[IMGCAP(1)]Golf is a humbling game. No two courses are alike and there are so many hazards that you must avoid: trees, out-of-bounds markers, thick rough, water hazards and sand traps. Even during a good round, one bad hole can ruin your score.
It reminds me of the challenges facing accountants who deal with an invoice process built around paper. Here, too, there are so many traps and hazards that complicate and delay the processing of a paper invoice. It’s no surprise, then, that more organizations are looking to attack the inefficiencies that exist between companies—such as sending and receiving invoices—and enable more effective collaboration.
As consumers, we tap into sites like Facebook, Twitter and Amazon.com that help us learn, share and shop better. Leading companies are now leveraging business networks to streamline and enhance invoicing.
Many AP organizations have considered scanning and optical character recognition as a first step to invoice automation, and improvements often result from eliminating paper and manual data entry. But the larger opportunity comes from eliminating the invoice errors that scanning and OCR can’t address, such as enforcing compliance on purchase orders and contracts, and expanding early payment discounts to increase the returns on cash. Business networks provide an ideal platform for doing this.
To handle all the invoice errors that plague the accounts payable function, network-based electronic invoicing offers user-configurable business rules that can address just about any invoice processing requirement, such as allowing suppliers to send non-PO invoices, applying line item unit price tolerances to order confirmations, setting or ignoring country-specific invoice rules, allowing suppliers to send invoice attachments, and much more.
Once you set the rules, all invoices submitted from suppliers must conform to them. Those that don’t are automatically flagged before they reach AP, and returned to suppliers for correction and re-submission. What results is a “smart,” largely touchless invoice process that drives productivity through the roof.
Business networks also provide the ability to deliver electronic purchase orders, making it possible to generate an electronic invoice from the data on the PO and ensure that invoices comply with preferred suppliers and negotiated prices. While the ability to support compliance is not something that accountants typically pay close attention, it is essential to the business, as it ensures that savings negotiated actually reach the bottom line.
What about management of non-PO invoices, which are often the most difficult, and costly, invoices to process? Here again, business networks can provide valuable support by allowing you to match the invoice against—or create an invoice from—a contract.
Beyond making life easier by simplifying their day-to-day routine, business networks can also help accountants forge a larger, more strategic role for themselves. To an organization that takes weeks to process an invoice, an early payment discount is a diamond in the rough. Business networks give you the ability to identify and lock these discounts in by providing the tools needed to fully automate the process of offering, negotiating, and agreeing on early payment terms, so that you can put those discount diamonds in the middle of the fairway, and give yourself a clear shot at some big savings: $2 million to $3 million or more in early payment discounts for every $1 billion of spend.
Here’s how it works: In return for a discount, you can accelerate payments for approved invoices to key suppliers. You earn an immediate and better return on your cash than you would by simply parking it in traditional, low-return liquidity vehicles. Your trading partners, in turn, can use the cash to fund their daily business needs and ensure they can meet your ongoing demands.
Welcome to the new world of collaborative finance, where you and your suppliers can work together to manage cash better. Moving beyond traditional, static discounts such as 2 percent 10 net 30, and enabling new forms of “dynamic” discounts, accountants can help to shift the perception of AP from a cost center to a profit center and position the function as a trusted partner to the treasury group.
Many treasurers are obsessed with delaying payments to preserve float, but today the earnings on cash balances are dismal. You can educate them on how your improved invoice process enables a new ability to capture and expand early payment discounts, delivering double-digit cash returns, with no risk. And no sand traps.
As with any new way of doing things, there will always be detractors. Back in the day, critics said the automobile was a neat toy for hobbyists, but it would never replace the horse. When the first computers arrived on the scene, industry watchers predicted, “There is a world market for maybe five” of them.
Business networks are fueling new ways of doing things across finance. And accountants that embrace them stand poised to transform the function and deliver their organizations to new worlds of efficiency and excellence.
Chris Rauen is a solutions marketing manager at Ariba, Inc. He is responsible for the marketing of the company’s network and financial solutions, including its invoice scanning, workflow and e-invoicing offerings. He has more than 15 years of business-to-business marketing experience. Prior to joining Ariba, he served in key marketing roles at OpenVision, Documentum, Xign Corporation and Rimini Street. He began his career as a business writer and senior editor of a technology magazine focused on computer marketing and holds a B.A. in economics from UC Santa Barbara.
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