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Customer Bill Pay

The (A/R – A/P) Business Process

The business process in this document is a combination of activities undertaken daily by two disparate departments within an organization — known as Accounts Receivable (A/R) and Accounts Payable (A/P).

The A/R business process refers to the steps necessary to create and deliver an invoice — and then making entries once the payment is received. The A/P process includes the requisite steps for receiving, reviewing, disputing and paying an invoice. The combined business process often involves a multitude of departments, resources and recurring steps within each organization. Depending on the size of the organization and resources deployed — the definition of and adherence to procedures can range from low to exact. One thing is for certain — the process time between the invoice & payment cycles are often lengthy, time-consuming, resource intensive and lack control, inaccurate financial reports are often the result of this process.

Results:

    •    Average DPO/DSO: 42 days
    •    Over 50% invoices are past due before they arrive at AP
    •    10% - 20% of invoices involve an exception process
    •    Exceptions can cost organizations $20-$50 to settle a single dispute
    •    2% net 10 days terms are impossible to obtain for many payers
    •    Cost to process/pay an invoice estimated over $10.00
    •    Time to match & research documents, lost invoices, reprints in excess of days

Challenges

Under traditional manual, paper-based invoicing — this business process is cumbersome lengthy and extremely inefficient. The interaction between and within the two organizations possesses too many manual steps and handoffs and is therefore primed for delays and inconsistencies. Disputed invoices are often set aside, and researching is highly labor intensive. The audit trail into transactions becomes difficult to track and a significant amount of time and money is spent on discovering the trail. Today, with the pressure of accountability, executive management needs to improve financial systems to provide timely accurate financial information for strategic financial reporting.

EDI-the Historical choice

Taking the above-defined business process from a manual, paper based system to a more streamlined, effective and timesaving construct was first accomplished some thirty-plus years ago. It was a process whereby invoices were transformed into electronic files and then delivered over a dedicated communication channel. This process — known as Electronic Data Interchange (EDI) — was designed to improve the invoicing process by minimizing the delays on payment and lack of access to process information. EDI was generally conducted between two very large organizations and was accomplished using a dedicated “point-to-point” network configuration. Although EDI was effective in solving some of the problems outlined above — it was not a solution that could be widely deployed and utilized. The EDI framework — from messaging format to networking components — is complex, expensive and resource-intensive to deploy and maintain therefore limiting its use to large organizations. This meant that the solution was deployed by large organizations possessing the significant resources necessary for the requirements of the solution.

Web Invoice Presentment & Payment

The advantages of taking the joint A/R and A/P business process to an electronic construct are greater and needed more than ever today. Excessive DSO’s, lack of insight into key business processes and inability to provide excellent customer support are issues that must be addressed and solved for all organizations. Web Invoice Presentation and Payment such as OBRIEN’s Customer Bill Pay have taken the EDI construct and improved upon it — making it far more flexible, cost effective and accessible thereby increasing its overall value measure for invoicing (“sell-side businesses”) organizations choosing to deploy the solution. This technology is developed and deployed on a Web-based infrastructure. It uses the Internet as its presentation, interaction and messaging channel. By relying on Web-based programming mechanics — it has eliminated the complexity and rigidity inherent in the old EDI structure. This technology today is robust, scalable and customizable — ensuring that deploying organizations can provide a highly functioning application to work with trading partners while achieving a measurable return on Investment (ROI) and improving process efficiency. This technology can compliment EDI initiatives or be an alternative to an EDI deployment.

How it Works

Web Invoicing simply takes the bulk of the A/R and A/P processes to the Web. The architecture eliminates the majority of the paper and inefficiency involved in the alternative. By presenting invoices electronically via the Internet and providing insight and A/P process support through a standard browser interface — the limitations and frustrations of the manual process are addressed.

All interaction with the invoice, reporting on business processes and management related functions are handled within the browser. Simplicity and easy access is the key feature — ensuring broad adoption and utilization among the receiving parties. Access is controlled and secure (matching the current internal procedures and controls) while providing more insight into the overall action set. Once invoices are presented, the ensuing actions, monitoring, reporting and payments are all handled within the system. This brings all of the new data into a single repository providing convenient access to support your ongoing business intelligence gathering and reporting. This system can be easily deployed as either an AR (biller) centric model or AP (buyer) centric model, whereas one of these two parties is the project sponsor of one of the models and will reap the majority of the system benefits of their deployment on their side. Customer Bill Pay can interface with accounting and ERP systems as well as reporting application and other third party systems to help maximize value.

The Benefits

One unique aspect of this solution is the application provides significant benefits on both sides of the business process.

Invoicing Party (AR)

  • Invoices are presented electronically
  • No mail float delays, ensures timely delivery and receipt
  • Eliminates print, reprints, and print mail costs
  • Improved customer service
  • Ability to respond quickly to invoice disputes through online notification
  • Improves cash flow forecasting
  • Reduce days of sales outstanding
  • By helping your customer accelerate the invoice processing cycle
  • Visibility into invoice status- Ability to track the status of the invoice throughout the process

Receiving Entity (AP)

  • Reduces the time it takes to process an invoice
  • Eliminate data entry and data entry errors
  • Invoices can be matched and approved online
  • Dispute can be settled quickly and efficiently online
  • Research time cut down significantly
  • Shorter processing cycle means early payment discounts can be taken
  • Ability to negotiate better trade terms
  • Credit risk is protected
  • Late payment fees eliminated
  • Improve audit & controls

Summary

The business process involving two separate organizations is being targeted for improvement by new, Web-based electronic Invoice Presentation applications. This application has targeted the Accounts Receivable (A/R) and Accounts Payable (A/P) business processes that are tightly related, but occur between two disparate organizations. Since the functionality of this application is designed to support and improve upon these two separate but linked processes — it is generating both Biller and Payer benefits. The combined business process — when handled in the traditional, manual and paper-based construct — is overly cumbersome, inefficient and time consuming. The A/R (a.k.a. ”sell-side”/Biller) organization is incurring unnecessary print and mail costs and is ultimately in the dark as to what is happening with their submitted invoices and more negatively, as to when they will receive payment. The A/P (a.k.a. ”buy-side”/Payer) organization is losing control of received invoices as they are routed throughout their organization for review, dispute and/or approval. The combined inefficiency means that the A/R organization is experiencing an excessive Days Sales Outstanding (DSO) measure while the A/P organization is incurring late fees, missing discount opportunities and ultimately risking its credit rating. In using a Web-based architecture and deployment construct, web invoicing is providing a convenient, easy-to-use solution for moving these processes to the Web. Access to information, invoices and management of the underlying procedures are provided via a standard browser interface. This interface ensures ease of access and utilization by all parties — which drives the return on investment and brings the cost savings to the two organizations. Generally it makes sense that the A/R organization takes the responsibility for licensing and deploying the solution. This ensures that the application will be used, benefits will be realized and the overall trading relationship is strengthened.

Value Proposition

Sending Entity will…

  • Streamline the Invoicing/Accounts Receivable Process
  • Strengthen the Relationship with Key Business Customers
  • Gain Access to a New Level of Business Intelligence

Receiving Entity will…

  • Gain improvements in the Payment/Accounts Payable Process
  • Avoid late fees, pursue discounts, protect credit rating

OBRIEN

OBRIEN is a business solution provider of web based ecommerce solutions for accounts receivable and accounts payable models.

For more information or a demonstration of Customer Bill Pay, contact Mike Mulcahy (630-483-6404 or mike_m@obinc.com), vice president of business development, OBRIEN/SolvEdge.