21 Sep 2012 e-invoicing – as simple as getting your supplier invoices to wipe their feet
I once lived in a house with a large kitchen with a white tiled floor that was difficult to keep clean. Dark colored soles on shoes would leave unsightly marks and even the slightest spillage would stand out like a sore thumb. We quickly got used to it however and we learned to remove our shoes and clean it very regularly. The downside of the white floor was that we needed to work hard to keep it clean. The upside was it was spotless. An operating theater in a hospital was no cleaner. You could have safely performed open-heart surgery in our kitchen.
Most people don’t choose white floors or carpets especially if you have young kids or pets. Darker colors or patterns camouflage the reality of life and it’s easier to live with a few grubby marks if you can’t see them and it’s exactly the same when organizations specify their business technology solutions. They specify solutions that fit in with the realities of a complex set of business process and design a solution that fits in with that. And quite right too you may say but I’d disagree. Sometimes you need a white carpet solution.
Take a real life example of a large, complex, global organization operating in more than 200 countries around the world. It’s grown rapidly through a set of mergers and acquisitions and as a result has a mixture of supply chain systems and processes – some new and universal across the whole organization, some legacy, some that work well and some that need constant hand-holding so as not to bring the business to it’s knees.
A benchmark study of its purchase to pay processes reveals that its operational costs are at least twice and probably 4 times higher than they should be so a project to automate these process, starting with e-invoicing, is a no brainer. There’s a potential annual saving of over $250,000. What approach should they take?
e-invoicing implementation – Approach 1
There’s too much at stake to get this wrong so a thorough study of purchase to pay processes is required. To get it right they need to ensure that the end-to-end processes work. They could take a Lean approach and get a small team of Six Sigma black belts in. That way they’ll get a full set of business requirements matched up with a full set of redesigned business process. They can then be sure that come go-live day – everything will all work. What could possibly go wrong?
e-invoicing implementation – Approach 2
Forget Six Sigma. There’s $250,000 a year at stake. In the two years it will take to build a business case, secure budget, tame the stakeholders and perform your study, half a million dollars has poured down the drain. You know e-invoicing makes sense – just do it.
Most readers will think that approach 2 is a joke. It’s not. There are times when this is exactly what’s required.
Imposing e-invoicing, or any other technology solution, on a complex business without first defining a robust set of business requirements won’t work. However, what it will do is reveal the imperfections of the current business. It’s like putting a white caret into accounts payable.
The Six Sigma project will come up with a set of requirements that meets the real world business needs. You need this set of functionality because we have that set of constraint. But that’s rather like saying “We should have a dark patterned carpet because I wear grubby shoes”.
Take your bloody shoes off!
In the real world example I’ve described, the white carpet approach worked like this: In a limited environment, with a set of practical safeguards put in place to ensure that nothing actually broke, e-invoicing went live – without a detailed set of business requirement being specified. 97% of invoices were rejected. Success? Yes – because with the rejections came a detailed set of reasons why they had been rejected – most of which was due to errors by suppliers – many so subtle that the Six Sigma study would probably never have found them.
Paper processes aren’t paper processes. They’re people processes. People handle the paper and they overlay common sense and experience onto an inefficient way of doing things so that it works. While the common sense and experience is valuable, it’s often not value for money and it acts like the pattern in the carpet that hides the stains. To implement e-invoicing successfully, getting your business processes defined up front is of course necessary but you will go a long way by simply putting a white carpet into accounts payable and getting your invoices to wipe their feet before they can come in.
Pete Loughlin can be found on twitter @peteloughlin