This vendor-written tech primer has been edited by Network World to eliminate product promotion, but readers should note it will likely favor the submitter's approach.
The economic whirlwind of the past few years has forced even the savviest of companies to rethink how and where their money is spent. Increasingly, the microscope is being placed on internal back-office processes, seen as prime candidates for strategic cost-cutting initiatives. Perhaps unsurprisingly to many who work within the department, accounts payable (AP) has emerged as an area ripe for improvement.
Most companies running enterprise resource planning (ERP) systems are all-too-familiar with the challenges of conventional paper-based AP processes that keep AP staff from focusing on their primary task -- accurate and timely closing, avoiding late payments, etc. Although ERP platforms are effective tools for archiving critical business data, most simply lack the capability to support the processes of each invoice transaction (e.g., receipt, review, approval, etc.). As a result, these repetitive tasks are often done through manual human intervention. Visibility and productivity remain low while error rates go up. What's more, financial planning, vendor relationships and even regulatory compliance efforts can suffer as well.
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Rather than adding headcount or additional infrastructure, more and more forward-thinking companies are stemming the negative effects of paper-centric processes by leveraging automation solutions.
Automated workflow is not a new concept. In the AP arena, however, it has long been regarded (and proven) to be an under-utilized technological solution. A 2012 study by The Institute of Financial Operations found that the majority (39%) of the 100 AP professionals surveyed say that paper-based invoices still make up 90% or more of their total volume. However, with the need to maximize operational functionality at an all-time high, and more customized solutions available, the treasure-trove of potential in electronic workflow is rapidly gaining attention. Results from the same 2012 study indicate that, when asked, "Do you use a workflow solution?", the majority (nearly half) of the respondents said, "Yes."
Clearly, AP automation is on the rise; the question is how to best implement it. Before evaluating AP automation solution providers, controllers, finance managers and others in the AP department must explore a number of key considerations; namely, the choice between installing a tool inside the ERP system or using a certified solution with data recognition, validation and workflow that resides outside the ERP system.
One company, one ERP system? Not so fast ...
On the surface, a solution that runs AP workflow inside the ERP system seems like the most reasoned and practical approach. In reality, this type of one-to-one relationship does not accurately reflect the complex, multi-connected global persona of today's business industry, and can lead to dysfunction down the road.
Many of today's companies achieve their growth by acquiring or merging with other companies, each with their own separate IT systems. This often leads to an impossibly diverse ERP landscape made up of vastly different systems, architectures and data formats -- it's not unheard of for a company to have as many as five ERP systems in use across a global enterprise. Plus, not all ERP systems have workflow engines, and success in modifying the application code to automate AP is not guaranteed.
What are the options? Some companies install an AP workflow tool inside one ERP application. While this may be a compatible solution for a select few, companies running several ERP systems within the organization must still maintain "inside workflow" in each instance. It's only a matter of time before additional costs and consistency issues rear their ugly heads.
Running a variation of an ERP system is another option that sounds good in theory, although, since they are all based on the same platform each system can be different enough to require special attention. From a high-level view, they appear identical, but it can be a very different picture at the operational level. Even if a company has standardized on an enterprisewide ERP solution, multiple instances in different locations around the world can require integration of multiple workflow tools in order to automate AP workflow, complicating initiatives such as setup of shared services centers.
Why "inside ERP" invoice processing falls short
There is a misconception that, because all actions can be performed from within the ERP interface, "inside ERP" workflow is a more streamlined and effective solution. However, this does not reflect the multitude of problems that many companies face in reality. Consider:
* The problem of access. Inside ERP processing can impede the ability of some users to perform their daily tasks. Storing an invoice inside the ERP provides access to the document, yes, but only select, high-ranking team members have access to all of the information needed to decipher how an invoice was approved, whether signatures were received, or whether instructions were followed correctly. Unlike an ERP-independent solution, it's difficult to configure the options and resources shared by all of the users so that usability and visibility are maximized while still protecting security. In other cases, especially when working remotely or traveling, some users may prefer to not use the ERP interface for AP workflow altogether. It's more efficient for them to use a mobile device to check and approve invoices, especially if it's a Web-based application that doesn't require incremental ERP licensing costs to approve invoices through the ERP interface.
* The problem of complexity. Opening up your ERP system to add AP workflow automation is not as easy as 1-2-3 -- with it comes a significant amount of costs, risks and complexities. More often than not, solutions that function within the ERP environment require a major investment of time and money for installation, integration and maintenance by ERP application engineers.
* The problem of flexibility. Solutions that are developed to operate within the ERP environment are, by nature, limited in their ability to integrate with multiple systems.
* The problem of performance. With an IT landscape that is constantly changing and ever-evolving, it is critical to integrate AP workflow automation at a level that maintains ERP system integrity while performing seamlessly. Tools that operate within the ERP environment have a habit of tapping system resources allocated to core ERP applications and other enterprise systems. The impact is only multiplied as companies add systems through mergers and acquisitions, and as additional staff requires more resources.
* The problem of recognition. While the part of the "inside ERP" process that extracts data from sources (paper invoices, email, faxes, EDI, etc.) resides outside of the ERP system, approval workflow is done inside, which creates a break in the end-to-end audit trail. Plus, instead of validating recognition and initiating the workflow from the same screen, AP personnel have the burden of dealing with two different applications and interfaces.
Thinking outside of the ERP for streamlined workflow
To avoid opening the proverbial can of worms associated with inside ERP workflow, companies often take an external approach to automation. An ERP-independent solution enables integration in heterogeneous ERP landscapes without the time, cost and risk involved in trying to implement a tool within their ERP application(s), and promotes a host of potential advantages:
* Access anytime, anywhere. External AP workflow gives buyers and managers an email notification when invoices need to be approved. In addition, they can check, comment on, add to, reject or sign off on invoices 24/7, worldwide. Web-based workflow offers the ability to create a matrix for automation of the approval process, including support for non-ERP systems and mobile devices.
* User friendly. One of the most common reasons for failure of business process automation projects is due to confusion, errors and user rejection. Users who are unfamiliar with ERP applications may not readily embrace the ERP interface due to its complexity and uniqueness. Fortunately, easy deployment via the Web browser and a familiar environment helps to simplify training and promote user acceptance in external AP workflow.
* Visibility and control. Workflow outside the ERP system allows users to access all relevant information in order to make an informed decision when approving an invoice, without the need to be an ERP application user. This can reduce the need to add ERP seats in the execution of an AP automation project. Users have a single access point for invoice data along with the original document image and a history of actions carried out on it. As a result, companies can:
Share AP data across business applications; Include Purchasing and other involved departments in the workflow; Include pre- and post-processing steps in workflow; Extend approval workflow to remote staff and mobile devices; View archived invoices and audit trail outside the ERP application.
* Stability for invoice processing. Since workflow outside the ERP system is unaffected by changes to the ERP implementation (e.g., upgrade to a new version, etc.), business continuity is maintained by keeping AP processing stable through the countless IT landscape changes a company can expect to undergo.
* Consolidation for shared services support. By definition, shared services centers are disconnected, at least geographically, from business users -- and sometimes from the pre-existing IS logic. As a result, they are often comprised of multiple systems, application instances, processes and business units. "Outside the ERP" workflow can support efforts to create regional or worldwide shared service centers for AP processing, addressing diverse systems automatically and including logic to avoid errors -- a key success factor and precisely what companies are looking to achieve in their AP shared services initiatives.
Esker is the worldwide leader in document process automation solutions. Addressing all types of business processes, from accounts payable and accounts receivable to order processing and procurement, Esker cloud computing solutions enable companies to automate the reception, processing and sending of any business document with one platform. Esker helps over 80,000 companies across the world to reduce the use of paper and eliminate manual processes while improving their productivity, efficiency and environmental impact. For more information, visit www.esker.com. Follow Esker on Twitter at twitter.com/eskerinc and join the conversation on the Esker blog at www.quitpaper.com.