation Initiatives”, May 2014

Prevent contract leakage by increasing the amount of spend being automatically rate validated. One OpenInvoice client is seeing less leakage with over 40% of their spend being automatically rate validated.

Implement electronic POs and save 30-50% on PO and acknowledgements costs.5

Optimizing accounts payable processes also helps companies achieve their strategic objectives.

“AP teams that focus on providing intelligence [around invoice and payment data] can also work more closely with its functional partners on activities that can drive greater efficiencies enterprise-wide.”

– Senior P2P Market Researcher,Ardent Partners

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Summary of Metrics to Consider6

Best-in-class Others Cost to process an invoice $2.20 $19.10 Straight-through invoices Percentage of total invoices that require no manual intervention

44.2% 18.4%

Invoices linked to POs (Greater % of linked invoices implies greater compliance)

73.1% 54.5%

Number of invoices processed per FTE per month (Greater # of invoices/FTE/month implies greater productivity)

3,559 1,335

Average time to approve invoices (Lower average time implies faster payments and more discount opportunities)

3.3 days 13.5 days

On-time payments (Greater % of on-time payments implies more discount opportunities)

91.4% 70.8%

Suppliers submitting electronically (Greater % of suppliers submitting electronically implies higher electronic invoice volume, faster processing, and greater opportunity for discount savings)

41.8% 14.5%

Duplicate or overpayments (Lower % of duplicate or overpayments implies the P2P workflow is working more efficiently)

1.07% 3.12%

6 Ardent Partners, “ePayables 2013: AP’s New Dawn”, May 2013

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Choosing OpenInvoiceOpenInvoice works with any ERP and easily integrates with your existing procurement processes and back-end systems. Electronic purchase orders and contracts can be added to your current OpenInvoice e-invoicing solution to create a robust set of workflow rules for automated 2 or 3 way matching validation, routing, disputing, or approving. You can even configure OpenInvoice to automatically notify requisitioners or department notification users when invoices require attention.

Electronic Purchase Orders

OpenInvoice allows you to digitize your purchase order life cycle and facilitate easier PO referencing and matching on invoices. By uploading your detail and/or blanket purchase orders to OpenInvoice, you can:

• Share your purchase orders with your suppliers and allow them to accept, reject, or propose changes through OpenInvoice.

• View change requests as well as invoice fulfillment status which is automatically tracked by OpenInvoice.

• Pre-populate purchase order information on invoices by allowing suppliers to flip purchase order lines. This guarantees PO line to invoice line matching.

• Configure workflow rules for OpenInvoice to identify PO presentment on invoices, flag mismatched criteria, automatically route the invoice for review, automatically dispute the invoice, or automatically approve the invoice.

OpenInvoice’s PO alerts identify the following compliance items:

Green Invoice is PO compliant Yellow Moderate amount over-fulfillment, moderate quantity

over-fulfillment, unit of measure mismatch, product/service mismatch, requisitioner mismatch, contract reference mismatch

Red Severe amount over-fulfillment, severe quantity over-fulfillment, and/or price/currency mismatch

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Electronic Price Contracts

The same level of control can be extended to non-PO invoices by matching the invoice against OpenInvoice contracts or PriceBooks. By uploading your contracts to OpenInvoice, you can:

• Send rate changes or contract amendments in real-time.• Allow suppliers to select from a predefined list of items.

• Configure OpenInvoice to match pricing to invoices, flag mismatched

criteria, automatically route the invoice for review, automatically

dispute the invoice, or automatically approve the invoice.

OpenInvoice’s PriceBook alerts identify the following compliance items:

Green Invoice is PriceBook compliant Yellow Off contract Blue Price mismatch (underpriced), no contract price Red Currency mismatch, price mismatch (overpriced)

How OpenInvoice Workflow Automation Works

With OpenInvoice’s workflow automation, you define the business rules and data validation requirements for the system to determine how invoices will be processed. Your rules can route invoices for processing to OpenInvoice, your back office, or back to the invoice submitter (automatic dispute or reject). For invoices that are routed to OpenInvoice, you can define rules for automatic code verification and/or automatic approval.

• Automatic Dispute or Preventing Invoice SubmissionConfigure rules for the system to prevent your indexers (Image OBO) and online suppliers (Direct Entry, Image Scan, and LIDO) from submitting invoices that are not valid. In addition, OpenInvoice can be configured to automatically dispute invalid invoices from your integrated suppliers (B2B).

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• Automatic Code VerificationConfigure rules for the system to automatically mark invoices as code verified upon invoice submission. If the invoice is not automatically code verified, a user must manually code verify the invoice.

• Automatic Financial ApprovalConfigure rules for the system to automatically mark invoices as financially approved upon code verification. If the invoice is not automatically approved, a user must manually forward the invoice for approval.

• Automatic Recipient RoutingConfigure rules for the system to forward OpenInvoice invoices to:

o a specific site and department.o a specific site, department, and user.o a requisitioner.

Invoices are submitted to the Remit To site and department as specified on the invoice by the supplier.

• Dispute ManagementConfigure rules to determine whether a disputed invoice is routed to a department within your company or returned to the supplier or indexer for resolution.

• Workflow Rule CriteriaCreate your workflow rules on a spreadsheet and import them into OpenInvoice. Select from a range of criteria that reflects your business rules and data validation requirements.

o Supplier typeo Presence of cost object referenceso Cost object associationso Presence of a PriceBook referenceo Presence of a PriceBook alerto Presence of a purchase order referenceo Presence of a purchase order alerto Routing (OpenInvoice or back office)o Maximum total invoice amount

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A Simple Example of Automated Workflow

Assumptions:

• Purchase Order (PO) suppliers are “trusted” spend.• All purchase orders submitted to OpenInvoice are fully coded.

Results:

• Automatically dispute invoices from PO suppliers that do not reference a purchase order.• Automatically dispute invoices from PO suppliers with a red PO alert.• Automatically code verify invoices from PO suppliers with a green or yellow PO alert.• Automatically approve invoices from PO suppliers with a green PO alert and a total

invoice amount of $1000 or less.

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OpenInvoice Success HighlightsOur clients tell us that OpenInvoice is an attractive solution that not only eliminates paper invoicing but facilitates a robust workflow automation engine that significantly saves resources and improves strategic decision making. Some have specifically switched over from other providers because they require more sophisticated PO presentment validation, online PO collaboration, and more complex price reconciliation.

Repsol Oil and Gas Canada Inc. (formerly Talisman Energy)

With approximately 70% of their invoices associated with purchase orders, Repsol adopted electronic invoicing to drive greater contract compliance. After an extensive RFP process and evaluation of at least five different technology providers, Repsol chose OpenInvoice based on the robustness of the solution, a strong supplier network, pricing, and the fact that OpenInvoice does not charge suppliers to transact on the network.

Within 2 years of implementing OpenInvoice, 33% of Repsol’s spend was being automatically rate validated, helping to ensure commercial contract compliance. Also, approvers were spending less time reviewing price rates and focusing more on the business. OpenInvoice has helped improve Repsol’s contract management process and visibility.

In their efforts to move spend under a PO based model, they became better at sending POs to suppliers and ensuring accuracy through online collaboration.

“Newfeld now has better visibility related to its accounts payable processes and the OpenInvoice solution allowed us to be more strategic about our time…Our team can focus on business priorities that help to increase our bottom line instead of worrying about the small details associated with invoices. We need that because we’re growing so fast. There’s no doubt that OpenInvoice provides significant value—in terms of productivity and assurance.”

– Newfield ExplorationCompany

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Next StepsMaximizing the value of your current invoicing technology requires you to look at the larger picture—one that involves creating efficiencies for other areas of your company, like treasury and procurement, as well as your suppliers. More accuracy and intelligence around liabilities can help treasury implement better cash management strategies and optimize working capital. Procurement can benefit from access to data the better understand company-wide spend and enforce compliance to negotiated contracts.

Collaboration is achieved by linking all the processes and systems used by these stakeholders. A well-managed, tightly linked P2P process includes the ability to improve contract compliance, strengthen supplier relationships, and optimize working capital through a streamlined AP process and high rate of discount capture. Automating more of your OpenInvoice technology will allow your company to realize its full potential to achieve its business objectives.

We invite you to learn more about how OpenInvoice’s full features can improve your company’s productivity, cost savings, and strategic initiatives.

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