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August 9, 2013
Electronic Invoicing, Part 1: Is EIPP the Right Choice for your business?
By Frederic Portal, Ataway Director of Strategy and Alliance
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This is the First in our Series on Electronic Invoicing.

Many Accounts Payables departments still struggle with costly invoices and manual data entry processes. Electronic Invoices have been shown for decades to streamline and reduce cost in the invoicing process business, but what is the right for your organization? Each company is different, so we’ll provide the most basic approach to adopting an Electronic Invoice Presentment and Payment (EIPP) system.

The first and most important step to take in adopting EIPP is to develop the Scope.

When thinking about the scope, there are a few questions you’ll need to ask. For instance: How many suppliers would you like to do business electronically with? What is the geographical scope? Do you have the intention to fully automate the Accounts Payable? Are you aiming to eliminate most of the paper? How quickly will the project’s objectives need to be meet? Are you looking at a Hosted, SAAS or ERP System?

The second step in adopting EIPP is in the Approach. In other words: What is the right mix of technologies for your organization?

We can divide these into three different areas of technology, from a more manual process to a fully automated process. Let’s take a look at these three options.

1. Scanning paper invoices

Dealing with inbound paper invoices is a time consuming and costly task. For decades now, Optical Character Recognition (OCR) systems have been steadily improving. OCR systems are mechanical or electronic conversions of scanned images. They are widely used as a form of data entry from some sort of original paper data source. It is a common method of digitizing print invoices so that they can be electronically searched, stored more compactly, displayed online and loaded in an ERP system.

When using OCR technology, your organization will have to set for each supplier invoice templates, mapping fields and defining key words for each invoice “type” so that the system can index and extract some of the information from the paper invoice. By scanning the invoices you can easily transform this function, eliminating paper and introducing a quicker more cost effective process. With this technology, your organization will receive invoices and scan then (mostly done by the mail room) and output the image and index them so your Accounts Payable clerk can type the invoices from the attached document to their financial system. Those images can be electronically searched, stored more compactly, displayed online and loaded into an ERP system. The finance team can then view and manage all invoice data online quickly and simply. Paper to Data/invoice imaging is cost-effective stepping stone to full e-invoicing, but that option is still a manual process where the risk of error is still present.

2. Optical Form Recognition (OFR)

In recent years, however, OCR technology has improved considerably. Now it is possible for Optical Form Recognition (OFR) to sort invoices based on their content, intelligently extract data from an invoice image without setting up any templates. The invoice data is automatically flowed into your financial management systems. This gives the invoice image a similar status to the electronic message in terms of its ability to facilitate an automated accounts payable process. This enables you to more efficiently process invoices with no templates to build, our human-like learning approach, providing a fast and accurate way to capture invoice data. OFR will reduce costly manual data entry, eliminate the volumes of exceptions, errors and manual rework that occur with less-advanced systems.

3. True Electronic Invoicing

Electronic Data Interchange (EDI) is a process in which vendors transmit invoice information to the buyer without any human interventions, thereby reducing the costs associated with the handling and processing of paper invoices. EDI is ideally suited for high volume invoices. AP does not need to receive copies of the invoices. Therefore accounts payable departments cannot provide copies of the invoices to department users if questions arise. EDI is a collection of standards, formats and file layout. Currently there are multiple EDI standards around the world: standard and its subsets (i.e. UCS,VICS), HIPAA (US-only based standard for healthcare transactions), EDIFACT (European Standards for electronic commerce), TRADACOMS (UK based EDI standard, currently in declining use). These EDI standards have many subsets focused on a variety of specific industries.

Commerce eXtensible Markup Language, or cXML is a protocol for communication of business documents between procurement applications. The cXML is based on XML and provides formal XML schemas for invoice transactions. cXML allows buyers and  suppliers to communicate invoices using a single-standard, open language. cXML is the most widely adopted B2B protocol in use today and it is rapidly becoming the industry standard for the transmission of orders, invoices and many other forms of data.

EDI and XML are complementary options to exchange invoices with suppliers.

Conclusion

From our experience helping customers implement EIPP Solutions, we can assume that 80% of invoices come from 20% of suppliers. In that case, an EIPP Solution can drastically reduce the cost of invoice processing and the number of errors. With just a moderate amount of effort onboarding with your top suppliers, you can eliminate 80% of paper invoices.

One final thing to consider when deciding on an EIPP solution is the distribution range of your suppliers and offices. A widely distributed supplier base will be sending invoices to and from many different countries. But the regulations for electronic invoicing may vary considerably. Local regulations on security and authenticity of electronic invoicing may vary from country to country and will need to be considered when deciding to deploy the solution in a single approach.

For global rollouts of e-invoicing systems spread across many countries, a hybrid solution encompassing OFR and electronic invoicing will ensure that local business requirements are met.

You can find more information about EIPP on Oracle’s web site: Oracle® E-Business Suite and Oracle’s PeopleSoft Enterprise Both Named A Leader in Latest Independent Research Firm’s Accounts Payables – Electronic Invoice Presentment and Payment Report. Our team of experts can work with you to implement a solution and get all your suppliers onboard, enabling you to make the easy migration to a fully automated payables process with Accounts Enterprise AP automation software over time.

In the next blog post on this series, we will look at the cost savings of EIPP systems and determine where efficiencies can be captured.

Consult with Ataway’s Team of Experts today, and learn how we can provide Solutions for your business in Electronic Invoice Presentment and Payment.

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