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w h i t e pa p e rAccounts PayableAutomation BenefitsFacts and best practices by leading analystsPurchase to Pay by Medius, Powered by ReadSoftAuthor: ReadSoft, August 2011Edited: Medius, June 2012Copyright 2011 m

Evidence for Accounts PayableAutomation BenefitsResearch-based evidence shows that automation is yet again the way forward forcost savings and improved efficiencyEnterprises are increasingly aware that paper and people-based processes leadto high AP transaction costs and missed business opportunities. In a recent survey1, approximately half the organizations interviewed stated that they hadproblems with manual data entry, inefficient processes and manual routing ofinvoices for review and approval. Other issues were lost or missing invoices, ahigh number of discrepancies and exceptions, an inability to see outstandingliabilities and no way to capture all discounts offered by suppliers.This White Paper examines the recent research findings carried out by severalindependent business analysis companies, namely: Aberdeen GroupGartner IncThe Hackett GroupPayStream Advisors IncIt breaks down the AP automation issues faced by organizations and highlightsthe numbers behind the proof that there are major benefits to be gained inimplementing an AP automation system. It also shows the criteria for selectinga solution provider and how organizations need to make sure they choose anexperienced provider such as ReadSoft to guide them through a proven process.The sources of the facts and figures that support this evidence are provided inthe conclusion of this document.These consulting companies conclude that there is tremendous potential forimprovement by automating the AP process - namely invoice receipt, invoicematching and approval workflow.Best-in-class Accounts Payable performance, according to the Aberdeen Group,gives you: 92% lower invoice processing costs 81% faster invoice processing cycle timesSource: The Aberdeen Group: Imaging and Workflow April 2011.Page 2 of 11

Key Factors Driving ChangeTime and MoneyTime and money are the key drivers for AP automation1 – along with high paperusage, most AP departments still suffer with high AP transaction costs and cycletimes. The top two pressures driving organizations to reassess their AP functionare lowering invoice processing costs and improving and/or standardizing theAP process. Research has shown that best-in-class enterprises report7 : Invoice processing costs that are, on average, 92% below their peers;Invoice processing time cycle times that are, on average, 81% fasterthan their peers.Other DriversOther reasons why organizations3 focus on electronic enablement of AP transactions are: Buyers and sellers gain savings opportunities by partnering and improving the process between each other;Technology has become flexible to integrate with existing business systems, and more affordable;Process, data and system standardization simplify implementing thetechnology;Improved performance in areas such as complying with contracts andoptimizing working capital;Sarbanes-Oxley (SOX) drives organizations to adopt technology withthe necessary controls as part of the application.Page 3 of 11

AP Automation Elements for SuccessIn the current AP world there are four elements necessary for AP success:Visibility, Collaboration, Control, and Automation:VisibilityVisibility into liabilities and operating expenses is the basic requirement formost major functions within an enterprise. It is used to give an overall view ofoperations and establish standards on which to base strategies for performanceimprovement.Research has shown1 that best-in-class organizations are 43% more likely tohave enterprise-level visibility for AP transactions. The rest suffer from highertransaction costs and longer cycle times. Not seeing material liabilities that arenot yet entered impact the timing and accuracy when closing accounting periods.CollaborationCross-functional coordination among key stakeholders such as accounts payable, procurement, finance, treasury and suppliers creates an environment wherekey information flows easily between these stakeholders1. Without this, treasurycan’t make optimal capital decisions; procurement can’t identify negotiation opportunities with key suppliers, and suppliers and internal stakeholders can’t trackinvoice processing status. It will also be difficult to set up different approval androuting rules based on different types of invoices or supplier arrangements, suchas PO-based, non-PO-based, preapproved and supplier maintenance.ControlGood audit controls help organizations enforce corporate policies and achievecontract compliance. Audit controls ensure that AP transactions are processedin a way that complies with policies, procedures and regulations. They helpreduce late payment fees, capture negotiated discounts and early payment discounts, eliminate duplicate invoice payments, and prevent fraudulent payments.Research2 has found the exception rates in top performing firms are 85% lowerthan other enterprises.AutomationAutomation is a critical foundation to lowering costs and streamlining each ofthe four AP sub-processes: invoice receipt, approval and inquiry, validation andreconciliation, and settlements. Technology solutions to manage invoices andworkflow, and electronic payment methods reduce the inefficiency of manualand paper-based processes.1-3While 44% of Best-in-Class enterprises utilize a single e-payables solution tofully automate their entire AP process, the majority of AP departments utilize apatchwork of solutions to automate certain processes.Page 4 of 11

Electronic payments have the highest penetration among all AP automation solutions (80% for ‘Best-in-Class’; 60% for all other enterprises). Organizations with‘on average’ 60% payments made annually via paper-based checks have anopportunity to greatly improve.BenefitsAn automated AP solution1 streamlines and drastically improves performanceby utilizing e-invoicing, scanning and workflow, online tracking and reportingcapabilities, electronic invoice dashboards and supplier portals, supplier networks, payment services and spend analytics for all invoices.Using an automated AP solution, organizations will successfully drive transformation of their accounts payable departments to overcome the challenges ofmanual and paper-based processes.Benchmarking research on AP strategies across nearly 400 organizations3 revealed the benefits that Best-in-class organizations achieve by developing efficient processes and mapping them to automated AP solutions:Performance areaBest-in-Class AdvantageInvoice processing costs91% lowerProcessing cycle time46% shorterLate payments12% fewerStaff time responding to inquiries30% lessPage 5 of 11

What are the must-haves?Key areas required by organizations to ensure that a solution covers current andfuture needs as the process matures2-4 include: Automate your process: From arrival to post and archive, with efficient workflow to streamline verification and exception handling; Any format, any source: Physical documents, electronic documents, and document images, via mailbox, email, fax and file transfer; Improve what you have: Integrate with the major ERP/financial system of yourchoice; Increase visibility: Improve your cash flow and invoice management; Better control of received and invoiced goods, automatic purchase ordermatching, optional automatic posting of invoices, enhanced security, less manual work, shorter total processing time, decreased total cost for supplier handlingand early notification of errors; Improved day-to-day information on financial status (regarding current projects, for example) and basis for business decisions. This saves a substantialamount of valuable time at the end of every month, quarter and year. Shared service centers: A centralized or shared services approach will helpensure that AP tasks are streamlined and standardized; best practices are documented and shared, and AP technology budgets are consolidated.And not just for large organizations.AP automation technologies have been limited to larger companies until recently. Now there is evidence that small and medium sized businesses are adoptingthe technologies for the following reasons4. A competitive business environment means even small and medium-sized businesses need to focus on reducing processing costs and increasing efficienciesfor invoices and employee expenses. Streamlining the AP process has become extremely important in a tough economy where cash flow and greater control over payables is critical. An increased interest in early payment discounts is driving smaller organizations to investigate tools and technologies that enable them to shorten theirinvoice receipt-to-approval cycles. On-demand and Software-as-a-Service (SaaS) delivery models have loweredthe initial cost of implementing AP solutions and make them easier to maintain. The convergence of electronic invoicing and front-end invoice imaging givesorganizations a single, comprehensive solution that can manage both paperand electronic invoices through a common process. Value added-services delivered by solution providers for supplier recruitmenttasks mean that buyer organizations can engage suppliers more quickly.Page 6 of 11

An End-to-end SolutionOrganizations obtain maximum value by selecting the broadest possible solutionset that can change user roles from exception and problem handling to oversightand process management. This requires end-to-end solutions for automating APprocesses in any major Enterprise Resource Planning (ERP) or financial system;from invoice arrival, though information extraction, validation and verification,to approval workflow - all with Sarbanes-Oxley (SOX) compliance support.Top performers are four times as productive as Non-top performersNumber of invoices a full time employee can process per yearSource: The Hackett Group, 2009So which types of solutions make the most sense?Extensive research3 has found that:Electronic invoicing solutions automate the invoice reconciliation and paymentprocess and address most invoice types.Workflow and imaging solutions manage all aspects of in-house invoice scanning and documentation and provide an effective electronic archival system.They are often part of a cross-functional enterprise solution.Payment automation platforms specialize in accounts payable and accountsreceivable processing. They offer relief in disbursements for payroll, benefits,regulatory and tax issues, as well as intra-company transfers. These solutionsrange from automated clearing house (ACH) and general payment processingto company-wide AP solutions.Enterprise financial solutions, which manage the budget and general ledger ofan enterprise, consist mainly of Enterprise Resource Planning (ERP) providers.They typically offer functions such as a general ledger, and sometimes moreadvanced capabilities like supply chain auto-reconciliation and AP workflow.Page 7 of 11