Automated Accounts Payable
Automate your business workflow
Over the past ten years many organisations, and especially those that have replaced their financial management information systems, will have introduced document scanning combined with automated workflow into their businesses. These two advancements in technology have enabled organisations to reduce the volume of paper circulating and have in general sped up the invoice approval and payment process.
However, another advancement in technology now enables further automation to the accounts payable function and one that has significant impacts on the costs associated with transaction processing. The following is the story of how NZ Fire Service fully automated their accounts payable function.
In early 2010 NZ Fire Service engaged Probity to assist with a review of their accounts payable function and find solutions to a number of frustrations. At this time NZ Fire Service’s suppliers had been in the habit of sending invoices directly to over 600 business units including more than 400 fire stations. The finance team had limited visibility of financial commitments until the approved invoice was received by the accounts payable team in Wellington. The second frustration was the inconsistency in conformity with the procurement process, in particular the completion and approval of purchase orders.
Probity’s consultant worked with Graham Paterson (Financial Controller) and together they mapped out how the ideal business process would work. With a detailed understanding of the technology currently available, it was identified that transaction processing could be centralised and better controlled. By having all invoices sent to Wellington it was possible to have them scanned (digitally imaged) and then loaded into one of several add-on applications available that would sit over NZ Fire Service’s J.D. Edwards application. This system could then manage the workflow and approval of the invoices. The added advantage of utilising an application of this nature was that many of those available also have the facility to raise and approve purchase orders electronically. Consequently the first stage of developing the solution was not difficult and utilised processes and applications that were used elsewhere and were well understood.
It was during the process of sourcing an organisation to provide the scanning services that we identified the possibility of utilising optical character recognition software to capture the invoice data electronically. At first we were a little sceptical as previous evaluations of optical character recognition software had shown there were still many issues with the accuracy of the resulting data. Not surprisingly, accuracy is important when you are processing invoices and making payments. However, after careful evaluation and analysis of the vendor’s internal quality control processes we concluded that we could obtain close to 100% accuracy with data capture, and that the outcome would be as good if not better than manual input.
The final solution had the following characteristics:
• The procurement policy at NZ Fire Service was redrafted requiring Purchase Orders to be raised for expenditure only over certain limits and for expenditure of a certain nature. This has been acknowledged as acceptable by their Auditors as a result of the improved financial controls that have been put in place as a result of fully automating accounts payable.
• Purchase orders are raised and approved within a specifically designed application that resides outside of NZ Fire Service’s ERP system. This system manages workflow and holds each employee’s financial delegation and the organisation’s approval structure (for convenience we will call this system F1).
• All invoices for NZ Fire Service are now sent to a Private Bag or electronic address in Wellington.
• Invoices are scanned (digitally imaged).
• Specific data required to process the invoice is scrapped from the digital image.
• An electronic file is created containing an image and the data for each invoice. This file is then imported into F1.
• Invoices are matched with approved purchase orders and automatically sent to J. D. Edwards for payment.
• Invoices for which there is no purchase order are sent to appropriate employees for approval. Once approved they are sent to J.D. Edwards for payment.
This is a simplistic overview of the process and many processing rules needed to be written into F1 to handle exceptions and potential data import failures.
The benefits for NZ Fire Service are as follows.
There were significant financial savings to NZ Fire Service. The accounts payable team was reduced by three people and invoices are now destroyed as opposed to being stored. Savings have also been identified in the Regions.
Process automation and compliance, driven by structured workflows and electronic delegations have improved financial controls, and the timeliness of transactions has improved the quality of NZFS financial management information.
