A company acquisition. Forecasted volume increases. The need to streamline or have more security and visibility controls. These are some of the reasons organizations decide to build accounts payable (AP) shared services systems to consolidate processing from multiple locations to one central location.
Is a shared services solution the direction your organization has chosen? Have you decided to keep the processing in-house after evaluating outsourcing operations in comparison with leveraging the experience and expertise of your existing AP staff?
As you evaluate automation versus increasing staff to accommodate the increased volumes, you’ll find that there are many solution options ranging from basic archival to fully automated capture and workflow processing. Here are the top ten considerations to keep in mind as you examine the various shared services options:
1. Capture Methodologies
Whether your invoices are arriving electronically, by email, physical mail and/or fax; invoices are sent to one central location and/or distributed, document capture is an important area of consideration. You’ll need a solid system in place to collect the invoices, extract the data and classify the information you need from incoming documents. Your invoice formats and volumes, in combination with the data you must extract, may or may not necessitate an optical character recognition (OCR) solution to help capture the data. Perform cost trade-offs to determine the level of automation that is cost justified for your solution. For example, a study conducted during an implementation for a major restaurant chain concluded that automated data entry would not yield significant savings, because their enterprise resource planning (ERP) system had a very efficient data entry interface.
2. ERP Integration
An effective AP shared services solution will need to integrate with your existing ERP software. Many companies have multiple ERP or accounting systems due to growth by acquisition. Integration with these systems during invoice capture and invoice processing to confirm purchase order (PO) information, vendor master and goods receipt is critical to ensure data integrity and accuracy. Invoice matching and the complexities surrounding line item reconciliation vary by industry and is a serious consideration in your system design.
During a recent multinational shared services implementation for an international chemical company, integration for PO confirmation accessed one system for purchasing information and invoice posting to a separate EPR system after approval and exception handling. The workflow system enforced unique process rules for North American, Latin American and European requirements.
3. Approvals and Exception Handling
An efficient approvals and exception handling process is extremely important to a consolidated accounts payable department. Approval and exception handling can be provided in the ECM workflow or by the ERP system. Regardless of where it is handled, it should be easy to use, integrated with your network security model and provide notifications, visibility, escalation and adhoc routing for exceptions with immediate access to the invoices and backup information without burdening your email system.
If an approval hierarchy exists, try to avoid having to recreate and maintain that information in multiple locations. In an implementation for a finance company with over 1000 offices, the AP implementation was able to reference the human resources database for invoice approval hierarchy.
A well designed shared services accounts payable solution can help your company be better prepared for audits and have the best financial controls through immediate and secure document access. Whether or nor your organization is publicly traded, having strong financial controls in place is critical. A workflow implementation can automate rules processing, enforce your financial controls, segregate duties and provide visibility.
If your organization has offices or divisions in different countries and there are language, tax and currency considerations, then you’ll need to take this into account in your decision making process. An effective system should also be able to handle different local and statutory requirements. Ensure your system captures a complete history of the all process steps and participants to satisfy your auditors. One implementation for a recruiting firm cost justified their ECM solution by enabling remote access to their system for auditors resulting in significant travel cost savings alone.
The ideal shared services solution will give you complete visibility of all obligations, your people and your processes. Through reporting metrics and dashboard interface you should always know the status of all key performance indicators to ensure your internal and external service levels are being met. Workload balancing and distribution should be accommodated inherently in your workflow tool. Don’t assume workload balancing is available in every tool; inferior products can result in hundreds of workflow queues.
However, a well designed workflow product can distribute and control work from just a few queues. Your dashboard or business activity monitoring will provide an immediate visual account of the health of your system.
6. People Factor
The system design process should involve both your management and knowledge workers. Early and ongoing team involvement will drive a better overall system design, staff support and buy-in for the delivered system and insurance that management goals are being met. The best system is useless if your team will not accept and embrace the use of it or if management does not support the project. Don’t overlook knowledge transfer.
- What training will your current employees need before implementing a new solution?
- Is training and support offered by the solution providers?
- Operational training for all types of users is critical, if you are a large company, can you do a “train the trainer” approach or will it be conducted by your solution provider?
Don’t forget the training materials. Systems administration training on all aspects of the system is critical, especially for an in-house system where you will be responsible for “care and feeding” backups, tuning and adjustments.
7. Vendor Coordination and Self Service
With implementation of a shared service center, vendor master clean up may be a critical first step for consideration. In additional to simply redirecting invoices to a central location, additional benefits can be gained by coordinating with your vendors to help you process invoices more efficiently and to help vendors get paid faster.
For example, appending the store number bill to address can help automate invoice approval routing in your workflow. Vendors may also be able to take advantage of consolidated billing. Look for a solution that offers a vendor portal, where vendors can submit invoices and determine invoice payment status. This will decrease the number of telephone inquiries and increase team efficiency.
8. Premises-Based Implementation Versus SaaS Model
Should you implement a locally installed solution or a Software-as-a-Service (SaaS) solution in the cloud? As you evaluate the two options, your IT department will play a pivotal role in the project. In most cases, IT will provide the infrastructure and the hardware to run the system for a premises based solution along with systems for backups and ongoing support. Involve them early to ensure they have the bandwidth to support the project. If your IT support is outsourced, be prepared to project those cost impacts. Advantages of a SaaS based solution can be reduced implementation times, reduced impact on IT and the ability to pay for the system as an operating cost rather than a capital outlay.
Cost is another important consideration. Evaluate the long-term costs (minimum of 3-5 year projections) associated with both solution options. Can you start as a hosted system and transition to in-house later if I want (or vise-versa)? Finally, think about your ability to control system changes and upgrades.
9. Disaster Recovery and Operational Continuity
Ensure that disaster recovery is a design consideration either with your SaaS provider or with your IT Team. Backups are a critical consideration of the data, but also include your plan to stand up your application if this is a local installation. Getting your data back is critical, but only part of the picture. If you’re in an area prone to hurricanes, earthquakes, floods or other natural disasters, consider site redundancy where your team can be redeployed if needed. Ask any prospective solution providers how this can be accommodated.
The initial purchase of a system is the time to negotiate redundancy. Some software providers charge for a second copy for test and disaster recovery and charge annual maintenance on those systems. While no business wants to have “down time,” think about the tolerance of not having access to your solution and balance your solution cost with that tolerance.
10. System Evolution
Your AP Automation system, if done right, will evolve and grow and allow you to enhance the capabilities over time. The key question is will you have the training, ability and access to change it with internal resources? In many cases the ECM, workflow and capture solution can provide a foundation for future enhancements and growth in other areas of the organization for shared services in Accounts receivable and human resources. The key question is whether you will be held hostage by your vendor or if you can take control enabling you to control the costs of growth and expansion.
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