1. The document outlines four steps for automating invoice processing: audit current processes, select a solution to support the entire purchase-to-pay process, aim for fully electronic processing with invoice automation and matching, and shift to electronic supplier collaboration. 2. Key benefits of automation include eliminating manual handling, automating workflow and coding, and providing new visibility for cash management and fraud control. 3. Successful automation requires integrating systems, focusing on e-invoicing for high matching rates, and partnering with suppliers for electronic ordering and invoicing.

1. Four Steps to
Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process

2. Table of Contents
1 Executive summary
2 Four essential steps when automating invoice processing
Step 1 - Audit your current process, set the goals for improvement and start the transformation
Step 2 - Selection process: Consider only solutions that support the entire P2P process
Step 3 - Aim at a fully electronic AP process and understand invoice automation and invoice to order matching
Step 4 - Make a plan to shift to electronic supplier collaboration
3 Introducing an e-Procurement solution
4 Conclusions

3. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
1 Executive summary
According to a recent survey1, 59 percent of accounts payable (AP) heads think that the AP
function is becoming more strategic and that improved AP performance has a positive impact
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on profitability. This survey approached 550 heads of AP around the world and it revealed that
inefficiencies of the AP process are costly for companies. The late payment fees are a reality and
early payment discounts typically cannot be leveraged. The respondents identified human error,
whether by AP or the procurement department, as the biggest cause of AP errors, and invoice
scanning / data entry as the most time-consuming and error-prone step in invoice processing.
There is a clear need for automation of the company to the first stage on its journey to- This ebook introduces the four essential
finance function’s AP processes; to bring in wards broader purchase-to-pay (P2P) ben- steps an organization will need to consider
real-time visibility and control; and to re- efits. The next stage would involve both the before automating its invoice processing
move both payment and accounting errors finance and procurement functions hav- and also reveals some of the real-life busi-
from the business. Electronic invoices play ing a direct impact on companies’ working ness benefits that a carefully planned AP
a key role. They not only move faster than capital management and cash forecasting. process transformation has delivered to
paper-mailed invoices but also provide an As long as the procurement and AP depart- Basware customers around the world. We
audit trail all the way from the initial pur- ments remain in their separate silos, the hope that this reading will lead to vivid
chase order placed by the procurement de- invoice processing can never be fully au- discussions within finance departments
partment. This drastically cuts down on the tomated and the real-time visibility to out- and would encourage them to embrace the
time an AP clerk would spend on both inter- standing AP liabilities will be just a dream. comprehensive P2P vision when consider-
nal and supplier inquiries before being able ing automating their AP processes.
to process the invoice. And with the rapid Hundreds of customer projects have shown
processing of their invoices, the suppliers Basware how crucial a comprehensive P2P
are able to give the valuable early-payment approach is when a finance department
discounts that still so often remain out of wishes to automate its invoice processing.
the reach to companies. It doesn’t mean the whole P2P value chain
has to be attacked simultaneously but to
Although a streamlined AP process saves ignore AP’s role in the larger process is to
both money and time, it can only take a fail to understand the exponential benefits. 1 Lost in Transaction - A Basware Research Report for Accounts Payable
A complimentary copy available for download at www.basware.com/transaction

4. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
2 Four essential steps when automating
invoice processing
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Step 1
Audit your current process, set the goals for improvement and start
Annual Length of the
the transformation 100,000 7,5
invoice volume working day
Understanding of the current accounts pay- The results of a recent study conducted by Saved time Working days per
5 21
able process down to the root causes of the Forrester Consulting showed clearly that it (minutes per invoice) month
bottlenecks is crucial for its improvement is the centralization of the AP responsibility Average salary of
and standardization. Whether an organiza- that enables the process improvement and
Saved time / man days 1111 $50,000
FTE/year
tion is considering to centralize the AP func- not, as often believed, transplanting of low- Saved time / man
tion into a shared service center (SSC) or to cost AP clerks into a shared service center 52
month
launch uniform processes across its subsidi- in a low-cost country2.
aries in different regions, the new process Annual
Saved time / man year 4 $200,000
should be described and the goals should be Once the new P2P process has been de- savings potential
set in the context of the entire purchase-to- scribed and the goals identified and ap-
pay (P2P) process. It is essential to realize proved within the organization, the AP de- Table 1
early on, the AP’s dependency on the other partment should initiate the change from a Example of time and cost saved by automating the AP process.
players in the bigger picture – all of the units manual to an electronic process immediate- The estimate is based on a company that is processing 100 000 invoices per year with a ve minute
doing purchasing within the organization, ly, and not wait for the other units to change reduction in processing time per invoice.
not only the procurement department but their processes first. According to our expe-
also all of its suppliers and contract agree- rience, the AP automation often serves as a
ments. catalyst that helps the other P2P stakehold-
ers to carry out their own process transfor-
Process centralization and standardization mation.
in conjunction with automation is known to
bring the maximum process efficiency. How- The Table 1 shows how saving only five min-
ever, centralization can be understood in utes per invoice during the AP process can
two different ways – as centralization of the improve efficiency on a monthly and yearly
AP staff or as centralization of the process basis. The automation of invoice processing
ownership. with order/invoice matching and an elec-
tronic approval process will normally reduce 2 Finance and Procurement Work Together To Achieve AP Invoice Processing Excellence.
the invoice cycle time by several days. A Forrester Consulting Thought Leadership Paper Commissioned by Basware Corporation.
April 2010.

5. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
Step 2
Selection process: Consider only solutions that support the entire P2P process In a nutshell, the targeted invoice automation
will enable Accounts Payable to:
The solution selection process is crucial to Therefore, the integration between the
the process transformation in many ways. ERPs and the new P2P solution is a pre-
Eliminate all manual handling of the routine
As a key rule, the selected solution should requisite when trying to build visibility and invoices and automate the recurring and PO-
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not be limited to the AP process only but control across the entire organization.* based invoices
should be flexible enough to enable the en-
tire P2P automation in the future – includ- Bring the ERP master data into the invoice
ing elements such as electronic catalogue automation system, but also consider in- Automate the workflow and coding for
and ordering, and invoice exchange with tegrating the other current and future key
the suppliers. systems such as the AP system or a pos- the rest of the invoices (except handling)
sible e-procurement solution. according to defined business rules and
Do not try to re-invent the wheel when pur-
chasing an electronic invoice processing It is essential that the solution does not approval policies
system. Benefit from fast and low cost im- make the organization dependent on exter-
plementation and from your peers’ experi- nal resources for the process development.
ence from other companies and countries. The AP costs can be kept down if the solu-
Automate the invoice processing control and
Standard packaged applications are widely tion is flexible enough to allow continuous benefit from early discounts and avoid late
adopted and are usually the best options, process improvement. payments
as they contain the built-in best practices
and the required legislative compliance. Finally, to save time and effort when set-
ting up the automated solution, a company Have an extensive invoice processing audit
In many companies, the ERP systems play should ensure that HR is brought into the
a key role whether we are talking about the process and the established approval hier- trail and automated built-in controls available
AP or the broader P2P process. Multiple archy should be followed. at all times for all users to increase the
ERP systems are commonplace – Basware
has encountered as many as 75 in one com-
control and avoid fraud
pany, making it difficult, if not impossible,
to get a single consistent view over the P2P
process.
Deliver a new kind of visibility for cash
management and forecasting as unrecorded
liabilities would be realized in real-time

6. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
Step 3
Aim at a fully electronic AP process and understand invoice automation and invoice to order matching
Invoices should be electronic before being validation of local suppliers’ invoices which Straigh
received by AP in order to benefit from au- usually requires language skills, could be au- t-throu
gh proc
tomated, errorless data cleansing and entry, tomated with a multi-currency, multi-compa- essing –90
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Invoice
and straight-through-processing. ny, invoice automation solution. In the event s/FTE %
that the invoice matching against a contract 100 00
Invoice automation is thus more than the or purchase order fails, easy access by the 0
scan and capture of the invoice data or an requisitioner or cost center owner ensures a
electronic processing workflow. True automa- quick action (approval/rejection) by the per-
tion enables AP to manage the invoice pro- son who knows the topic best.
Invoice
cessing without any manual user interven- autom
tion. As the enabler of the best data quality, Improving automation should be one key goal ation
and thus, best automation, e-invoicing plays for any drive to get off paper. Automation in- Invoic
es/FTE –66
an increasingly important role. In fact, the cludes many aspects of the invoice handling 30 000 FTE
recent Forrester study clearly showed that process. Arguably, the starting point has to
the companies integrating fully automated be invoice data entry. In a paper-based com-
e-invoicing with e-procurement have the best pany, invoices are manually entered into the
chances of achieving AP invoice processing system – a more modern company uses OCR
Paperl
excellence.3 technology to perform data capture during ess wo
the scanning process. An even more forward rkflow
As mentioned previously, a majority of 550 thinking company will have suppliers submit Invo ices/FT –25 %
AP heads think that the invoice scanning is
the most time-consuming and error-prone
their invoices electronically – these come di-
rectly into the system and avoid all sorts of
15 000E FTE
step of their AP process. Companies should, costs, inefficiencies and errors associated
in fact, put in place a clear AP strategy aiming with scanning.
at e-invoice processing only and partner-up
with solution providers who enable a smooth Paper-
based
shift from scanning to automated e-invoicing. h andling
For instance, e-invoicing would make it much Invoice 0%
s/FT
easier for a single shared service center to
support an entire organization globally. The
5 000 E FTE
Continuously
increasing savings (%)
3 Finance and Procurement Work Together To Achieve AP Invoice Processing Excellence.
A Forrester Consulting Thought Leadership Paper Commissioned by Basware Corporation. April 2010.

7. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
The data quality of e-invoices ensures
the highest possible matching rates which translate
into significant efficiencies and cost savings per invoice.
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Once the invoice data is in the system, auto- That is the ideal scenario, which is called What’s more important than setting multiple
mation continues with opportunities for auto- straight-through-processing (STP). Invoices checks into the system (the more checks and
matching invoices to purchase orders and/or often do not match purchase orders though, controls the lower the matching rates) is the
contracts. Obviously, something like invoice- and while STP should be your goal, automa- control and visibility afforded by matching at
to-order matching requires orders to be in a tion can be a dramatic improvement to excep- line level rather than header level. It’s worth
purchasing system somewhere and for those tion management within the invoice handling looking at the difference between the two.
companies who have a high volume of its total process.
invoices relating to purchase orders, the ben- The best way to achieve the additional control
efits of automation are equally high. Exception management is all about discover- and visibility afforded by line-level matching
ing the reason the invoice does not reconcile is through e-invoicing. The purchase order
The matching process takes an invoice, tries with the purchase order and requires manual details within your ordering system will in-
to associate it with an order, and after finding handling. Ideally, the system will still copy the clude line level information and e-invoices
and successfully matching the data on both coding data from the PO to the invoice and come directly into the system and can then
documents, copies the coding details from the forward the invoice directly to a specific per- be matched line-by-line with one or more pur-
order. Since the order was already approved son depending on the reason for the failed chase orders. The data quality of e-invoices
and the invoice reflects the PO’s expectations, match. ensures the highest possible matching rates
the system can automatically approve the in- which translate into significant efficiencies
voice to be transferred to the ERP/financial The matching process typically involves a vali- and cost savings per invoice. E-invoices are
system for payment according to the payment dation check to ensure the goods have been cheaper to receive, cheaper to process, and
terms contained in the Master Vendor list. received before automation sends the invoice contribute directly to the highest possible
to be paid. This is called a three-way match matching rates and cost savings.
(invoice – PO – goods receivals). It is equally
possible for there to be additional checks such
as a quality inspection or check on contract
terms.

8. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
Step 4
Make a plan to shift to electronic supplier collaboration
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Ordering and invoicing on paper – even with The biggest challenge when shifting from In addition, the selected solution pro-
an electronic processing system in place paper to e-invoicing is the activation of the vider should have a flexible service of-
– gives room for delivery and invoicing er- suppliers. This requires a common activation fering that would enable the suppliers
rors. One of the greatest benefits of the au- plan from AP and the procurement depart- an immediate and cost-efficient shift
tomated P2P solutions is that it can include ment, the owner of the supplier agreements, to e-invoicing according to their cur-
the suppliers as part of the process through and the main contact persons. The actual sup- rent invoicing volumes. It should also
contract-based electronic catalogs, electronic plier activation project, i.e. supplier contact- be possible to smoothly increase and
ordering and electronic invoicing. ing and introducing the e-invoicing solutions automate their e-invoicing once the
available, can be outsourced to a solution pro- volumes grow.
For Accounts Payable, this would mean com- vider; however, the supplier prioritization and
plete automation of the invoice processing the activation targets should come from AP The supplier integration is clearly a
with a full audit trail all the way from the ac- based on the processed invoice volumes (i.e. mutual benefit for both Accounts Pay-
tual purchase order. Through an automated the biggest invoice volumes should come in able and Procurement. Getting suppli-
solution, AP can actually outsource the most as electronic first in order to gain the biggest ers to support your AP strategy and
time-consuming routine tasks by offering process improvements). provide electronic invoices immedi-
both the suppliers and the company’s em- ately eliminates the errors and time-
ployees a self-service invoice entry, viewing In many cases, the suppliers may already consuming inquiries during the invoice
and reporting. be providing e-invoices but through a differ- processing. The electronically gener-
ent service provider than a company’s AP is ated invoice data, matching the ne-
Additionally, the P2P automation often planning to use. Therefore, it is important to gotiated contract terms, also enables
serves as a means for supplier consolidation select a solution provider who has interoper- the company’s buyers to better take
and for facilitating category management. ability agreements with other e-invoicing ser- advantage of the possible on-time and
For instance, one Basware customer had over vice providers, and has an open network to early payment discounts and to elimi-
1,500 marketing suppliers alone, accounting all of its own, and its partners’, AP customers nate the late payment penalties.
for 25 percent of total indirect spend. By in- and suppliers.
troducing the P2P automation, the customer
ended up saving 20 percent of that cost.

9. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
Getting suppliers to support your AP strategy
and provide electronic invoices immediately
eliminates the errors and time-consuming
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inquiries during the invoice processing.

10. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
3 Introducing an e-Procurement solution
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Accounts Payable’s strategic role within the E-Procurement is the logical “next step” in the
broader P2P process, especially in terms of purchase-to-pay automation process. Basware
the desired real-time spend visibility, is often procurement solutions offer a reliable way to
ignored. It is crucial to realize that invoice han-
dling does not exist in a vacuum but is closely
improve spend compliance and make cost sav-
ings throughout the procurement cycle – from
No sacrifice of flexibility:
linked to the company’s procurement process
and practices.
sourcing and contract management to day-to-
day purchasing and supplier connectivity. City of Helsinki – 18 000
The efficient spend management, real-time Visit us at www.basware.com/resources for ac- purchase orders per month.
cash flow estimates and supplier base optimiza- cess to the number one source for guidance
tion become possible only with a solution that
seamlessly links together the Procurement’s
on how to best integrate Finance and Procure-
ment.
The city can buy anything
purchasing and AP’s invoice handling process-
es. It is only when the cost-reduction opportu- from tigers to tubas via the
nities are visible to Procurement that they can
be considered when negotiating future supplier
agreements.
catalog-based e-procurement
Additionally, it is only when the approved pur- system and has been able to
chase orders are visible to Accounts Payable
that they can be reported as committed liabili- reduce the capital employed by
ties, and taken into account in cash flow fore-
casting. EUR 2,000,000

11. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
Conclusions
With a majority of survey respondents In order to have real-time visibility to The selected solution provider should
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identifying human error as being the outstanding AP liabilities and for in- have a flexible service offering that
biggest cause of AP errors, and invoice voice processing to be fully automated, would enable the suppliers an immedi-
scanning / data entry as the most the procurement and AP departments ate and cost-efficient shift to e-invoic-
time-consuming and error-prone step must work together on important ing according to their current invoicing
in invoice processing, more companies steps such as supplier activation. Gain- volumes. It should also be possible to
are embracing e-invoicing in order to ing suppliers’ support of the AP strate- smoothly increase and automate their
streamline the AP process. The long- gy and having them provide electronic e-invoicing once the volumes grow.
term benefits are too compelling to invoices immediately eliminates the
ignore. Keeping in mind that although errors and time-consuming inquiries The transition from a manual P2P pro-
a streamlined AP process saves both during the invoice processing. cess to a fully electronic process need
money and time, it can only take a com- not be a painful and tedious process.
pany to the first stage within a broader In addition, the solution selection pro- Outsourcing the shift to electronic of-
purchase-to-pay maturity curve. cess is crucial to the process transfor- fers considerable benefits - One be-
mation in many ways. As a key rule, the ing that at the end of the project, the
It is important for a company to review selected solution should not be limited company will have a defined customer
its entire purchase-to-pay process to the AP process only but should be integration process that provides a ba-
first, then work towards an integrated flexible enough to enable the entire sis for a long-term and self-driven e-
e-invoicing solution. It is also essential P2P automation in the future – includ- invoicing strategy.
to realize early on, the AP’s depend- ing elements such as electronic cata-
ency on the other players in the bigger logue and ordering, and invoice ex-
picture – all of the units doing purchas- change with the suppliers.
ing within the organization, not only
the procurement department but also
all of its suppliers and contract agree-
ments.

12. Four Steps to Invoice Automation
From Manual to a Fully Electronic Purchase-to-Pay Process
Invoice Automation Successes
“Invoice automation has actually improved Finnair’s competitive position by providing us with
greater operational transparency and responsiveness. It enables a more solid connection with
line-of business people across the group and strongly influences, and improves, purchasing
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decisions.”
Mervi Mäkelä
Director Cash Management
Finnair
“The increased visibility and efficiency that invoice automation provides has made it an
attractive solution not only for group countries with high labor costs, but also for those where
labor costs are low, such as China and Egypt.”
Pether Jonsson
Group Vice President
ABB
“Invoice automation saves significant time and money, enables enhanced tracking and easy
auditing, and provides the accuracy, efficiencies, visibility and control we need. We’re even
using it to monitor suppliers and look for opportunities to consolidate invoices and capture
early payment discounts.”
Daniel Garuti
Vice President and Accounting Supervisor
Loomis, Sayles & Company, L.P.

13. Basware is the global leader in purchase-to-pay solutions with more than 1,500 customers and 1,000,000
users in over 50 countries around the world. With Basware, organizations can reduce the cost of buying and
paying for goods and services, and gain visibility and control of their entire spending process by automating
manual processes, from sourcing, contract management, purchasing and supplier collaboration to invoice
automation.
Basware solutions and services enable substantial cost reductions across businesses and deliver value by
providing compliance and control, as well as fast return on investment. The solutions are distributed and
implemented, either on site or as a service, in Europe, the US, and Asia-Pacific through an extensive network
of Basware offices and business partners.
contact@basware.com
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