How do companies extend the benefits of SAP ERP deployment to the edges
of their business, and break down information silos? Jonathan Symons, MD of ITESOFT, shows how to short-cut the paper trail in finance departments.
For many companies, deploying SAP R/3 is a little like decorating the living room in a house the improvement in one area can highlight the shortcomings in other areas. The benefits gained from using SAP start to make users more aware of information silos within their organisation, which can slow down the overall efficiency drive.
As a result many SAP users, after the initial deployment, turn their attention to extending automation and data flow further to the edges of their organisation. This means building on the SAP core and taking it into areas that can deliver an immediate and sustained ROI, not just in terms of costs but also in manpower savings through boosted efficiency.
One of the most effective ways to dismantle data silos outside the SAP environment is to look at established functionally-based processes, which often tend to be paper-bound hence maintaining the silo effect. If the data from key documents within these silos can be taken into a digital form that is usable in core ERP and management systems, its possible to make real strides in efficiency.
Paying less to pay
The invoicing and accounts payable sections of a companys finance department give an ideal example. By definition not a value-adding process, this part of business usually turns out to consume huge amounts of resource and value instead. For any organisation processing over 100,000 invoices a year - and some companies process over 10 times this amount research shows the costs will mount to hundreds of thousands of pounds per annum.
However, if documents such as invoices, remittances and faxes can be scanned and digitised at the point of receipt i.e. in the Accounts Payable or finance departments, theres no need for subsequent re-keying, greater productivity and fewer errors.
So how does this happen? How do SAP users go about breaking down these paper-based information silos? Lets look at a typical example of a food manufacturing company which is a SAP R/3 user, which processes invoices and remittance advice documents from a range of suppliers, and examine the benefits it can gain from handling these documents electronically.
Extending SAP to the accounting mix: FoodCo
FoodCo is a food manufacturer which supplies prepared products to the trade. A SAP R/3 user, its accounts department currently handles over 500,000 invoices and remittance advices per year from its customers and suppliers. FoodCos previous remittance handling system was paper-based, and worked as follows.
When a customer sent in their remittance, it was stored with other remittances of a given value range, with an estimated 1000 pages of remittance advice daily for clerks to sort through to find a given remittance. Each was filed in the correct batch of outstanding remittances. If a clerk received an electronic payment from a customer, they had to manually search through all the remittances within the pile for the value of the remittance a lengthy and inefficient process.
Furthermore, there is a legal requirement to keep customer remittances for 6 years, which meant further inefficiency in retrieving archived documents, plus the costs of retaining temporary staff for filing. FoodCo wanted to address these areas and enhance its remittance and document processing with electronic storage, eliminating the need for paper-based remittances, and automating search and retrieval functions.
As a result, FoodCo deployed scanning and document processing within its accounts department to address handling incoming remittances and invoice processing. When a remittance is scanned, the image is processed and data captured from it including customer name, account at customer, value of remittance, customer address, invoice details and payment details.
Linking to SAP
Linking software between SAP and the document processing system is also deployed, which gives a number of operational benefits. To ensure the integrity of the body information captured, the invoice number will be checked and verified against all outstanding invoices for the given customer from the SAP database. If the invoice number does not produce a match, staff are automatically presented with a list of all outstanding invoices against that customer: this saves on manual search time. However, if the invoice number and amount from the remittance advice matches an outstanding purchase order, no manual intervention is necessary.
Customer bank account and sort code details are resolved automatically by a look-up into FoodCos SAP database also saving time per document processed. Once validated, the indexed payment information is automatically uploaded into the SAP system. A TIFF image of the document is retained for archiving, and made available via Archive Link from the SAP environment giving a complete electronic record for each item.
The same applies for invoice processing. Data input is reduced, accuracy improved and processing time shortened by capturing the header, footer and body detail from supplier invoices received. Captured data is delivered to SAP, which improves efficiency and enables staff to focus on analysis rather than time-consuming paperwork. Linking the capture process with workflow for cost allocation and approval provides significant additional savings in time and cost.
The hypothetical example of FoodCo is mirrored in the real world. SAP users deploying automated invoice processing solutions from ITESOFT have found a positive return on investment in less than a year by breaking down the paper-bound data silos in their accounts departments, digitising inbound paper invoices and remittance advices, automatically extracting critical data, comparing invoices with supplier, order or receipt information with the SAP database and automatically uploading the data.
A key example is PSA Peugeot Citroen's group finance, audit and performance management department. According to Christian Cardot, director of finance and management systems, the companys main objective was to streamline supplier invoices. ITESOFTs software makes it possible for all incoming invoices to be fed into the business workflow within two days of receipt, he said. Cardot reports that administration costs, linked to invoice processing, had been halved due to major gains in productivity, with matching rates for orders, delivery slips and invoice increased because of improved data quality. Furthermore, the rate of legal action with suppliers has also declined 20%. The accounting staff can once again concentrate on data analysis as time-consuming tasks have been eliminated, the company found.
The bottom line, then, is clear. Extending SAPs reach into the finance department can give strong functional and business benefits, and unlock very real potential for future enhancements.