At many companies, accounts payable (AP) departments are responsible for processing invoices and interacting with suppliers, ranging from small “mom and pop” businesses to large multinational organizations. For some global organizations, their invoice totals can easily top thousands of sheets of paper each week.
Starting the Evolution
While electronic invoicing solutions have been available for several years, many companies are just now taking steps to move away from the slow, labor-intensive and paper-based invoicing method to more efficient and environmentally responsible alternatives.
By moving to an e-invoicing network, companies can experience immediate breakthroughs in efficiency and positively impact the environment.
Eliminating the Paper
Labor is by far the major cost component for accounts payable. To meet the challenge, companies need a solution that addresses the fundamental problems that increase labor costs in AP — paper and exceptions. And since the majority of causes for exceptions can be traced back to paper, companies should focus on eliminating paper.
When the project team at Mohawk Industries, a leading supplier of flooring for both residential and commercial applications, wanted to eliminate paper from its back-end accounting processes, they initially considered electronic data interchange (EDI). However, they soon found that EDI would require a heavy dependence on scarce IT resources.
Since every one of its suppliers had its own requirements and invoice formats, the company’s IT department would have to manually map every one of the participating suppliers to its JD Edwards system.
Limiting the program to high-volume suppliers still would have presented the Georgia-based company’s IT team with 1,000 mapping projects – an unreasonable project load for a limited IT staff. Additionally, many of the company’s suppliers balked at the EDI option because of the high costs involved and what would have been a heavy reliance on their own internal IT staffs to manage this type of complicated transaction.
The company’s project team next evaluated outsourcing, but discovered the potential cost savings would be offset by a number of issues, such as challenges associated with logistically implementing an outsourced solution, Sarbanes-Oxley compliance and supplier relationships dependent on the performance of a third party manually handling invoices.
Consultants and potential vendors introduced another option: e-invoicing. The project team focused on one key question: What solution will convert the highest number of paper invoices to electronic in the shortest amount of time? After a year of researching alternatives, the company decided to move to an e-invoicing network.
The e-invoicing network didn’t require specialized hardware or software, so demand on IT would be minimal. Moreover, there weren’t any limitations on invoice formats, file formats or communication methods, so getting suppliers to participate was easier. Additionally, the e-invoicing network’s supplier enrollment team took the lead in managing the onboarding process.
Implementation & Results
Suppliers with high invoice volumes were enrolled into an integrated solution option, which immediately connected their accounting systems and invoices to the company’s back-end systems.
Within five months, more than 75 percent of those initial suppliers had enrolled in the e-invoicing network, enabling the company to annually reduce paper invoices by more than 400,000 sheets of paper.
The Bottom Line
Overall, the company’s transition from paper to electronic invoices has saved 6 million sheets of paper. That’s the equivalent of 700 trees, 85 barrels of oil, 173,000 kilowatts of energy and more than 2,500 pounds of air pollution.
Transitioning to e-invoicing enabled the carpet manufacturer to develop another important component of its environmental initiative and further solidified its environmental leadership while realizing about $3 million in annual savings.
Thayer Stewart is vice president for sales and marketing at OB10. Before joining OB10, Thayer was vice president of marketing at EmployeeMatters, an automated payroll processing and benefits administration provider, acquired by Intuit. Before that, he spent 12 years at American Express, most recently as vice president of marketing & business development in the Corporate Services division. At American Express, Thayer was instrumental in launching and growing their Corporate Purchasing Card business. He can be reached at Thayer.firstname.lastname@example.org