Speaker BioCheryl Calvert is an SAP FICO Analyst working for Incitec Pivot Limited. She thinks deeply about IT systems, how they contribute to the overall IT landscape and how they deliver value to the business. Cheryl’s research in IT systems value, change management and training is published in leading journals.

Cheryl is the chair of the Readsoft (now part of Lexmark) User Group in Melbourne and manages an international forum for users of the Readsoft Invoices solution. Prior to Incitec Pivot, she was a Project Manager in Corporate Business Systems at Monash University. She has lectured in both Accounting and IT at Victoria University and the University of Melbourne. Cheryl is the author of two SAP books which were used widely by universities in Australia and overseas. The books inspired her enjoyment and immense satisfaction in helping end-users to engage with complex IT systems efficiently and effectively

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I am going to make a promise that this is the busiest slide in the entire presentation.

I have simply cut and paste two of the emails I received this week regarding EDI and Smart XML. Just so you can see that other companies are excited about the potential for this functionality. My objective today is to help you to realise that potential too.

What this presentation is about is a relatively new and easy way to EDI vendor invoices. Incitec Pivot Ltd and BOC Ltd are the first to use this method in Australia and I am thrilled to have this opportunity to share our journey with you.

Incitec Pivot Ltd is a global manufacturer of fertilisers and explosives—employing 5,000+ employees worldwide. IPL are one of the top 50 companies listed on the Australian Stock Exchange. We have two Accounts Payable centres for Australasia and the Americas.

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A year ago I was at a procure-to-pay conference organised by Readsoft. Their Chief Marketing Officer, Andrew Perry, delivered a presentation on e-invoicing and business agility. I am sitting in the audience thinking, that sounds great for the future, however that future is a long way off.

In 2012, IPL had invested in Readsoft’s Invoice Capture solution called “Invoices.” We had also invested in “Process Director” which manages the Invoices data within SAP, and we invested in the infrastructure that runs it.

So I am sitting there listening to Andrew Perry––and I am wearing my sceptical hat. Then Andrew shows a slide of how the mechanisms for invoice data capture has evolved and where it is heading in the future. Something like what’s on the right-hand side of the Powerpoint slide. However, I have totally bastardised Andrew’s graphic, yet the essence of the trend remains the same. In the future, we will be processing more invoices via xml, than we will by email or by traditional scanning. Now that made sense to me. Andrew had my attention.

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Looking at the e-Invoicing Maturity levels proposed by Capgemini, Perry advocated that the market was quickly heading here––Level 5 Service Provider Platform. This is where buyers connect to a cloud of suppliers and are able to interact with any one of them through a common interface. Invoices are exchanged in XML format. This means that the buyer does not need to maintain connections with lots of different suppliers. Rather, buyers connect to just the one platform.

That sounds like a fantastic way to manage invoices, but how does my company and other companies get there? Is it possible to retire our existing in-house solution to migrate to a cloud-based one where our invoices are managed by a third party?

There will be a lot of stakeholders to convince to get that one over the line. It would be like trying to go from 0 to 100kph in under 3 seconds––while driving a Volvo. Like most companies, we are not moving at the pace of Porsche Spyders, Ferraris, or Lamborghinis.

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Then I recalled that the Invoices 5-7 solution came with Smart XML functionality and we had upgraded to Invoices 5-7 in March 2014. So at the end of Andrew’s meticulous presentation, I put up my hand and mentioned that we already had the capability to process XML invoices without investing in an e-invoicing solution. The technology is called Smart XML. ‘Yes, but no-one in Australia is using Smart XML’, was Readsoft’s response. ‘That’s okay,’ I say. ‘IPL are not afraid of being early adopters––we will go first.’

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I believe that before companies will embrace e-Invoicing, they need to be familiar and comfortable in receiving and processing XML invoices. Smart XML is that half-way house–– for want of a better analogy––between EDI and a cloud-based e-invoicing solution. Referring to the e-Invoicing Maturity Level Model, Smart XML would sit somewhere between levels 4 and 5. Let’s call it level 4.5

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The disadvantages of EDI are that connections need to be established with each supplier and that there are different standards for XML files. With multiple standards, buyers must make individual agreements with suppliers as to which standard to use.

There are also other disadvantages such as increasing the complexity of the ERP landscape and it usually takes several months to implement an EDI solution.

If your company already has an Invoice Automation System which comes with an invoice cockpit, then EDI must integrate with that cockpit.

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Yet Smart XML, to a great extent, overcomes these limitations. Since Smart XML is embedded technology within the Invoices solution, it acts as middleware receiving the XML files and transferring them to SAP.

Smart XML comes with several XML standards. If no standard is detected as the XML invoice is interpreted, then a general standard is automatically applied. This general standard is then tweaked to provide the base template for XML communications with the particular supplier. The development time to achieve this is relatively short, less than one day.

I made it my mission to get XML working within Readsoft’s Invoices solution.

It was a challenge, without the local technical expertise, to get XML up and running. No-one in Australia had seen an end-to-end XML process before. It’s hard to implement something, if you have never seen it working. But using snippets from the web and the help files embedded within the Invoices solution, I was able to get a simple XML file to process into SAP.

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In early 2014, BOC Ltd contacted IPL to implement an EDI solution. BOC is a supplier of gas products, regulators, welders, industry clothing and safety protection. BOC Ltd are a member of the Linde Group operating in over 100 countries. They have been a supplier to Incitec Pivot Ltd since the early 1990s.

At the time, I had prepared the Business Case for BOC’s EDI solution and raised some concerns due to our investment in Lexmark’s Invoices and Process Director solutions. We were already converting paper based invoices into electronic data via our scanning system. We also required integration with Process Director within SAP. Without this integration we would lose our workflow functionality for BOC invoices, our control checks, and our central view of most invoices data. However, Smart XML would overcome these limitations.

I contacted BOC’s eBusiness Manager and asked whether they would be interested in sending us an XML version of their invoice. Granted, it wasn’t exactly what the eBusiness team had envisaged when they demonstrated their EDI solution to IPL. BOC’s EDI solution involved online catalogues, purchase orders, goods receipts, invoices, etc. It’s far more complex than a simple XML file of their invoice. What’s in it for the supplier, I had to wonder? Nonetheless, BOC said they were thrilled to exchange any document electronically. Thus our collaboration commenced.

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So why didn’t we go down the direct EDI path with BOC? With direct EDI, we would need to invest in a parallel solution to the Readsoft Invoices solution. We are already using an Evaluated Receipt Settlement (ERS) process within SAP, and a few ad hoc workarounds to deal with unique business processes. The downside of having multiple methods to get the vendor invoice into SAP, is that we need to get all of these methods integrated into the Invoice Cockpit called Process Director. And that integration is time consuming and expensive.

Accounts Payable need a central view of all of their outstanding invoices. They need a workflow engine to send invoices out into the business––and they need to track the statuses and communications pertinent to those invoices. So the problem with a direct EDI is that it will sit outside of Process Director, unless we invested in an alternative solution, at the time called the EDI cockpit (also by Readsoft). Not only would we need to invest in the EDI cockpit, there is also the development time to integrate the data files into SAP. That development will be applicable to one vendor only.

So here we have this ‘sleeper’ functionality called Smart XML. It’s implemented. It’s not going to cost us anything except the opportunity cost of labour, and it’s integrated seamlessly with Process Director. Another advantage is that it’s a plug-and-play type solution. As long as another company uses similar data capture fields, then we can export the solution out of our system and they simply import into their Invoices module. I am not kidding, it works. We tried this with Village Roadshow and

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they reported they were 90% complete within two days of commencing the project. They are about to go-live with XML data processing of BOC invoices too.

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BOC email us an XML version of their invoice, and our Invoice’s system automatically receives and interprets the XML invoices and transfers them to SAP. Because we are receiving the raw data––that is, the invoice does not need interpretation by acharacter recognition engine––then the data is almost always accurate.

For this reason, the emailed invoice gets pushed through––without human intervention––into SAP.

Before the project, we received paper invoices from BOC which we loaded onto our scanner. Because BOC’s invoices had a blue background, the interpretation software did not always read the characters accurately. Number 5 was often interpreted as number 6. Not so great, when all your purchase order numbers begin with 45!

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Lexmark’s Invoices module is the middleware which processes the XML file. With Invoices, invoices transition through the Verify component before being ending up in SAP.

That transition is invisible if all the green lights are on as the vendor invoice moves through the components that make up the Invoices software. Accounts Payable staff won’t see or have to touch the BOC invoice at all.

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The BOC invoices ends up in Process Director in SAP. Process Director is a cockpit of all our invoices.

In the example I prepared for this presentation, I used an invoice which has been posted before. You can see as the invoice moves into Process Director it is flagged red with messages to check whether it has already been processed.

This is one of the big strengths of Process Director.

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Smart XML renders a readable PDF version of the invoice. So we start with an XML file and it is transformed into a PDF document. Fantastic. If we need to workflow the document to the business––say to request the completion of the goods receipt––then the store person reviews the PDF. With pure EDI, that is without EDI cockpit integration, the store person would need to decipher the XML data file.

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Here the first invoice is the XML one for BOC Ltd. I placed a stop on it because it had been processed before. Note that PD contains all of our invoices, irrespective of source (scan, email or XML).

The status indicators tell us where the invoice is at along the process chain. If the invoice is out in workflow, it tells us why and who is holding the workflow.

The system is configured to send reminder emails if the workflow is not returned by a set-date.

Note the tick in the third column. This means the invoice has been out in workflow and has been actioned and returned.

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Accounts Payable in Asia Pacific have 6.5 FTEs who process about 125,000 invoices per annum for the Asia Pacific entities. Post implementation of our Invoice Automation System, head count reduced by 2 FTEs and there had been significant improvement in invoice processing lead times, trade working capital and automation.

Before we implemented PD, Accounts Payable stored invoice communications through email messages (Lotus Notes), handwritten notes, even post-it notes stuck to a computer’s monitor. Nowadays, they can workflow invoices to any remote plant worldwide and they can readily display a history of all invoice communications. Integration with vendor master data enables them to easily email vendors from within the PD module using standard email templates.

PD has other useful functionality such as performing control checks of invoice data, workflow templates, invoice approval, and attachment of vendor invoice.

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In summary, I am excited about the potential for Smart XML and its integration with Process Director.

As you have seen, it is a simple, fast to implement and cost efficient alternative to direct EDI. Implementation time for the first supplier is measured in days not months. Second and subsequent suppliers can be set up in hours not days.

It moves us along the e-Invoicing Maturity model without investing in a hosted e-invoicing solution. I believe it is the next logical step for a lot of companies who are looking to improve their Invoice Capture systems, but are reluctant to invest in a cloud solution.

I am encouraging other Lexmark using organisations to activate this functionality. I have put instructions on how to set it up on the Readsoft User forum: http://readsoftuser.forumchitchat.com. Collaboration is the key to encouraging more suppliers to email invoices in XML format.

The more buyers who want XML, the more likely suppliers will send their invoices in XML format.

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I have embedded several documents within the Powerpoint presentation. If the conference organisers convert the PPT to a PDF then you can also locate these files on our forum:

http://readsoftuser.forumchitchat.com

The Smart XML thread in the forum contains a presentation about setting up SMART XML and provides lots of hints and tips.

The forum also contains some sample XML files—single and multiple lines. As well our discussion of any issues we have encountered and their resolution.

The Invoices Help files also contain a lot of information about setting up Smart XML.

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