The Paper Trail

While the electronic delivery of invoices would appear to be a logical means of streamlining and automating the process, seamlessly integrating the seller’s accounts receivable with the customer’s accounts payable, some companies today still insist on paper. But does this not necessitate multiple workflows, manual efforts and inconsistent approval and payment cycle times? Not necessarily.

Management of accounts receivable is an important part of the cash collection process. Throughout several stages of the full order-to-cash cycle, including order management, credit checking and the release of orders to production or delivery, more extensive use of technology correlates with best-in-class performance. Best-in-class also takes advantage of process automation to reduce the manual intervention required in producing invoices.

This and other best practices result in lower levels of overdue accounts receivable (see Figure 1). Yet use of technology may also be influenced by external factors as well. The percentage of invoices issued electronically is actually lower in best-in-class companies than in the average performing company.

The ability to produce electronic invoices through electronic data interchange (EDI) is a standard feature of most ERP systems today and the facility to generate a fax or email from ERP is becoming more prevalent. Only a small percentage (17%) use electronic invoice presentment and payment (EIPP) applications (see Figure 2, opposite).

Although an additional third indicate plans to adopt this technology, the need and opportunity to issue invoices electronically are often limited by customer request. Best-in-class companies achieve their performance level by paying close attention to their customers’ needs and preferences even if it means less automation for themselves. So, how can you fully automate invoice delivery when your customers still want paper?

Case in point

Pierce Box and Paper has indeed simplified and automated this process while still delivering what its customers want. In business for more than 50 years providing innovative and up-to-date packaging services and solutions, the company currently delivers invoices to some of its customers via fax and emails generated directly from its Microsoft Dynamics ERP solution. Yet a portion of the company’s customer base prefers to receive paper invoices. Pierce Box and Paper is happy to comply, but does so while avoiding handling the paper, and at the same time reducing its own costs. It does this through a combination of EIPP and outsourced services.

"One of our customers signed on with an e-invoicing partner because they wanted to receive their payables directly into their back-office system. The e-invoicing partner in turn contacted us," says Pierce Box and Paper operations director Jim Erlich. Of course, the customer’s accounts payables are Pierce Box and Paper’s accounts receivables.

The e-invoicing partner's solution provides vendors like Pierce Box and Paper with four options for invoice delivery: electronic invoices, fax, email or postal (paper). In addition to accommodating the electronic invoicing request from their customer, Pierce Box and Paper also chose to use the system for postal delivery.

"We looked at the alternatives from a cost perspective. Today it costs us almost nothing to send the invoice via fax or email. We were already doing that through our ERP. Because we use a Microsoft Dynamics ERP solution, it integrates seamlessly with [Microsoft] Outlook. So there would have been no cost savings there."

However, Ehrlich did find time and cost savings in eliminating paper handling internally. He looked at the costs in terms of the time required by the CSR, paper and postage.

"We found we could save money by using. But even if the cost was a wash, we would have done it because it saves time. From the perspective of the customer service representative (CSR), the process is just like sending it to a printer. Yet business rules are established that directs the output to a fax server, email or to be printed. If it is to be printed, it is automatically transmitted to the e-invoicing partner. We are essentially outsourcing the printing and delivery of the paper invoice and an email confirmation of delivery is sent back to the individual CSR. We save 10-30 minutes per CSR per day, which is important since we are trying to increase sales without increasing headcount."

Key insights

Invoicing automation comes in multiple flavours, translating to varying degrees of interoperability:

• E-invoices provide the highest level of automation and interoperability but require cooperation and collaboration between buyer and seller in order for the vendor’s accounts receivable to be imported into the buyer’s accounts payable. This, however, can be outsourced, as demonstrated by the intermediation between Pierce Box and Paper and its customer. The value proposition is clear: cost reduction by eliminating data entry, faster payment and fewer disputes. But there is an upfront investment involved.

• Electronic delivery of documents via fax or email is a more efficient and cost-effective way of delivering the equivalent of a paper document, but does not necessarily eliminate data entry for the customer and does not guarantee the proper details will be included in submitting payment.

• Paper documents require manual effort on both the send and receive sides. Yet simple forms of automation, combined with outsourcing can streamline and simplify the invoicing process for the vendor.

• If you are looking for ways to speed the time from order to cash, consider these forms of automation. Talk to your enterprise applications solution provider to understand options included in your Accounts Receivable module, as well as partners or point solution providers that have experience in integrating with your applications. Several EIPP solution providers including Accountis, Algonquin Studios, basWare, Deskom, eDOCS, iMex, Metaviewer, MXS and Transcepta offer solutions targeted at improving the cycle from order-to-cash. After all, the ultimate goal is to put cash in the bank.