Outsourced Invoice Processing Pays For Itself In One Year
This manufacturer was able to reduce its miscellaneous AP (accounts payable) costs 20% and gain productivity by outsourcing its invoice processing.
According to a recent InfoTrends study, the U.S. DPO (document process outsourcing) market approached $1 billion this year and is expected to grow to $1.6 billion in 2010. Numbers such as those indicate that a large number of organizations are transferring control of their manual document processing to outsourced service providers. One manufacturer that outsourced its invoice processing has been able to reduce miscellaneous AP costs by 20%.
Prior to the company’s outsourced invoice processing implementation, vendor invoices were mailed directly to whichever branch location placed the order. It was the duty of personnel at those locations to review the paper invoices, provide an approval signature, add the company’s internal general ledger account number and location number, and mail the invoices to the AP department at corporate headquarters. The AP department sorted the invoices and then rekeyed all pertinent information (e.g. invoice number, date, dollar amount) into the company’s AP financial software. This manual invoice processing system lacked tracking and reporting capabilities and occasionally resulted in delayed and lost invoices. After researching the situation, the company decided that outsourcing its invoicing process was the logical choice.
OUTSOURCED INVOICE PROCESSING SOLUTION INCLUDES WORKFLOW FEATURES
“Once we decided that we had to make a change, we spoke to four outsourcing vendors and our in-house IT staff,” says the company’s executive director. “Our IT department investigated the possibility of creating a custom system; however, the department’s finished proposal was five times the cost of the proposed outsourced services.” Management was primarily interested in a solution that would capture key data, such as invoice number and dollar amounts, from invoices. The invoice information could then be routed to the correct user, as determined by the company’s business rules, and imported into its AP software.
The company chose Archive Systems ASPEN 360 Web-based hosted document processing and management service. “Archive Systems had an online demo, which we used to verify that the product met our needs,” says the executive director. “In addition, Archive Systems had a workflow product specifically dedicated to AP processing.”
The initial planning and configuration, most of which was completed by Archive Systems, took two to three months. Despite the simplicity of deployment, the manufacturer chose to ease into the project one department at a time. Almost immediately, the pioneering department noticed invoices being processed more efficiently and could see a dramatic reduction in the number of invoices getting lost.
Using the hosted solution, the company’s vendors send invoices to one post office box, which Archive Systems accesses and processes the contents of daily. Once an invoice is scanned and indexed by Archive Systems, it is electronically routed to the correct company departments and is eventually imported into the company’s AP software for payment. Archive Systems currently processes approximately 10,000 invoices per month for the company. Of those, about half are workflow related and, therefore, routed for approval and entry into the AP software system. The other half are scanned for archival purposes.
Outsourcing the invoice processing resulted in a 75% reduction in the company’s processing labor, which translated to a 20% reduction in its miscellaneous AP costs. These savings allowed the company to pay for the outsourced services in one year. In addition, the accountability lacking in the manual system is now in place.
Once the success of the headquarters implementation was apparent, the company decided to roll out the outsourced service to its other locations. To aid in training the large number of users, the company created a computer-based training module. The module allows employees to go through a self-paced tutorial that shows how to use the system to process invoices. Today, the company has implemented the ASPEN 360 product in all of its U.S. offices as well as two of its foreign offices. The company is currently considering expanding the outsourced invoice processing service to the remainder of its foreign offices.