SAP Offers to Acquire Ariba

Last week SAP announced its intent to acquire Ariba.  We run into Ariba Invoice a lot as we sell electronic invoicing and payables automation.  We easily differentiate ourselves from Ariba Invoice, so it’s usually just up to the customer what they’re looking for (Procurement driven project focused on technology alignment, usually Ariba Invoice; Payables driven project focused on results, usually iPayables).  However, these events have an impact on the marketplace beyond just who is going to win a client.

In my opinion, the acquisition of Ariba by SAP is going to hurt the payables automation movement.  Ariba was one of the drivers in the market place.  They were educating the market and helping companies understand the benefit of electronic invoicing and payables automation.  I fear that it makes more sense for SAP to focus those marketing efforts only on their current customer base (large as it is), and that even then, the focus will not be on payables automation.  Or, worse still, it could be that SAP is really more interested in gaining Ariba’s experience in cloud offerings and is not as interested in pushing their quasi-competitive to SAP products at all.

Either way, I think we may lose one of the strong evangelists of electronic invoicing and payables automation.

Electronic Invoicing/Payables Automation: A Change in the Market

I attended Fusion 2012, a trade show with an accounts payable focus, and noticed a change this year.  I started attending the show in 2001 and electronic invoicing was always a curiosity to the attendees.  We spent most of our time educating payables professionals about automation and the benefits of electronic invoicing.  But in the last few years, more and more professionals understand the concepts and we have spent less time educating and more time differentiating ourselves from other providers.

This year we reached a milestone when instead of being the unique electronic invoicing and payables automation techies, we were given a sarcastic, “Wow, payables automation, that’s really different than anyone else here”.

I have mixed feelings about this.  I sort of liked being the unique innovator and am proud of our patent  from 1999 around electronic invoicing.  But at the same time, it’s hard to sell what people don’t understand.  So, I don’t necessarily like all the other companies that offer some form of electronic invoicing or payables automation, but I really like that the market has matured to the point that more than just early adopters are implementing this technology.  (Check out Aberdeen’s latest report on this topic.)

The statistics still show a dismal amount of paper, and there are still large percentages of corporations that want to implement electronic invoicing/payables automation.  However, this year more than ever, it seems that people really know what that means.  Add to that the fact that we have about three times the number of RFPs outstanding than we’ve ever had before, and I’d have to say that we have a legitimate change in the market.  Electronic invoicing and payables automation is moving from early adopters to mainstream.

Purchase to Pay – Collaborating for Success

I’m sure we have all heard the saying, “If you want something done right do it yourself.”  I’m also sure that at least once in our careers we’ve felt these sentiments.  This approach can work great in the short term or for the immediate issue, but is it the best way?  Can individuals, groups, companies or even countries take a go it alone approach and be successful in the end?  My opinion is probably not.

So what does this have anything to do with Purchase to Pay you may ask?

Purchase to Pay is not an object but a process.  This process involves multiple organizations that work together to achieve an end goal or goals.  Hopefully the goals are the same if not complementary goals.

Take for example the activities of processing Purchase Orders, Receiving, Invoicing and Payment.

These activities can involve the Procurement, Account Payable, Treasury, and other additional departments, for things such as approvals, to be involved.  Not one group but multiple.  When these groups can smoothly work together (collaborate), great things can be accomplished.

Visibility, control, efficiencies, cost savings and yes, revenue opportunities, through items such as dynamic discounting and other payment options are just a few of the benefits one can achieve.

Just as organizations are made of up of internal groups, they also work with external groups.  From the Purchase to Pay perspective this would obviously involve your suppliers.  Your suppliers also play a role in helping to make your organization successful.

Collaboration is a two way street and the benefits should flow both ways.  You are important to your suppliers because you are their customer.  I know this sounds obvious but view things for a moment from the supplier perspective.  They are in business to provide a product or service to you and other companies.  The better the relationship, the quality and the pricing, the more they hope you will purchase from them.  It should really be a win-win deal.

So collaborating on solutions which are a benefit to both organizations such as Purchase to Pay brings the benefits to both groups.  In addition to the benefits for the customer I discussed above the supplier can receive benefits such as shorter cycle times, faster DSOs, visibility, faster resolution, reduction in manual tasks and decreased costs to name a few.

We believe technology and tools which are available today are taking companies past the world of hard copy paper processes and laborious data entry and fragmented controls.  E-invoicing, workflow, electronic payments, etc. now offer, not just savings, but new opportunities in process controls, cash flow visibility and analysis, enhanced supplier relationships and new revenues in departments customarily thought of as cost centers.

So in the end, the whole can be greater than the sum of the parts through Purchase to Pay collaboration.

Robert Ripley is Chief Operations Officer at iPayables with experience in management and IT consulting, IT Integration, business process design and AP Automation with Fortune 500 companies.

Dynamic Discounting – the Sweet Icing on the AP Automation Cake

Let’s start this week’s blog off with a little confessional.  I know out there are companies that take the discount they didn’t earn.  They take the 2% and pay at 30 days (or beyond).  Maybe the vendor relationship is strong enough to overlook the practice, but let’s not be naive about who eats that 2%.  Suppliers aren’t naïve and will get their fair price wherever they can find it – even in little price increases.

So assuming that you’re one of those companies that only takes a discount if you can actually pay early but still have paper coming into AP you probably find yourself partaking minimally at the discount pool.  How do you create more discount opportunity and drink more deeply?

First – Automate Invoice Capture.  Too much time is lost in the mail, mailroom and data entry.  Even companies that semi-automate with an imagine solution are 5 to 7 business days in pre-scan processing of that piece of paper.

Second – Automate Invoice Approval and Matching.  This phase can be the real bottleneck depending on the approval process.  If a paper invoice is going to sit on someone’s desk you are in trouble.  If it’s stuck in AP because the semi-automated workflow isn’t smart enough to get the invoice to the right person at the right time you’re in trouble.  If you are still matching invoices to PO’s manually you are in trouble. Truly automated invoice approval and matching can reduce approval and matching to 1 to 5 days.

Now the total process from submission to approval takes a total of 3-5 days with gives 25-27 days on standard 30 day terms to get some discounts flowing.  The next question becomes, “How do I get my supplier to take a discount now?”.  Suppliers want flexibility.  They don’t need to give up 2% on every invoice.  But sometimes it makes perfect business sense so you need to make the opportunity available to them every time.

Automating Accounts Payable with  iPayables gives you the efficiency and   speed you need to capture more discounts than ever before.  With just the click of a mouse suppliers agree and commerce flies on.

“Living High on the Hog” thru Electronic Invoicing

I have received some “guff” for lack of a better term, regarding my portrayal of imaging solutions as “lipstick on a pig.”  In reality, imaging and scanning solutions do have their place in the market, they are not, and should never be considered as electronic invoices.

I was in no discernible way trying to mar the proud tradition of pigs as well.  Swine are a beautiful thing, especially if they are slowly fried in lard and then baked to make Carnitas!  Putting lipstick on this noble beast does nothing to enhance any of its attributes, therefore it is pure folly.

Ultimately, the point I was making is that by being the one who is responsible for bringing electronic invoicing to your organization, you will be solidifying your position in the company and you will ultimately be able to enjoy your life living high on the hog!

Elevating Your Organization to Electronic Invoicing

I have previously written about many facets of electronic invoicing, from features and benefits to cost savings and efficiency gains.  Implementing a great electronic invoicing application does all of that of course, but can it secure your job in the organization for years to come?  Can it elevate your stature in your organization so that you are looked at as an integral part of the company, an extremely valuable piece of the corporate machinery?  Just by implementing electronic invoicing?

I am here to tell you “Yes.”  Extremely effective electronic invoicing applications affect many people in a company.  Anyone who ever approves an invoice will be using this application and this is typically management and up.  If you have aided in adopting said e-invoicing project, your name will be tied to this initiative, and your name will be known throughout the organization.  If you have been responsible for implementing an application that not only makes life easier for these people, but also improves the bottom line, your star will truly rise.

People within the organization will be able to approve invoices on the fly; disputes will be reduced or eliminated.  Electronic invoices are typically approved within 5 days of creation, this gives an unprecedented ability to utilize treasury to optimize your payments and increase your discounts!  Electronic invoicing, with the correct e- invoicing partner, makes your company better, and all because you were the one willing to take the initiative and explore the possibilities of electronic invoicing.  You took the time to see what is truly electronic invoicing, versus what amounts to putting lipstick on a pig, or what most call imaging.

True electronic invoicing involves the creation of the invoice in an electronic format, not sending an electronic pulse to a printer, having this machine put ink onto a piece of paper, then putting it into an envelope, putting on the postage and mailing it.  Then someone receiving the mail, opening it, prepping it, and scanning the piece of what used to be a tree.  Then what do they do with the paper, they charge you to destroy it.  This is not what innovation and forward thinking is about, and it is time we recognize it for what it is.

In the life cycle of a company, there are peaks and valleys.  The peaks are fun and life is good, but the valleys are the times where survival is the key.  Do you want to be known as an innovator and an important part of the corporate machinery?  What people do you think the company will make certain that they retain?  Who ever thought that electronic invoicing could be the key to your future at your company?

Aberdeen Benchmarks for Payables Automation

As a follow up to my previous post, Aberdeen just released a study titled, “AP Invoice Management in a Networked Economy”.  It’s a great study to use as a benchmark in your organization and should give you an idea if your accounts payable automation is truly automation.

Scott Pezza and William Jan, the authors, describe Best-In-Class performance with three metrics:

• 4.1 days to process an invoice from receipt to approval
• $3.34 average cost to process an invoice from receipt to approval
• 90% capture rate for available early-payment discounts

They attribute automation as one of the key factors in all three metrics.  Metrics for iPayables customers look a little better than these, but if you’re in the general area of these numbers you’re doing pretty good.  Check out the paper at http://www.aberdeen.com/link/sponsor.asp?spid=30411008&cid=7498

Please Don’t Pretend It’s Accounts Payable Automation

I’ve heard a few awkward stories of people “pretend automating” their payables department.  Their people are still doing basically the same jobs and they still face most of the same challenges that they always have.  My fear is that many accounts payable groups today feel that payables automation consists of one or two tools you buy: a scanner, a workflow solution, a place for vendors to look at their invoice status.  Maybe they feel pressure to tell their boss that they’re automated or maybe they really just don’t know what it means.

There is a cold, cruel way to tell if you’re automated.  Think of what automation means in the auto industry.  It’s not factory workers wearing robot costumes or walking around with special tools.  The cold truth is if someone’s job is automated, they’re not there anymore.

Any accounts payable group that still has basically the same clerks as before entering data, coding invoices, reviewing signatures, matching purchase orders, or answering invoice status calls, just can’t claim to be automated.  I’ll also call out accounts payable departments that switch people from keying into scanning, or outsourcing the whole department to a different group of people.  Not payables automation.  Even if you have everything imaged and your clerks don’t have paper, they have images that they’re coding into the AP System.  Not Automated.

Also, while using some efficiency tools are a great start, tools by themselves are not accounts payable automation.  I knew a company that received a large number of EDI invoices, which was great.  They printed them out on paper and keyed them into their payables system, which is not so great.

A fully automated solution should start with electronic invoicing from as many suppliers as possible (so include EDI, web entry, file upload, PO flip) and throw in a scanning post office box to catch the remaining paper scraps.  PO matching should happen as the supplier is entering the invoice so they can resolve issues before they even submit the invoice.  Status of the invoice is available to the supplier through every step of the process.  Workflow routes invoices to the person who order the goods for coding with all the validations and controls necessary to ensure it is done properly and is forwarded to the various approvers after that based on the controls defined by the company.  Disputes are resolved online between the supplier and the buyer.

In an automated environment, accounts payable departments don’t touch invoices, they don’t look at invoices.  They monitor the flow, administrate the system, maybe handle exceptions, but all of the traditional clerk activities are automated.

Maybe payables automation isn’t for everyone.  I worked with one company that turned it off after the epiphany.  In their words, “If we do this, she won’t have anything to do”.  Not until after they implemented, did they really understand what real automation meant.

Payables automation doesn’t need to be cold and cruel.  Most of our clients have created internal audit groups or just moved people into unrelated positions.  Every organization needs to determine when they want to automate payables.  Eventually, it will be an efficiency requirement of every organization.  It is wonderfully efficient and provides visibility and control as never before.  However, there will be companies that just aren’t comfortable with it yet.  For the companies that aren’t comfortable yet, I can understand, but please, don’t pretend to be automated if you’re not.

The Truth about AP Automation

Now a quick word about AP Automation.  Just as AP Outsourcing can leave large swaths of the AP landscape untended, some services claiming to be Accounts Payable Automation don’t cover the breadth and depth of the payables canvas.  AP Automation is not just your ERP system, imaging, EDI or a vendor portal.  It’s all of these things and a whole lot more.  I’ll leave some of those details for another blog, but know that for AP automation to be successful it has to include products and services that cover all of the AP function.  And knowing is half the battle.

Outsource Accounts Payables? Outsource your CEO instead.

So you really can’t outsource your CEO, but today as we chatted here at iPayables about AP outsourcing our CEO, Ken Virgin, was being a smart aleck so I jokingly said “We should outsource you.”  Outsourcing your CEO, VP of Sales or COO is laughable on its face (we did have a good laugh) because these positions are valued for their strategic thought, determined execution and the leadership they bring to the organization.

Even if one of these positions is costing you a lot of money and could be done more efficiently elsewhere you’re not likely to even consider it.  The same is true to the majority of the folks working in Accounts Payable departments in most companies.  It’s just sometimes hard to tell since they are buried under a mountain of paper and inundated with endless vendor phone calls.

The rationale usually goes something like this:  If I scan all my paper invoices and have folks in Bangalore or Shanghai key them and reroute the phones to India or China I’ll save a bundle of money.  The truth is you will save some cash.  The question is at what cost to vendor relations, company reputation and overall efficiency.  Accounts payables can be like veins in the circulatory system.

Not always valued for their contribution, vital to overall health and quite a pain if something goes wrong.  The real question that smart companies are asking themselves is “why is there cost and inefficiency in AP and what can I do about it”.  Especially companies that already travelled the AP Outsourcing road.

The answer of course lies in the automation of accounts payable.  More and more companies are untying the payables outsourcing knot; automating the capture, workflow, matching, and payment of invoices and unlocking the intelligence and capabilities of their AP staff.  These companies have realized that paying someone to key invoices – even at outsourced rates – is not the answer.  Automate, Automate, Automate.