Schneider Electric Powers Up Invoice Processing

By Pam Carper, Manager of Disbursements – Schneider Electric

For nearly 175 years, Schneider Electric has taken pride in its long and rich legacy of innovation and leadership. And, in the last few years, we’ve extended that innovation to our payables process.

In 2008, we began looking into process improvement goals for our Accounts Payable (AP) department that would allow us to get out from under the burden of processing hundreds of thousands of paper invoices using two legacy accounting systems. Although we had begun the process of implementing SAP for our accounting systems, we knew that would take several years and we really needed to make improvements to our AP department right away.

In the beginning, we were processing 650,000 invoices at three different AP locations. The paper-based invoices accounted for 90 percent of all invoices we received, so improving the invoice-to-pay process became the priority. Handling such a large volume of paper naturally led to errors. To compound those challenges, each North American AP center utilized up to two different legacy accounting systems and multiple vendor master files.

Setting Our Strategy

In order to achieve the goals of streamlining the payment process, we looked at three primary strategies: outsourcing, OCR and EDI. However, when each option was researched more closely, we saw that each method had its limitations that prevented us from achieving all our goals of:

• Streamlining the payment process
• Reducing paper handing and associated costs
• Increasing internal controls
• Reducing processing and payment errors
• Expanding a shared services operation without adding staff
• Easily moving forward with the new SAP environment

This process of elimination led us to look into e-Invoicing, and we quickly determined that it would provide the best strategy for improving the invoice-to-pay process.

e-Invoicing: Technology and Supplier-Enablement Services

Successful e-Invoicing initiatives require two distinct components: 1) effective technology and 2) supplier enablement services. When evaluating various solution providers, we carefully considered both the feature-function capabilities and the fully loaded costs for each option. In the end, we selected OB10 because it allowed Schneider Electric to eliminate paper and take advantage of additional key benefits, such as:

• No new hardware or software needed for us or for our suppliers.
• Regardless of their size or technical sophistication, all of our suppliers could participate because of the multiple e-Invoicing submission methods OB10 provides.
• OB10 manages our supplier enrollment completely, no matter where the supplier is located.
• OB10 e-Invoicing is tax compliant in the EU, which enables other Schneider Electric operations to utilize OB10.
• An image for each invoice is received, which allows for expedited approval and resolution of issues if there are exceptions.
• When we upgrade our accounting systems to SAP, there will be no disruption of service to us or to our suppliers.

Within the first six months of utilizing the OB10 Network, we had realized $200,000 in annual operational savings and could project $500,000 in annual operational savings when OB10 was fully deployed. We’ve not only experienced fewer errors, but we’ve also had a faster cycle time and a higher percentage of invoices processed straight through without requiring any manual intervention.

OB10 empowered us to operationalize e-Invoicing so there’s no risk of regressing back to paper invoices. After quantifying these results in our U.S. operations, Schneider Electric is now implementing OB10 e-Invoicing in other markets, so that they can realize similar results.

Morning Coffee with Donna Weaver

In this segment of Morning Coffee I’d like to address a topic that seems to be on the hearts and minds of many people from a number of organizations and industries - how to determine whether electronic invoicing makes sense for their organization from an ROI perspective.

In recent months, I’ve had many discussions with people who are interested in e-Invoicing but may not know how to effectively arrive at an ROI. But, before we get to the ROI component, it’s important that we clearly identify what an e-Invoice is not. An e-Invoice is not an invoice attached to an e-mail, an invoice that is faxed or an invoice that is scanned in using the latest OCR solution. With an e-mail, the recipient still must receive it, print it out at their convenience, and then do the manual data entry. A fax is still a piece of paper that the recipient receives. OCR, while full of technology, is never 100 percent accurate and therefore requires manual intervention along the way to correct errors. A real e-Invoice is identified as invoice data that is provided in a purely electronic form by a supplier through a third-party network or portal and delivered directly into an organization’s ERP system with no manual intervention on the AP side. This is actually the nirvana of invoicing – no paper.

Now that we’ve clearly defined what e-invoicing is, here’s how you can calculate ROI:

• Take the number of full time employees (FTEs) required to receive, open, scan, sort and enter invoice data into your ERP/financial systems. Then, multiply that number by the annual cost for each FTE. This is your total FTE cost.
• Next, take your total FTE cost and divide it by your annual invoice receipt volume. This will provide you the most conservative cost per invoice possible.
• Gather pricing from the vendor(s) you have in mind and compare this number to the total FTE cost. Keep in mind, you have to know the invoice volume to expect from your suppliers so your vendor(s) can accurately estimate. You must also consider the cost of enrolling suppliers into a network that enables invoice submission; does the vendor offer a proactive and comprehensive enrollment strategy that is done on your behalf or are you left to enroll your hundreds or thousands of suppliers on your own? If you must do it on your own, you must estimate and add in the total cost of doing that into your ROI.

If you would like to arrive at an ROI in a way that is a bit more automated, just let me know and I’ll show you how to do that.

Yes, I would like to calculate my company’s ROI automatically

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