best practices for sap® ilm to improve performance

© 2018 Dolphin, www.dolphin-corp.com Page ii

Copyright © 2018 Dolphin Enterprise Solutions Corporation (dba Dolphin)

All rights are reserved, including those of duplication, reproduction, use or disclosure of the contents of this documentation, or any part of it. No part of it may be reproduced in any form, passed on to third parties or particularly by electronic means, processed, reproduced, distributed or used for publication without the written permission of Dolphin. We reserve the right to update or modify the contents.

Trademarks © 2018 Dolphin Enterprise Solutions Corporation (dba Dolphin). SAP, SAP NetWeaver, ArchiveLink, ABAP and all SAP logos are trademarks or registered trademarks of SAP SE in Germany and in several other countries. All other product and service names mentioned are the trademarks of their respective companies.

© 2018 Dolphin, www.dolphin-corp.com Page iii

TABLE OF CONTENTS

1 Introduction ..................................................................................................................... 1

2 Identify Current Accounts Payable Challenges .......................................................... 2

2.1 Improve the Speed, Accuracy and Transparency of Invoice Processing ...................... 3

2.2 Meet New Business and Regulatory Requirements ......................................................... 5

2.3 Keep Pace with Rapidly Changing Technology ............................................................... 6

3 Build a Roadmap for the Future of Accounts Payable .............................................. 7

3.1 Centralize and Standardize Invoice Processing – Globally ............................................. 9

3.2 Extend Improvements Across the Entire Procure-to-Pay Process............................... 10

3.3 Align Improvements with the Technology Roadmap ..................................................... 10

4 FS2 AccountsPayable – An Integrated Solution Ready for the Future................... 11

4.1 Flexible and Intelligent Invoice Capture .......................................................................... 12

4.2 Automated Invoice Processing ........................................................................................ 13

4.3 Access to Real-time Invoice Information ........................................................................ 13

4.1 Fast, Efficient Approvals and Exception Handling ........................................................ 14

4.2 Advanced Reporting and Analytics ................................................................................. 15

4.3 Seamless Access to Digitized Documents ..................................................................... 16

5 Conclusion .................................................................................................................... 17

© 2018 Dolphin, www.dolphin-corp.com Page 1/21

1 Introduction

For the past few decades, Accounts Payable (AP) departments have been gradually automating invoice processing by moving away from traditional paper-based processes and investing in technology such as Optical Character Recognition (OCR) and workflow to improve the efficiency of the AP department. Despite these investments, however, the pace of change in the AP department has remained relatively slow.

This is about to change as several macro-economic factors are pushing AP and the entire Finance department into a new era of innovation that includes robotics, cloud and blockchain. Major drivers of this faster pace of change include:

• Aggressive competition and rapid corporate expansion that require companies to automate processes to handle large volumes of transactions without increasing costs or headcount

• New standards and regulations that are forcing companies to abandon paper and fully digitize processes so they are more transparent and it is easier to respond quickly to audit inquiries

• New technologies such as Robotic Process Automation, Artificial Intelligence, and Blockchain, combined with pressure from the IT department and business users, that are pushing the Finance department towards a more modern and digital future

The pace of change is so rapid that a recent poll by CFO Research in conjunction with SAP revealed that ”85% of finance leaders say that corporate success will depend on the finance department’s ability to adapt to the rapid pace of change and greater business complexity over the next five years”1. This shift is especially true for companies running SAP systems or other large ERP systems, as there is a major move away from on-premise systems to the Cloud and other mobile-ready solutions that provide the flexibility and new capabilities that modern businesses require.

This white paper will discuss how to address the current challenges faced by the Accounts Payable department as they prepare for the future. It will discuss how AP and the entire Finance department can build a roadmap for strategic transformation and adopt solutions such as FS2 AccountsPayable that will help them address these challenges and prepare companies for what’s next in the age of robotics, cloud & other innovations.

1 ."Thriving in the Digital Economy: The Innovative Finance Function," prepared by CFO Research in collaboration with SAP, November 2015.

85% of finance leaders say

the finance department needs to adapt to the rapid pace of change and greater business complexity.


2 Identify Current Accounts Payable Challenges

The historically slow pace of change in the Accounts Payable department is due to the fact that companies are reluctant to tamper with proven and stable back office processes. However, as innovations are rapidly introduced in other parts of the business, the AP department must be ready to innovate as well. Finance leaders must regularly review and update processes and introduce new technology to ensure that the AP department can keep pace with the rest of the business. Otherwise, companies risk being at a competitive disadvantage.

Review current Accounts Payables processes to determine how to:

• Improve the Speed, Accuracy and Transparency of Invoice Processing

• Meet Global Accounting and Regulatory Requirements

• Keep Pace with Rapidly Changing Technology

Be sure to consider ideas from the different individuals that contribute at each stage in the invoice process by asking members of the Finance, Procurement and IT departments as well as key suppliers for ideas on how to improve. This way, the AP team will be able to develop a more comprehensive view of the improvements that are required from the moment an invoice is received to the moment it is paid.

Once the team has identified the current challenges facing the Accounts Payable department, it can start to consider “What’s next?” This information will enable the team to build a process roadmap that will address the team’s current challenges and prepare it to support to the rapid pace of change in the business in the future.


2.1 Improve the Speed, Accuracy and Transparency of Invoice Processing

Despite decades of applying technology to improve the speed, accuracy and transparency of invoice processing, many companies still struggle with processing invoices quickly. This is because organizations have automated only parts of the process, leaving the other parts prone to costly errors and delays.

In fact, according to Ardent Partners, the average time to process an invoice is 13.5 days. This is less than ideal because, assuming standard 2 percent 10 – Net 30 invoice payment terms, most invoices would not qualify for available supplier discounts. Some of these delays are due to the large number of invoices that are still processed manually by many companies. Ardent Partners research states that 58% of invoices are still manually indexed and routed for approval2. This is far too high a percentage of manually processed invoices given today’s available technology.

Workflows and robotic process automation can easily be introduced to reduce the number of manually processed invoices. Even companies that have previously invested in automation technology such as Optical Character Recognition (OCR) can implement new web-based supplier portals and supplier networks that are faster and more accurate. These technologies provide 100 percent accuracy eliminate the need for manual indexing. They also provide greater transparency, enabling staff to see invoices as soon as they are submitted.

2 Ardent Partners:“ePayables 2013: A New Dawn”, V. Patal, May 2013


Exceptions are another reason why many invoices cannot be processed quickly. According to Ardent Partners, more than 16% of all invoices have exceptions. Exceptions require a lot of effort from the AP staff as well as other people in the organization (i.e., Procurement, Receiving, Business Users and Master Data teams) to resolve, slowing down invoice processing.

Simple business rules and data validation can be introduced to catch exceptions early in the process, so users have sufficient time to resolve the issues. Reports that identify the number and type of exceptions in the process can also help organizations identify the root cause of exceptions. With this information at hand, organizations can take the appropriate action to prevent the same exception from happening in the future such as improving master data, providing suppliers with more training, or introducing process check points.

These numbers are also supported by a recent a survey of over 100 Global Process Owners that was conducted by Dolphin and Shared Services Link in 20163. In this survey we found that:

• Only half (52%) of all organizations surveyed were able to process invoices in less than 10 days

• More than one-third (38%) of invoices that need approval take more than 5 days to be approved

• If an invoice had an exception, it can take anywhere from 15 minutes (52%) to more than an hour (24%) to resolve

When you consider that many AP teams are responsible for processing hundreds if not thousands of invoices a month, these precious minutes, hours, and days spent approving invoices and handling exceptions can add up quickly, leading to a much slower and costly invoice process.

These examples illustrate why it is important to continually assess processes and invest in new technology when necessary to improve the speed, accuracy and transparency of invoice processing. Even if some automation technology is already in place, review AP processes regularly to see if new technologies or ways of doing business can help improve processing. Look for changes that improve both the efficiency and effectiveness of the process. Improvements should lower processing costs, improve productivity, and make it possible for the individuals involved to focus their attention on other high value tasks that will help the company effectively manage cost, cash, and risk.

3 “Process Maturity Survey of Global Process Owners”, Dolphin and Shared Services Link, 2016

52% of invoice

exceptions require 15 minutes to

resolve


2.2 Meet New Business and Regulatory Requirements

As part of the corporate cash flow engine, the Accounts Payable department must process invoices according to regulations; comply with tax reporting requirements; and respond to audits or other inquiries quickly and efficiently.

Two recent regulations that have affected the AP department include Sarbanes-Oxley (SOX) and the Standard Audit File-Tax (SAF-T) format. However, other regulations such as General Data Protection Regulation (GDPR), which comes into effect May 2018, have the potential to impact the AP department by restricting the information that is collected during invoice processing. This rapid growth of regulations around the world, is one of the reasons companies are renewing their investment in back office process improvements. Increasingly, companies are looking for solutions to transform traditional, paper-based processes to more modern, digitized processes that will reduce the burden of responding to these new requirements.

Another emerging business requirement for the AP department is fraud prevention .According to the Association of Finance Professional’s Payments Fraud and Control Survey (2017), almost three-quarters of organizations have experienced actual or attempted payments fraud4. Many organizations are urgently introducing new process controls, including supplier information

management and supplier scoring, to help prevent fraud. However, until organizations move to completely digitized and transparent business processes with built-in fraud detection systems, it will still be very easy for a savvy criminals to continue this pattern of massive payment fraud.

Eliminating manual steps and paper from processes is the best way for companies to ensure they have the speed and transparency necessary to meet these new business and regulatory requirements. Fully digitized processes provide companies with real time information as invoices move through the system, so companies can monitor supplier spend and payments and detect potential issues before they negatively impact the business or are discovered in an audit.

4 2017 AFP Payments Fraud and Control Survey, Association of Financial Professionals, 2017

Figure 1: Payments Fraud 2006-2016


2.3 Keep Pace with Rapidly Changing Technology

While large enterprise systems such as SAP have made it easier to process invoices across a large organization, many companies still struggle with keeping their processes up to date because technology changes so rapidly.

This rapid pace of technology change is particularly challenging for the Accounts Payable department, which has been slower to change than other areas of the business. Teams should be prepared to adopt some or all of the following technologies as they move quickly from the front office to the back office:

• Mobile • Cloud-based Services

• Big Data • Internet of Things

• eCommerce Business Networks • Robotic Process Automation

• Analytics and Business Intelligence • Blockchain

Robotic Process Automation (RPA), Artificial Intelligence, and Blockchain are particularly well suited to invoice processing.

• RPA can be used to capture information from inbound documents – such as invoices and goods receipts – providing the AP team with much greater insight into the “back story” of the transaction. RPA can also be used to automate many simple tasks, freeing users to do more complex and valuable work

• Artificial Intelligence extends the automation provided by RPA into decision making support and can suggest next steps to users based on past behavior, further reducing the time and effort required to process an invoice

• Blockchain is a relatively new technology for enterprises that will enable companies to quickly and securely conduct transactions on shared ledgers with suppliers and other business partners

For organizations running SAP systems, the pace of change will be even greater because all SAP customers must move to SAP S/4HANA with its new transaction processing capabilities by 2025.

Finance leaders cannot afford to ignore the importance of these technology changes. Now is the time for finance leaders to educate themselves about how technology can be used to improve existing business processes to support the company’s strategic vision. Preparing for these changes will enable finance leaders to help drive the technology decisions, instead of being forced to adopt solutions that do not meet the company’s real business requirements.


3 Build a Roadmap for the Future of Accounts Payable

Invoices touch many areas of the business. Therefore, to build a roadmap for the future of Accounts Payable it is important to consider how to deliver a consistent, integrated experience from initial invoice capture, through processing, posting, payment and reporting.

To do this, organizations must look for ways to move invoices more efficiently by:

• Reducing manual tasks that do not add value, automating the process wherever possible to improve speed and accuracy

• Considering the friction points as invoices move through the process. Are there ways to improve the way the invoice moves from person-to-person to reduce friction and improve collaboration?

• Increasing access to information for all stakeholders by digitizing documents and storing them in a central repository and providing real-time reporting


A process maturity model can help you start a discussion about the AP roadmap with your team. Use the model to determine where your processes are now and where you want to take them in in the future. Your proceses may be Automated or Optimized in some areas, but Traditional or Electronic in others. Identify where your company can make improvements and then create a roadmap that will enable you to introduce the necessary changes.

Every roadmap should include elements that help centralize and standardize processing globally; extend the improvements across the entire Procure-to-Pay process; and align with the company’s technology roadmap.

Figure 2: Accounts Payable Process Maturity Model


3.1 Centralize and Standardize Invoice Processing – Globally

Organizations can easily increase the value of any invoice process improvements by centralizing and standardizing them across the entire company. Large, diversified organizations with multiple locations, business models, and enterprise systems frequently do this by setting up global or regional shared services centers, but this model can be used by any company with a distributed invoice process. Even if invoice processing is done by a single team in a single location, it is still possible to standardize the way invoices are received and processed to increase efficiencies.

A centralized process ensures that all invoices are processed as consistently and efficiently as possible. It also ensures the company has greater transparency and control over invoices moving through the organization, which helps minimize risks such as fraud.


3.2 Extend Improvements Across the Entire Procure-to-Pay Process

Another way organizations can increase the value of process improvements is to look for ways to extend them beyond the Accounts Payable department and across the entire Procure-to-Pay process. As shown in the figure below, solutions such as FS2 AccountsPayable provide organizations with Supplier and Payment capabilities that enable organizations to extend the value of process improvements by creating a seamless, fully integrated Procure-to-Pay process.

Figure 3: FS2 Procure-to-Pay Solution Components

Look for solutions that enable your organization to implement improvements in a modular fashion so you can deliver value to the organization quickly and then gradually expand the solution as your business needs evolve.

3.3 Align Process Improvements with the Technology Roadmap

To maximize the return on investment of processes improvements, ensure they are aligned with the company’s technology roadmap. Think of how processes can take advantage of new technology or need to change when the technology changes. This is particularly true for organizations that will be moving to SAP S/4HANA in the next few years. Any modern AP solution should include capabilities such as those listed below and the IT department should be informed of any new technology requirements:

• Modern and responsive user interface

• Web and Mobile components

• Advanced reporting and analytics

• Support for content management best practices


4 FS2 AccountsPayable – An Integrated Solution Ready for the Future

One solution that is ready to address current Account Payable challenges and prepare teams for the future is FS2 AccountsPayable. FS2 AccountsPayable is an end-to-end invoicing solution that automates and optimizes the entire invoice lifecycle from invoice receipt through bank payment transfer. For companies running SAP systems, the solution has capabilities to processes invoices faster, more accurately, and with greater transparency so organizations can meet increasing business demands, comply with local and global regulations, and reduce the cost per invoice.

Figure 4:FS2 AccountsPayable

An SAP-Certified add on software solution, FS2 AccountsPayable supports best practices for invoice processing, providing organizations with the enhanced features and flexibility needed to modernize old, outdated processes and accommodate unique and emerging business requirements. Customers who have implemented FS2 AccountsPayable have been able to achieve the following benefits in as little as six weeks:

• Electronically capture 100% of invoices

• Automatically post more than 80% of all invoices

• Increase operational productivity by 40–80%

• Reduce cost per invoice by 40–60%

• Reduce exception handling time by more than 75%

• Decrease supplier inquiry response time by 60% or more


FS2 AccountsPayable is suitable for all types of organizations, from large organizations that process millions of invoices each year to smaller organizations that want to adopt a more efficient and modern Accounts Payable process. Customers choose FS2 AccountsPayable not only for its advanced Accounts Payable capabilities but also for its ability to centralize and standardize invoice processing globally; maximize the use of existing IT infrastructure components; and extend efficiencies across the entire procure-to-pay process with other FS2 solution components.

Key capabilities of the solution are highlighted in the following sections.

4.1 Flexible and Intelligent Invoice Capture

FS² AccountsPayable enables organizations to capture invoices quickly and accurately using either manual (Paper, PDF) or electronic (Portal, eInvoice, EDI, etc.) invoice capture methods.

Figure 5: Flexible Invoice Capture

For organizations looking to increase the rate of automated invoice capture, the solution supports leading Optical Character Recognition (OCR) solutions for efficient in-house invoice capture, leading third-party eInvoicing or scanning service providers for an outsourced invoice capture, and complete integration with FS2 Suppliers or SAP Ariba for a complete Procure-to-Pay solution.


4.2 Automated Invoice Processing

The FS2 AccountsPayable solution uses robotic process automation (RPA) to process and post invoices automatically based on a set of configurable business rules and machine learning capabilities.

Figure 6: Automated Invoice Processing

When auto-posting is not possible, the solution efficiently routes invoices directly to the responsible individuals for approval or exception handling. Approvers have the option of approving invoices directly in the SAP system, using email, or using a web-based app on their mobile device.

4.3 Access to Real-time Invoice Information

The FS2 AccountsPayable solution provides real-time access to invoice information regardless of the invoice status in the solution’s InfoCenter.

Figure 7: Invoice InfoCenter

Users can view summary information for in-flight invoices and easily drill down to view invoice details in SAP systems, including the full invoice history, approval status, and original invoice images. With real-time information, users can quickly take action to ensure invoices are paid on time, discounts are captured, and invoice processing is as efficient as possible.


4.1 Fast, Efficient Approvals and Exception Handling

With FS2 AccountsPayable, users can choose to approve invoices directly in SAP systems, in the FS2 AccountsPayable InfoCenter, using email or a responsive web application. When approving an invoice, users can easily take additional action on the invoice, such as add coding, change approvers, or request master data changes. Once an invoice is approved, if it meets all defined checks and controls it passes through the system and can be auto-posted, thus giving staff more time to focus on exceptions.

Figure 8: Invoice Approvals


4.2 Advanced Reporting and Analytics

FS2 AccountsPayable comes with many pre-built reports and dashboards which make it easy for users to manage the complete invoice processing cycle. Users can modify their personal list of reports and the dashboard based on their requirements and it can include any standard SAP reports or custom reports.

The solution provides users with immediate access to real time data and does not require a separate reporting environment or custom-built reports. The real-

time reports and dashboards eliminate the need to duplicate data in a separate reporting instance and because it leverages standard SAP GUI, users don’t require additional software which eliminates compatibility issues and simplifies the solution administration and maintenance.

Built-in reports include Exception Analysis, Workload Trending, Invoice Format Ratios, Accruals, Open Inventory, Auto-post Rates, Missed Deadlines and Cycle-time Analysis.

Figure 9: Accounts Payable Dashboard


4.3 Seamless Access to Digitized Documents

FS2 AccountsPayable ensures that supporting documents are stored efficiently, according to document management best practices. Users can easily access supporting documents at any time in the invoice lifecycle. The solution supports multiple industry-standard SAP-certified content repositories using the ArchiveLink interface, such as SAP ContentServer, PBS Content Link, or Dolphin Content Archive Service.

Figure 10: Access to Supporting Documents

Images of the invoices and supporting document are automatically linked to the SAP FI (and MM for PO invoices) document in SAP systems, so that any user who has access to the SAP transaction can access the image. With FS2 AccountsPayable, users can easily access any invoice-related document to quickly respond to supplier inquiries and internal and external audit requests.


5 Conclusion

As organizations adapt to the rapid pace of business and technological change, Accounts Payable and the entire Finance department must do so as well.

Finance leaders must understand the challenges currently facing their department and build a roadmap for strategic transformation. They can help draw attention to the challenges faced by AP and the rest of the back office by highlighting the important role that these functions play in the corporate cash flow engine.

By educating themselves about the business and technology changes shaping the business, Finance leaders can help the organization invest in solutions such as FS2 AccountsPayable to improve existing processes now and prepare the company for what is to come in the future with robotics, cloud & other innovations.


ABOUT DOLPHIN

Dolphin leads the way in SAP business performance improvement and is a unique partner that manages both data and processes. From data and information lifecycle management to end-to-end solutions for SAP procure-to-pay and order-to-cash processes, Dolphin delivers a competitive advantage that drives cost savings, optimizes cash flows and fosters a lower total cost of ownership. Leveraging SAP technology, Dolphin’s data lifecycle and business process management solutions, and add-on applications with SAP-certified integration, have built-in flexibility and are designed to be tailored to each customers’ specific business processes and IT environments.

The company was founded in 1995 and has offices in San Jose, CA, Philadelphia, PA and Toronto, Canada. Dolphin’s smart, adaptable and proven solutions are implemented by hundreds of companies across North America and around the world. Among Dolphin customers are more than one-third of Fortune 100™ companies running SAP systems. To learn more, email us at [email protected] or visit www.dolphin-corp.com.

mailto:[email protected]

mailto:[email protected]

http://www.dolphin-corp.com/

https://www.sap.com/index.html

https://www.asug.com/

https://www.linkedin.com/company/dolphin-corporation/

https://twitter.com/dolphincorp

https://www.dolphin-corp.com/our-company/blog/