MBG Article
Peel Back the Layers - The Proof is in the Process
Back in the 1980s, Robert Crandall, former president and chairman of American Airlines, had taken a single olive out
of each salad, saving some $40,000 a year for the airline. Innovative? Somewhat. Effective? Absolutely. Cost savings don’t need to be particularly innovative like Mr. Crandall’s olive-elimination, but they do need to be effective. Regardless of a company’s size, nearly every enterprise must respond to invoices in order to conduct business without interruption. The trend towards outsourcing invoice processing is an effective, cost-savings solution that ensures bills are paid promptly to avoid late fees and penalties, and errors are identified quickly. The end result is that organzations can reallocate resources elsewhere geared toward more revenue generativing activities.
Business leaders are striving to make continuous efforts to streamline their business processes, especially within the telecom sector. The recent Aberdeen report, The Total Telecom Cost Management Benchmark Report: The Cost of Not Acting, uncovered that two-thirds of enterprises do not have software to drive centralized procurement of telecom services. What is even more alarming is how much companies are paying in late fee penalties. The Aberdeen Report points out that on average companies are paying $2.6 of their spend in late penalties. Furthermore, the Aberdeen Group report goes on to say the cost of processing a single telecom invoice can cost between $28 to $34. With the average Fortune 500 Company processing approximately 15,000 invoices, the cost savings that can be attained through efficient processing of invoices can be both dramatic and immediate, while reducing late payment penalties (see Example 1). Implementing a telecom expense management solution (TEM) with comprehensive invoice processing capabilities addresses the ‘who, what, where, and why’ of bill payment and establishes a efficient process.
Example 1: Realized Savings Through Invoice Processing Efficiency
*Scenario A invoice processing costs based upon average costs ($28 - $34) reported in Aberdeen Group Research: The Cost of Not Acting
So Long Paper
Taking control of this back office pain-point begins with removing paper from the process. The sheer volume of invoices an organization receives makes it neither feasible nor efficient to conduct an accurate checks and balances per billing cycle. A company receiving fifty invoices spread between five accounts each month exerts a tremendous amount of time identifying errors. The time spent verifying unauthorized charges and contract rate compliance further exhausts resources. Moreover, once errors are determined, the time spent contacting vendors to rectify the error takes a significant amount of staff time. By the time all of this is resolved, or at least somewhat resolved, next month’s invoices have already arrived.
Expedite It
There’s nothing more aggravating than hearing from a telecom vendor ‘we never received the payment’. In a paper-based system, it may take hours to verify payment, especially if the invoice was never filed or filed in the wrong place. Eliminating paper and adopting electronic data to automate the process means fewer errors and less scrambling. It also means not having to wait for authorized persons to render payment approval. Data on invoices allows organizations to have a complete overview of payables in process. Automated workflow eliminates the possibility that invoices are overlooked or worse – forgotten.
Closing the Loop
With the increased scrutiny from SOX compliance; it is necessary to accurately track invoices. Invoice processing makes it possible for staff to guarantee appropriate action is taken regarding payment. The assurance that bills are promptly addressed promotes quality within financial operations. Electronically tracking the invoice from the moment it is received until the moment it is remitted, creates a concise audit trail. Automatic alerts can be set to notify the appropriate party when a specific action must be taken. Detailed reporting assists in tracking down information quickly and accurately.
Now more than ever invoice processing, as part of a comprehensive TEM solution, can ensure efficient payment processing – eliminating late fees and penalties, reducing errors, improving availability of invoice information and gaining better control and security of invoices. A successful TEM engagement with an organization will create a mutually beneficial and long lasting relationship. The potential payback from electronic invoice and payment is immediate and real.
