In the digital age, organizations as a whole and procurement departments in particular swim in data. It is everywhere, spread across an alphabet soup of internal and external systems – some connected, some not; some refined, some not; some structured, some not. It wasn’t always this way. Twenty-five years ago, the procurement function was manual, paper-based, and transaction-oriented. “Data” was but a character on Star Trek: The Next Generation. All of that has changed in the past 15 years, following the dot.com bubble and the wave of digitization, connectivity, and automation that has swept over the world. Now, “Big Data” permeates and drives the digital world, and it will only get more intense from here.
There is a Big Data “crisis” sweeping organizations and procurement teams today. But with the right people, processes, technologies, and ultimately the right attitude, this “crisis” can be an opportunity for Chief Procurement Officers (CPOs) and their teams to transform operations and deliver more value to the enterprise. Technologies exist today that allow procurement to not only manage Big Data up and down the source-to-settle value chain, but also leverage it for greater value.
This series explores further each of the eight sub processes of the source-to-settle process to illustrate just how Big Data can be managed and leveraged to make procurement’s life easier and extract the most value out of the data residing inside and outside of the enterprise. Next up, eInvoicing.
What is eInvoicing?
Before we get into that, let’s back up a bit.
Ardent Partners uses the term “ePayables” as an umbrella term to describe any type of technology that automates some or all of the accounts payable (AP) process. In the Ardent Partners ePayables framework, there are three basic steps of the AP process (from the buyer’s perspective): receive, process, and pay. With ePayables (also called AP automation), there are solutions that automate the first part of the process – the paper invoice or the electronic information that is sent from the supplier to the buyer, as well as the second and third parts of the process, the payment side, which executes the transfer of funds from the buyer to the supplier.
Electronic invoicing (“eInvoicing”) is a wholly electronic method of sending and receiving invoices, as opposed to the traditional method of sending and receiving invoices through paper, mail, and as emailed attachments. Suppliers create an invoice in an electronic format that is readable by other systems and that is directly received, rather than having the AP department manually enter the information into their system. eInvoicing solutions result in faster invoice transmission and more efficient and accurate data capture as opposed to the old and slow method that is susceptible to human error.
When eInvoices come in, they are automatically and directly received by the company. The information is received electronically and this information is then matched against the order or some type of document (e.g., a contract or receiving slip) to ensure that what was invoiced is what was ordered and that the price is the same so that the company can realize the savings they identified by purchasing the widget from the supplier.
How Do eInvoicing Tools Manage and Leverage Big Data?
An eInvoicing solution can help give procurement teams greater detail into their spend by offering a greater level of detail compared to to the information captured from paper invoices. It will give them itemized line-item detail as opposed to the random information captured from manual, paper invoices (which may possibly only show a lump-sum payment is due but nothing itemized). It is much harder with paper invoices to deduce what was purchased and whether the payment is correct, which can complicate external and internal compliance efforts.
With eInvoicing systems managing Big Data, the opportunity for AP teams is gaining visibility into the reconciliation part of the AP process and the ongoing status of the process. Here, AP managers can analyze both ends of their spend – the initial order and the corresponding payment, and whether the two match. After all, a buyer might order goods and services that may never come in – they may cancel the order, it may be on back order, or it may never get fulfilled. When AP makes a payment is truly “where the rubber hits the road” as it relates to spend and to savings. And, with eInvoicing solutions, AP teams have a better way to reconcile and approve the numbers on the invoice and ensure that everything is copacetic.
eInvoicing solutions also make sourcing and procurement teams that much smarter because they enable better visibility into line-item spend which can then help them develop new strategies or modify current buying behaviors. It can thus improve their compliance, sourcing, and spend management practices. It can also drive more efficient buying behaviors across the enterprise – for example, with order management. Business units may be purchasing multiple orders of the same item and having them shipped to the enterprise one at a time, instead of buying them in bulk and having them shipped together. With eInvoicing solutions, procurement and AP teams can identify “downstream” efficiencies to gain and communicate them “upstream” to sourcing and purchasing teams that can then coordinate and group buys into one order, shipped together. It can also improve supplier management, since sourcing and procurement teams can also determine whether their suppliers are overcharging them, why, and how they can address these behaviors.
For AP and procurement teams, the Big Data opportunity boils down to gaining greater visibility into the line-item detail of enterprise purchasing, which allows them to transform what has been a fairly unremarkable business function into a hub for innovation and process efficiency. From there, they can help stakeholders upstream and across the enterprise to modify behaviors, drive greater compliance, and enhance spend and order management behaviors. They can also identify further savings opportunities, or where they can realize greater value within their suppliers. Finally, eInvoicing helps AP managers and staff better understand workflow and invoice and payment status. In short, eInvoicing can help to transform AP from a tactical business function to a strategic value driver.