No company wants its AP (accounts payable) processes to run like a magazine subscription scam. You know the ploy. Landing in your mailbox one day is a bogus invoice for $147 worth of subscriptions to a half dozen magazines you don't want and certainly don't recall ordering. While Siberian Living may have its loyal readers, you have no intention of becoming one of them.
At Helmerich & Payne, Inc. (H&P) (Tulsa, OK), an oil and gas exploration and contract drilling firm, poorly marked invoices were regularly landing on approvers' desks. That was because staff in the AP department at corporate headquarters often received supplier invoices that didn't clearly indicate who from H&P had placed the original order. So, to get approval for payment from rig managers on the rigs or from managers in division offices, AP staff had to guess which rig, office, or person should review the invoice. For example, rigs have two rig managers, who rotate shifts. Even if the invoice was routed to the rig that had, in fact, ordered and received the supplies, it was difficult to make sure that paperwork made it to the appropriate approver. With more than 150 approvers across the company, H&P faced an uncomfortable level of guesswork.
At the time, H&P relied on cumbersome paper- and mail-based processes to route the more than 6,000 invoices coming in each month. As a result, payment was often delayed due to invoices being misdirected, sent back, lost, or duplicated for re-mailing. "Guys on the rigs would tell us, 'I didn't get that invoice.' After sending out invoices a second or third time, we would end up missing vendors' discounts for early payment," says Eric Ludeman, senior business analyst for H&P.
Furthermore, H&P was wasting its employees' time. Rig managers were spending inordinate amounts of time keying order information into spreadsheets and sending them to AP in preparation for matching orders to invoices during the subsequent payment approval process. "We had lots of paper floating around and realized we had to figure out a better way to route it," Ludeman says. Clearly, it was time for the oil drilling giant to migrate to an electronic workflow engine.
Documents On The Move
H&P brought in an integrated ECM (enterprise content management) suite from Gauss (Irvine, CA), which includes tools for document imaging and workflow management. The product H&P initially implemented is an earlier version of Gauss' flagship ECM product, VIP Enterprise 8, to which H&P plans to upgrade in the near future. Now, when an invoice gets mailed in from a supplier, the AP staff scans it into the system according to vendor number and AP clerk number. The AP clerk responsible for that account brings up the imaged document and keys information from the invoice into entry fields in an accounting software program running on an AS/400 server. Once the accounting software identifies the invoice as a valid, non-duplicate invoice, it is indexed. Entry fields are then screen scraped and copied to the Gauss suite. The scanned invoice and related entry fields can then be routed along the approval chain according to business rules set up in Gauss' electronic workflow module. As each person finishes reviewing the document, the workflow tools automatically push it to the next person in the predefined sequence.
Out on a rig, for example, rig managers start up the software and check their workflow queues. When they open a file, they have access to the scanned invoice, as well as information about how AP has coded it. If any invoices have been inaccurately routed, rig managers immediately move them to a particular workflow folder that AP regularly checks for misrouted documents. To determine whether or not an accurately routed invoice should be approved, rig managers pull hard copy delivery tickets and match the items that were actually delivered with the items listed on the invoice. Rig managers can also annotate the scanned invoice before sending it on. For example, they can note "third party billing" to indicate that one of H&P's customers ordered supplies or services for a contracted rig and agreed to reimburse H&P for it. In that case, the invoice would be routed to the workflow queue of an AP staff member responsible for contacting the customer for reimbursement.
Tap Workflow Processes For Savings
While the new workflow system hasn't completely eliminated misrouted invoices, it has certainly made rerouting easier and overall processing more efficient and cost-effective. H&P's AP department now sends out significantly fewer duplicate invoices. The department has eliminated costly microfiche and microfilm record keeping and has reduced labor costs associated with filing and retrieving paper invoices. "We estimate that we have reduced costs by more than $81,000 per year by implementing the workflow system," Ludeman says. H&P anticipates payback on the investment in four to five years.
In addition to cost savings, the system has brought greater flexibility in terms of the AP staff's ability to reduce approval slowdowns. Staff can now quickly determine which queue an invoice is in and how long it has been there. Authorized approvers can be easily added to or deleted from the system, and the software automatically updates the routing rules to reflect those changes. In the past, AP had to make judgment calls in terms of whether someone who initialed a paper invoice truly had the authority to approve it. Now, staff can check the level of authority assigned to each person who has access to the system. Moreover, using the coded index fields, AP can track the audit trail for any payment, determining when the invoice was received, when it was scanned, who approved it, and so on.
H&P implemented the new system just in time. With an increase in day rates and with rig utilization at a higher rate, H&P launched a multimillion dollar capital expenditure program. In the last two years, it has built 13 new rigs and plans to build 20 to 25 more. Already the drilling division is processing 2,000 to 3,000 more invoices per month than it did before. With the Gauss software, H&P is able to handle the increase in invoice volume.