Nobody likes to pay bills. Even the seemingly simple task of managing one's personal finances can be a grueling and time-consuming ritual that involves examining individual invoices, balancing bankbooks, and writing out and mailing checks. This pain is compounded in the business world. Businesses not only have to manage a larger number of invoices, but accounts payable (AP) employees spend a great deal of time associating each invoice with the appropriate profit and loss centers and keying vital invoice information into the company's accounting system. This time equals money. In fact, according to a survey conducted by the IAPP (International Accounts Payable Professionals), the average cost to manually process an invoice is more than $8, and approximately 70% of this cost is wrapped up in document handling and data entry processes. For companies faced with processing thousands of invoices a month, these costs can place a significant drain on a business. Moreover, the inefficiencies inherent in manual invoice processing can lead to data entry errors or late payments that can negatively affect a company's credit standing or customer satisfaction levels. Oakwood Worldwide realized the negative impact manual invoice processing was having on its business and implemented an intelligent data capture solution to automate steps in the process and maximize efficiencies.
Manual Invoice Processing Exhausts Time, Labor
With more than $600 million in annual revenue, Oakwood Worldwide is the leading temporary corporate housing and serviced apartment provider in the world. At any time, Oakwood can lease more than 25,000 residences worldwide. For each domestic unit, Oakwood must manage and process multiple utility invoices including gas, water, electricity, Internet, cable, and telephone. Furthermore, each bill contains many different lines of data that refer to various charges over a date range. For example, a cable provider, such as Comcast, may have cable, telephone, and Internet charges for various housing units all listed as different line items on the same invoice. Oakwood AP processors must process each of these lines individually to ensure each service is associated with the appropriate client. On average, Oakwood AP employees process approximately 75,000 lines of data each month.
Originally, Oakwood processed all of these invoices manually. Invoices would come into the mailroom, and processors would key important invoice information into Oakwood's OTIS (online tenant information system). Processors would verify that all of the invoice details matched the specs of each account, would enter the latest transaction into the system, and ultimately cut and mail the checks for payment to each vendor.
"With manual invoice processing, we had 18 to 20 employees who were dedicated strictly to performing all of the OTIS lookups and data entry procedures," says Brad Niemiec, manager of national accounting processes for Oakwood Worldwide. "On average, each employee could process approximately 125 lines of invoice data on a daily basis."
This manual process sufficed for a number of years. However, in 2005 Oakwood grew by 25%, followed by a 28% growth burst in 2006. While this growth was great, Oakwood's AP department was not allotted the corresponding headcount. It quickly became a challenge for Oakwood's AP department to process all of the bills with the personnel it had. As a result, some invoices weren't being paid on time, and vendors responded by disconnecting service to Oakwood's housing units. At one point, Oakwood's disconnect rate rose to 0.2%.
"In our business, if a client goes into one of our apartments and the electricity isn't on or the phone isn't connected, that's a major customer service defect we have to try to overcome," says Niemiec. "We needed to find a way that would help us pay invoices more quickly and reduce our disconnect rates."
Gain Executive Buy-In With An Invoice Processing Needs Analysis
As president of his local IAPP chapter since 2003, Niemiec was introduced to data capture technologies that could help automate steps in the invoice processing cycle. He decided to pursue an automated invoice processing solution with a data capture vendor, Kofax, and a local Phoenix-based document management solutions provider, Western Office Systems, in mid-2006 (see sidebar this page). Beyond the technical capabilities of the capture software and the knowledge base of the local integrator, two things helped Niemiec gain buy-in for the automation project from senior management — a thorough needs analysis and ROI calculation.
The needs analysis for Oakwood's automated invoice processing solution was prepared by Kofax and Western Office Systems and detailed the components (e.g. software, servers, document scanners), services (e.g. integration, customization, training), and associated costs involved for the entire project. One line item Niemiec ensured was included in the needs analysis was a 'not to exceed' quotation. Implementing an automated invoice processing system often requires the capture software vendor or integrator to create customized templates for invoices of varying layouts. These templates ensure the data capture software can identify the areas on the page to extract information. Depending on how many different vendor invoices you're dealing with, this template-development process can quickly rack up vendor and integrator service charges and inflate the cost of the overall solution. By asking Kofax and Western Office Systems to commit to a service charge ceiling, Niemiec ensured all of Oakwood's vital invoices would be added to the system without having to worry about snowballing service fees.
In conjunction with the needs analysis, Kofax and Western Office Systems also provided Oakwood with a comprehensive ROI calculation. This calculation compared the costs outlined in the needs analysis with the estimated savings the automated invoice processing technology could provide in terms of hard costs (e.g. labor reductions) and soft costs (e.g. service disconnect rate reductions). The ROI calculation projected that Oakwood could expect to nearly double its invoice processing productivity, which would result in a full payback on the solution in 14 months.
Automated Invoice Processing Requires A Phased Deployment
Once Niemiec was granted the funding to proceed with the project, the next step was to determine how to deploy the solution. Given the custom templating necessary for some invoices, it was inconceivable to simply flip a switch and have all invoices compatible with the automation system at once. Niemiec decided the company would add vendor invoices to the automation platform incrementally — starting with vendors that Oakwood received the largest volume from and working back to vendors with the fewest number of invoices.
"A phased deployment allowed us to break the project into manageable chunks," says Niemiec. "Our processors are all assigned to specific vendor accounts. When a certain vendor invoice was added to the system, we would train that processor or group of processors how to use the system. These intimate training environments helped our employees get up to speed quickly and made things easier for the trainers."
Before any new vendor invoice or business rule is added to the automated invoice processing system, it must first pass through Oakwood's test environment. Oakwood invested in a smaller-scale, lower-powered version of its automated invoice processing solution that includes its own servers and PCs. This test environment is separate from the production automation platform and was included as part of Oakwood's needs analysis to ensure any additions or changes made to the system will work as expected before they are implemented.
Eliminate Data Entry, Increase Productivity
With Oakwood's new automated invoice processing platform, invoices are now opened in the mailroom, batched in groups of 30 according to vendor, and scanned on fi-5650C document scanners by Fujitsu Computer Products of America. Kofax VRS (VirtualReScan) software, a key component of Kofax Intelligent Capture & Exchange, is leveraged during the scanning process to optimize the clarity and quality of each image captured. Batches are saved under the name that corresponds to the AP employee responsible for processing invoices for that specific vendor (e.g. all Comcast invoices are saved in the system as Lisa_Batch_1, Lisa_Batch_2, etc.). Kofax Ascent Capture then begins extracting data from each invoice and has those images ready for data validation when each processor views the batch. Processors no longer need to manually key in invoice information. They simply need to tab through verification screens in Kofax Ascent to ensure all the data captured is correct. Account lookups in OTIS are automatically launched based on information extracted from the invoice as a result of customized data release scripts developed by Kofax and Western Office Systems. The only time a processor has to manually key information into the system now is to correct data capture errors, which occur only about 30% of the time. Even in instances where corrections need to be made, it is usually to only one or two characters, which is much less work than having to key in the entire data field.
Oakwood's automated invoice processing system went live in April 2007, and the company saw significant results in as little as six months. "As of October 2007, our AP employees were processing an average of 277 data lines per day with our automated invoice processing system as opposed to 125 lines per day manually," says Niemiec. "Our payment cycle also accelerated, which helped us achieve our lowest service disconnect rate ever — 0.03%."
Oakwood hopes to build on this success moving forward. For example, the company is currently working with Kofax and Western Office Systems to add some new features to the automated invoice processing platform. One feature is a notes box that will allow Oakwood processors to record any special steps or actions they needed to perform on a particular invoice (e.g. if they had to bill back a customer for a pay-per-view movie listed on a cable invoice). Another added feature in the works is automatic e-mail notification capabilities. This feature will allow Oakwood's district managers to be automatically notified if any of their tenants' invoices exceed a specific dollar amount so they can take appropriate action. These features will only add to an already successful deployment that Niemiec says is well on pace to achieve its projected 14-month payback.