Receipt to Pay

Group Leader: Jim Pfeiffer

Objectives:

The Receipt-to-Pay Discussion Group, including this page and the links referenced from this page, is intended to serve ISM members and others who are: • Interested in learning more about online procurement and payment • In the process of selecting an eProcurement or ePayment solution

Practical Considerations:

Many organizations expend substantial resources processing paper invoices. Moreover, the manual, paper-based processes limit their ability to take advantage of early payment discounts. The application of technology to receipt-to-payment processes can substantially reduce process cost and reduce process cycle time.

The front end of the process requires that all of the elements of the match required for payment are received and processed electronically – either in a single system or in multiple integrated systems. Depending on the organization’s matching rules, this can include delivery of an electronic invoice, online receiving of goods or services and creation of an electronic purchase order.
Because electronic enablement of each of these elements can be costly and because bringing them together often requires integration, an analysis of invoice volume and associated effort as well as the potential for additional early payment discounts should be undertaken before any technology decisions are considered.

Systems exist to match each of the elements and, if the matching rules are satisfied, then the transaction is often forwarded to an Accounts Payable system for payment. If the elements do not match these systems can reject the invoice and notify both the buyer and supplier to resolve the issue to expedite the process.

Electronic payment systems can be integrated to Accounts Payable systems to eliminate the time and expense associated with paper check processing and delivery.

Key technology decisions include:

• Should we build our own connections to suppliers or should we use some sort of value-added network? (e.g. EDI VAN or Web Services Network)
• Where (in which system) should receiving occur?
• Where (in which system) should matching occur?
• Do we want to purchase and customize software or implement a hosted solution (software as a service)?

Features and functionality available in these solutions vary greatly from one provider to another – and not all providers enable the complete process. Regardless of the technology chosen, the overall solution should include:

• Online receiving
• Electronic invoice presentment
• Matching
• Pre-screen for match to divert issues to buyers and suppliers and limit the need for A/P intervention
• Dispute resolution
• Electronic Invoice Payment
• Payment status notification for the buyer and supplier

Online Receipt-to-Payment Processing:

The utilization of technology to enable matching reconciliation and payment. These applications are often used to (a) reduce the cost of invoice processing and (b) enable companies to take greater advantage of early payment discounts by reducing process cycle time.

LEARN MORE:  (under construction)

Solution Providers
• Ariba
• Xign
• Harbor Payments
• Perfect Commerce
• Trade Card
 

How does online Receipt-to-Pay Work:

Essentially online receipt-to-payment mirrors the offline process. Technology is leveraged to bring together each of the elements required to pay an invoice (in the case of the 3-way match, the Purchase Order, Receipt and Invoice). Technology is also used to identify and highlight issues for resolution and facilitate timely resolution. Finally, technology can also be used to make payment once the appropriate approvals have been made

Perspective:

Considering enablement of the receipt-to-payment process is reminiscent of the story about the blind men describing an elephant. Each person touching a different part of the elephant perceives a much different creature. Similarly, different solution providers come at this problem from different angles and cover different parts of the process.

• eProcurement systems certainly have the purchase order leg of the match and may also have the receiving function as well as companion modules for electronic invoice presentment and matching / reconciliation

• Electronic Invoice Presentment and Payment Providers – these can be either software (often chosen by billers) or service providers (often chosen by buyers)

• ERP systems have the Purchase Order, matching / reconciliation and accounts payable functionality

• Payment “Factoring” Providers

• Banks – some banks offer EIPP applications for suppliers to manage their billing and collections over the web.

Some excellent references can be found via the links in the table below. Please note that some of these articles or white papers are only available for a fee while others are vendor-sponsored and as such have an obvious bias.

Business Models:

The business model of the solution provider(s) is another key consideration.

• Value added supplier networks – Similar to EDI networks, there are a number of supplier networks emerging that facilitate internet commerce transactions. A buying organization would use these networks to connect to their suppliers. The connection may include electronic transmittal of a purchase order, purchase order confirmation, advanced shipping notice, change orders and ultimately the invoice.

These networks provide two very real benefits: they eliminate the need to build and maintain the individual connections with suppliers (which substantially reduces implementation cost) and, because they already have many suppliers in the network, this can be a far faster implementation.

The challenge with these networks is to pick the right one. There were many competing “marketplaces” in the dot-com era – many of which collapsed either before they had critical mass or after they figured out that supplier integration was much more difficult than originally advertised by the underlying software providers.

A few players emerged from the rubble and have successfully integrated former marketplaces into effective networks. If you are considering one of these networks you should look very hard at the effort required to enable transactions and the company’s financial viability

• Software – There are numerous software options. You can purchase and install software or utilize “software as a service” via an application service provider. In either case, you should be prepared to staff up for the effort to build and maintain supplier connectivity.

• “Factoring” – There are also providers that not only facilitate the electronic transaction but who also will provide a sort of payables “factoring” service. Essentially they will pay the supplier in exchange for a share of the early payment discounts available.