Adding ECM to Accounts Payable Processes: An Introduction

By Richard Medina posted 05-26-2013 19:56


This post provides a crisp overview of ECM for AP processes and offers some advice about your AP roadmap.

I often use Accounts Payable (AP) processes as a measuring stick to see how ECM will fit an organization. It’s true that AP processes can be quite complex, embedded in a full “Procurement-to-Pay” or “Purchase-to-Pay” lifecycle, but often they are simpler. Folks have been trying to digitize and automate their AP processes since imaging first began, so it’s well-trodden ground with relatively low risk, and often the best place to start with ECM before tackling any line of business processes.

When we walk into a company and see that they have successfully digitized and automated AP, with solid ERP system integration, in less than 6 months, then we know that we and they can be aggressive with their ECM roadmap. When we see a company that’s failed on its 3rd attempt over 6 years to deploy a solution that AP staff can use just to see images of invoices, we know that they need a lot of help first laying down the foundation for the ECM program.

Overview of the AP Process

The business case for trying to improve AP processes with digitization and workflow is persuasive because the inefficiencies and other problems are significant and measurable. Talk to an AP team and they will usually cite the four following problems:

  1. Inefficient use of resources: too much time, labor, and other resources
  2. Processing cycle takes too long and should be streamlined
  3. Not enough process control
  4. Not enough process visibility


The appropriate ECM tools used effectively in conjunction with an ERP system can provide the following benefits:

  1. Reduced paper-handling and reduced labor
  2. Reduced misplaced or lost invoices
  3. Reduced storage costs
  4. Increased processing speed
  5. Decreased errors (higher accuracy)
  6. Fast, reliable, easy access to invoices, using the familiar ERP user interface
  7. On-time payments; more early payment discounts
  8. Auditable business processes with greater visibility, improving efficiency and facilitating regulatory compliance

Some of these benefits, particularly benefits 1 – 6, can be derived almost immediately through invoice capture and digitization. Others, like 7 and 8, are more complex and require more significant changes in processes and software implementation.


Overview of the Typical Target State AP Process

The typical target state of an AP process that’s been improved by ECM looks something like the following. Note that this is a target future state, and should be approached in phases, each of which can provide significant benefits. It’s also highly simplified.

  1. First, paper invoices and related documents are captured. Electronic invoices are also ingested. Let’s call the relevant capability Capture.
  2. Then documents are sorted into relevant categories, relevant information is extracted from them, and the documents are indexed with metadata. This is done manually or automatically, using IDR (intelligent document recognition) and OCR. Data from ERP systems is often used to identify and validate the documents and data. The relevant capabilities are OCR, Indexing, and Validation.
  3. The metadata and digital documents are released into the managed ECM repository. The relevant capabilities are Repository Services.
  4. The software also transfers a subset of the data extracted from the documents into the ERP system. The relevant capability is ERP Integration.
  5. Typically, if there is a complete match between the invoice and the purchase order in the ERP system, it is automatically posted for payment. If not, the invoice is routed in workflow to the correct AP clerk. The relevant capabilities are ERP Integration and Workflow.
  6. AP clerks can use the familiar ERP UI for accessing documents. Depending on the ECM solution and how it is implemented, AP clerks and non-accounting participants may use other UIs as well for accessing documents and participating in workflows. The primary relevant capabilities are User Interface and Search. But the documents are also managed by the ECM system (Repository Services), which is integrated with the ERP system (ERP Integration).
  7. The workflow is provided by the ERP system, by the ECM tool, or both. Workflows are usually designed for exception handling, matching, and approval processes. The relevant capability is Workflow.
  8. The ECM system provides records management. The relevant capability is Records Management.
  9. The ECM system provides reporting, audit, and analysis. The relevant capability is Reporting.


How Should you Roll it Out?

For most organizations, we recommend that you implement ECM in AP incrementally rather than in a single giant step. As I said above, phasing will introduce significant benefits at each stage, while managing risk of failure and change management. Your phasing should follow the “Rollout Principle”, a simple best practice for ECM roadmap design: Roll out the simpler, lower risk, more independent, more foundational components before more complex, higher risk, dependent components.

Depending on your particular situation, the Rollout Principle gives you a few options regarding which capabilities you should start first. But it almost always implies that you should not start with sophisticated OCR and intelligent document recognition, complex workflows, and complex reporting. While these capabilities may become important later, they should be weighted less than capabilities critical for your early phase or phases.

Regarding the first capabilities to roll out, it will depend on your situation.

  • You may want to focus on digitizaton, so capture with some easy OCR, along with relatively simple integration with the ERP system would be a good fit. You should start looking at Capture-centric AP solutions. Many of the leading capture and OCR vendors (and product lines owned by larger ECM suite vendors) offer AP solutions.
  • Alternatively you may want to incorporate your AP documents and workflow into your ECM system, including an ECM repository and workflow that can be used for other ECM initiatives on your roadmap. In this case you should start looking at ECM-centric AP solutions. Many of the leading ECM vendors offer AP solutions.

In both cases you should plan on providing fast, reliable, easy access to AP staff from within the ERP user interface. This means that even in the early phases you should be looking for a solution that’s been certified by your ERP system vendor.


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