[IMGCAP(1)]Today’s economic conditions are creating an environment in which many organizations need to streamline back-office business processes and improve visibility of incoming and outgoing cash flow.

For accounts payable departments, in particular, there are many approaches to how an organization might streamline internal processes; however, the primary culprit of inefficiency is the prevalence of and reliance on paper. Many companies have attempted to install complex systems to rid themselves of paper, often with unimpressive results.

While organizations have worked to reduce paper invoices for more than 20 years, many still struggle to determine the best approach to transition away from it. In fact, according to Gartner analyst John E. Van Decker’s December 2008 report “Accounts Payable Invoice Automation,” about 75 to 80 percent of invoices in the United States are still paper-based.

With an estimated 1 billion business-to-business invoices processed each week, hundreds of millions of paper invoices are at work clogging up organizational processes. The report also states that organizations should consider electronic invoice submittal by leveraging a supplier portal or a procurement network to facilitate the submission of invoices.

Electronic invoicing, while still relatively new, is rapidly gaining prominence as a solution to this age-old problem. Large “networks” are bringing together large communities of buyers and suppliers into a shared platform, accessible via the Internet. Invoices are uploaded from a supplier’s billing system to the network, where they are validated and translated, before being sent to the client’s AP system in the required format.

The true potential, of course, is the power of the network. A small supplier in Taiwan can send invoices electronically to a customer in Italy, without ever having to agree with the client on a mind-numbing array of technical protocols and formats to establish a proper “handshake.” Most AP departments can quickly move from a paper-based invoicing system to an electronic environment by identifying and tackling potential roadblocks and barriers to implementation.

To borrow and paraphrase a famous quote, the first step in moving to an e-invoicing system is “know thyself.” Departmental and organizational objectives must be clarified and AP teams must understand what drives the internal groups from which they’ll need to gain support. Once the implementation team has a clear understanding of the issues that are important to their organization, they can more clearly outline and explain the benefits and expected outcomes of moving to e-invoicing.

The next step is for organizations to complete due diligence of the leading vendors to gain a full understanding of which options and features are available and which solutions better meet their needs. While choice is good, it also creates confusion for accounts payable departments about which vendor provides the best fit.

With that as a backdrop, organizations should make sure to take the time to conduct careful research and ask relevant questions to know and understand exactly what vendors will do and what they will not do. Look at their customer list. Does it include well-known and well-respected brands from a variety of vertical markets? Moreover, will they provide you customer references with whom you can speak about their customer service levels and supplier adoption strategies?

In turn, buying organizations must have a clear picture of what will be required from them when implementing an e-invoicing initiative. Network providers will likely be responsible for quite a number of activities during the implementation process; however, customers will have to share responsibility in order for a project to be successful.

As stated in a 2008 Forrester Wave Report by analyst Duncan Jones, complete solutions will deliver four key capabilities: enable suppliers to submit invoices electronically, straight from their own systems; transform the data into a usable format and layout; validate data, using supporting records and discrepancy approval workflows; and provide process monitoring so buyers and suppliers can work together to reduce errors.

The due diligence process should also provide an opportunity to gain a better understanding of how to best realize a return on investment and how quickly an organization will recognize cost savings and cost reductions.

With some solutions such as optical character recognition and electronic data interchange, it’s extremely difficult, if not impossible, to extract a compelling return on investment. At the same time, these solutions require costly upfront hardware and software investments that can make implementation cost-prohibitive. In many case, e-invoicing delivers significant ROI in as little as a year.

The next few years will produce a critical tipping point in which organizations, by necessity, will need to be more aggressive in their adoption of solutions that streamline process management of accounts payable functions. The good news is there are solutions that are highly scalable and easy to implement. With the proper upfront planning, AP departments can lose the paper, gain efficiency and significantly reduce the costs associated with processing an invoice.

Thayer Stewart is vice president of marketing and business development for OB10, a global e-invoicing company. He can be reached at thayer.stewart@ob10.com.

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