Accounts Payable Overview

Accounts payable is often considered the easiest finance module in SAP and the needs to automate vendor invoice management are often ignored. As a company grows, so do the number of invoices. How do you even manage those timely invoice entries, data validations, approvals, discounts, and those upset vendors if you miss the payments? Having helped multiple clients with AP automation, I will explain the tips and techniques to identify the right solution for your company. Pre-automation, invoices are entered manually into the system, verified, processed, sent to the recipient for approval and archived (Figure 1). Multiple manual touchpoints may take longer to process invoices, which leads to unhappy suppliers.

• Invoices can come in any format via any medium: paper invoices, EDI invoices, invoices to dedicated email box, fax, etc.
• On a daily basis, an AP processors may be assigned the task of inputting a certain number of invoices in the system. AP processors manually input the invoices while doing the data validation.
• Certain industries, such as logistics, have many discrete pieces of information that needs to be tied together.

AP Automation

AP automation can offer:

• Automated handling of Purchase Order (PO), non-PO, paper, and recurring invoices in all formats including EDI, XML, PDF, etc. thereby reducing manual entry.
• Improved compliance
• Control, visibility, and transparency of invoices, even the invoices received that have not been entered yet
• Significantly reduced invoicing processing time
• The ability to operate in multiple languages and currencies
• Companies the ability to accommodate higher volumes of invoices
• Automatic coding
• Out of office management
• Archiving of the invoices
• Audit Trail

In a nutshell, AP automation is a solution that includes scanning, OCR (Optical Character Recognition Tool), exceptional handling of workflows, analytics, supplier self-service, and even any mobile approvals.

Why do you need AP Automation? 

As business grows, manual invoice management becomes a human resource intensive and inefficient process. No one wants to lose credibility with vendors if payments are not made in time. You need a solution that fits your needs. Organizations that have unique requirements include those that have non-SAP and SAP ERPs and management wants a solution that fits for both, as well as those that have additional requirements to integrate vendor master data creation with automation tools and their solution provider can do it, if they have Fiori. Businesses need automation to increase efficiency of processes, introduce a better audit trail, and improve the visibility of actual payable commitment.

How to Get Started on AP Automation

I am often asked by clients to provide them the “best” automation solution provider. The answer to that is not as simple. Vendor Selection: How do you even know which vendors are available out there?

• Look at peer groups like SAPinsider, SAP Sapphire, and others online.
• Develop your requirements and be ready with your specific scenarios, like volume of invoices. Refer to figure 3.
• What’s the landscape: modules implemented; progression of number of invoices, any tax tool.
• It is Important to segregate how the invoices comes in, like manual, IDOC.

Here is how to select a vendor:

1. Set up the calls for RFP (request for proposal).
2. Have right stakeholders in the call from your side.
3. Demo and record.
4. Get together with your group and shortlist a few vendors.
5. Get a reference for these vendors.
6. NEGOTIATE! Refer to figure 4.

ROI is the most important part of vendor selection, and that requires real calculation and techniques to decide. The numbers can be very intimidating and hard to understand. On the high level: Get the quote and develop ROI for next 3-5 years, that includes but not limits to:

• Software licensing fees
• Consulting fees for design and implementation
• Consultant travel costs
• Up front and ongoing maintenance agreement fees
• Additional hardware

Break it into one-time cost and perpetual cost (maintenance/subscription cost). Refer to figure 5.

• Factor in Full Time Employee (FTE - pre & post automation).
• Think about logistics costs like hardware.
• Pre- and post-cost per invoice.
• If the vendor doesn’t have target price, go back to the vendor.
• Your savings must have some target to get approved.
• Consider inflation and acquisitions.

Questions for Vendors: The below list is just a handful of questions (do not limit yourself to basic questions only).

1. How many customers of your product use SAP? How many are not SAP?
2. Are you currently a certified SAP Partner? Please provide details of what is certified. Describe which features of your product are available from within SAP?
3. Which features of your product are available in an external web browser?
4. Does your product image archive documents?
5. Describe the process for invoices that arrive via email.
6. Does new email trigger an OCR process to pull an invoice in and start the workflow?
7. Describe how the OCR accuracy is improved or “trained.”
8. Does the OCR process integrate with SAP master data to improve accuracy (i.e., find something that appears to be a PO number on an image and validates within SAP). If so, describe how many data points are used.
9. Is workflow integrated with SAP workflow?
10. Describe your ongoing support structure.

Selecting AP automation vendor is not always asking “who is the best vendor”. It requires existing data analysis, developing ROI and even hiring the consultants who have experience in this area. It’s a challenging task that you must live with if wrong decision is made. AP automation is a necessity for a growing business.