AP Automation – the 5 options

AP Automation – the 5 options

Posted by Pete Loughlin in e-invoicing 30 Mar 2011

We’re delighted to welcome Lars Kjærsgaard as one of our first guest bloggers. Lars is an International Sales Manager & Account Manager at EDB Consulting Group in Denmark and has some great insights into successfully moving toward 100% electronic invoicing.

In my mind there exist at least 5 methods/ways to either automate or semi-automate invoice entry:

SEMI-AUTOMATE – manual entry from scanning w/o OCR

E.g. small Company Codes (sales companies) with very small Invoice handling needs.  Split screen with manual account assignment in one screen-part and the invoice in the other – afterwards triggering workflow if needed.

SEMI-AUTOMATE – from scanning with OCR

Well-known scanning, interpreting and verification processes in scanning software. Manual verification of invoices and registration in the ERP system afterwards, triggering Approval Workflow if needed.

Aim at FULL-AUTOMATE – from scanning with OCR

Same as above but with “Autoverify” enabled when all data fields are fully recognized in the interpretation process – hence sending scanned invoices directly into the ERP system, without human interaction. “Autoverify” can be enabled on vendor level at any time. Hence Workflow is triggered automatically if needed.

Aim at FULL-AUTOMATE – from PDF Invoices received in emails

The solution automatically monitor one or multiple e-mail addresses. When e-mails received in the e-mail account, the solution detaches the PDF invoice(s) into a folder which is monitored by the scanning/OCR solution. When the automatically detached e-mail invoices are detached into monitored folder, the OCR/Interpretation process starts. If all Invoice fields are fully/100% recognized (and Autoverify is enabled) – invoices are sent to the ERP system with no human interaction. 100% automated. “Autoverify” can be enabled on vendor level at any time. Hence workflow is triggered if needed.

FULL AUTOMATE – from 100% electronic (EDI) supplier / VANS provider

When implemented and tested thoroughly,  EDI invoices can be matched and posted very large scale.  Of course it depends on a number of factors, e.g. the purchasing processes performed before invoice receipt,  Goods Receipt and very much the state of material master data and vendor master data. In Denmark we have customers that receive 80% of their invoices from EDI – and after a vendor master data optimization period, a material master data optimization period – the large scale main road is 100% match from invoice positions with Purchase Order positions,  hence posted automatically and automatically released for payment.

Our customers have their special characteristics and represent different company-cultural maturation stages regarding receiving and handling invoices. But it is not a case of choosing one of the methods above – all methods can co-exist at the same time without any problems. It is pure activation and configuration of the solutions modules. If the right solution is chosen, the solution offers receiving and handling processes that match all cultural maturity stages – mixed or not mixed.

In 2005 in Denmark it was legally required that companies could deliver electronic invoices to public companies. It was decided by the Government. This was a very, very big enabler for 100% e-invoicing in the private sector, and 100% e-invoicing is a pretty common solution in some business. Still some businesses lack cultural maturity to receive and deliver e-documents.

Lars Kjærsgaard


  • Torsten Budesheim March 30, 2011 at 4:23 pm /

    Let me start out by saying kudos to the Denmark government for putting such a requirement out there. Hopefully many other countries will follow this example.

    There are two main things in Lars’ blog post that stand out to me:

    1. Many organizations still only look at invoice management when it comes to upgrading accounts payable (a/p) processes. While it is a great opportunity for a leaner, cleaner, and more efficient a/p process, it does fall short of the actual, much more strategic opportunity that organization should aim for when upgrading their a/p process, Dynamic Discounting. Dynamic Discounting creates a win-win situation for suppliers and buyers by taking out the middle man (a.k.a banks, factoring services) for the supplier’s short term financing needs. Instead the buyer pays invoices early in return for a discount, which makes suppliers more competitive and lowers the cost of goods and services for the buyer. Dynamic Discounting will benefit the procurement and treasury group as well, but this may be better addressed in a separate blog post.

    2. Lars mentions that many companies are not yet able to deliver invoices electronically. This is a great opportunity for a supplier portal that helps exactly those customers either enter their invoices or use a PO and turn it into an invoice with a simple mouse click. In order to achieve maximum adoption, a supplier portal must be free to the suppliers. A supplier portal can also extend the scope from invoice automation to vender master management and other self-services and help improve collaboration between supplier and buyers.

    To summarize, a/p automation is a great start, but add dynamic discounting to it and the a/p automation initiative pays for itself through the additional early payment discounts that can be achieved on the entire spend.

  • tim woodhouse March 31, 2011 at 12:39 pm /

    Torsten I totally agree and I am alway trying to get DD onto the agenda but it is a slow process – there are millions hidden away here – I’d be happy to hear any views on how we can get DD higher up the agenda

  • tim woodhouse March 31, 2011 at 12:46 pm /

    Good to see Lars giving us his very comprehensive view – one point I would like to widen the discussion on is where Lars says;
    the solution detaches the PDF invoice(s) into a folder which is monitored by the scanning/OCR solution

    my view is that we know that using OCR on PDF’s has inherent faults ie image quality etc – I have been working on new technology PDFR – see http://www.pdfr.co.uk – this eradicates all possibility of faults making it as trustworthy as an e-invoice – to me it’s a no brainer – what does anyone else think?

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