Roundtable: Improving the First Time Match in P2P




On the purchase to pay path, there are many barriers which prevent organizations from placing orders that can be invoiced against and matched first time in a touchless manner. This roundtable session asked P2P leaders what they were doing to avoid discrepancies and improve the first time match from the beginning.

Patricipating were:

Peter Wrapson
Head of P2P
EDF Energy

Frans Bouwmeester
Sr Product Marketing Manager
Kofax

Massimiliano De Renzo
Project Manager
Bayer Euroservices

Keith Miller
Process Manager
Ericsson

Percy Kirkman
P2P LEader Western Europe
Procter & Gamble

SSON: Before beginning the session could all participants introduce themselves and what you are hoping to achieve from this roundtable discussion?

Frans Bouwmeester: I have been working for Kofax since 2004 and spent the last two years specifically on P2P including matching and electronic invoicing. The topic I am focusing on now is how to deal with exception handling, how to set up a single system for invoices that come in via various media and make sure that first-time matching works better. My particular focus right now is figuring out how we can do a better job dealing with exceptions and getting higher quality information from invoices. I look forward to finding out how things happen practically on your side and what can be improved there.

Massimiliano Di Renzo: I work for Bayer EuroServices, part of the Bayer BBS Group. I am Project Manager in the Accounts Payable department. We are working on different projects and one of these projects is to increase, of course, the first-time match as well to introducing electronic invoices. This is the first goal, but our work is increasingly on the first-time match and we need to avoid mismatches and analyze why we have these mismatches; so we are working with purchasing, having a lot of meetings and teleconferences with them to increase the first time match.

Keith Miller: I work at Ericsson as Process Manager for call off and invoice-to-payment and I work within the sourcing organization. We have a global shared services centre in Manila and we are 85% down the line with that being fully operational. My main focus for participating in this roundtable is that one of the consequences of Manila is we need to continually improve our purchase order quality and as a consequence the first-time match.

Peter Wrapson: I look after the purchase-to-pay section for EDF Energy in the UK. We are a very widely based, diverse organization in the utilities area and we really struggle with first-time match. What I want to get out of today’s meeting is to understand what practical solutions there are for first-time match. We employ various technological resources to improve, but I am conscious also that there is a need to change the culture and I am quite interested to see how other people tackle this.

Percy Kirkman: I work for Procter & Gamble as Purchase to Pay leader Western Europe. We’ve had a strong focus on improving first time match during the past two years, together with increasing our PO share. Looking to next year, we’re working towards the expansion of e-invoicing and procurement cards as enablers of further vendor service and efficiency gains.

SSON: What are the main barriers for preventing your organizations placing orders which can be invoiced against and matched first-time in a touchless manner?

Peter Wrapson: I think, for me, the biggest obstacle in this area is the associated process. We as a company have lots of reasons to place orders. We have a fairly large supplier base. They place orders in a way that often prevents getting a first-time match and it is understanding how we can get the template or the sort of best first quality into our purchase orders that enable them to come back and be matched. Certainly when you are buying services - and services is a big issue for me, something close to my heart - whatever they put on the invoice very rarely matches what is on the purchase order and I want to know how other people are dealing with this area.

Keith Miller: For me, in a similar way, our biggest problem is not necessarily that purchase orders are placed; it is the diversity of the purchase orders. We have, from one extreme or another, production all the way to services - and services are a growing concern in Ericsson and probably now in a lot of cases the majority. We have a very high purchase order compliance rate but our matching particularly because of the volume of services is extremely poor. I have not necessarily got a perfect magic wand but I can certainly agree with the services aspects: it is a big, big area where it is quite difficult to deal with the internal and vendor change management to achieve a good match.

Frans Bouwmeester: Services, we hear that a lot. The matching is a big problem simply because the companies who provide the services write something completely different on the invoice to what was on the initial service contract. You really need some sort of fuzzy matching, not looking for identical line items but really looking into the context of what was on the original purchase order contract. It is more like keyword matching, not line item matching. There is the technology out there to do that - Kofax has that technology. The implementation of that is very much specific to the type of services being ordered and the invoices that are there, so you need payment cycles for that. Again the technology is there. It uses online learning, meaning the more invoices you get and the more you manually tell the system; "OK this invoice from that vendor matches this contract or these POs", the more information the system gets, the higher matching it should get. The learning capabilities are out there.

Massimiliano Di Renzo: I’m thinking about services and in particular utilities. Utilities are not really easy because we do not know exactly what we are going to be invoiced so it’s not so easy to place orders. In many cases we do not have orders for utilities but in some other cases, yes we do have. From a technical point of view we should have open orders, so when we cannot match on the price and the quantity towards the end of the year we can review what we have paid, so you will have first-time match with invoices on a monthly basis. For example, we can verify what is going on and it maybe possible to ask for a credit note, perhaps. In this case I think we can increase the first-time match. I do not know what your feedback is about this point.

Peter Wrapson: I’m delighted to hear the comments because first of all I realize I am not alone - sometimes you feel very lonely out there thinking "is it just us having this problem?" It’s good to hear you are having similar problems. I think we are already down the road about having what we would call "consolidated open orders" and we have already started to dissect our service area into having open orders with agreed consolidation going on behind it and perhaps uploading the detail under one value to increase our first-time match. We feel it’s probably the only way we can go with services. We found this very valuable when dealing with temporary staff, because temporary staff is an area in utilities where it is bought all over the place from any number of agencies and we have worked this one quite nicely with an uploaded spreadsheet going behind it. From what you are telling me, this is something that could help. I’m rather interested in the fuzzy logic; I think that would need quite a lot of work though to dissect your supplier base to understand exactly what fuzzy logic goes with what set of services.

Keith Miller: I would like to, to some extent, challenge what the definition of first-time match would mean. For me - if I understand the Kofax technology being referred to - it would still leave you very reliant on the timing of goods receipts. For me a match means the invoice ideally is straight through and paid. I would make one other comment with regards to utilities and I refer to utilities which we are using for our own consumption, would and do actively encourage that these are set up more in the form of direct debits or standing orders as opposed to bringing them anywhere near the purchase order process.

Peter Wrapson: Keith, I absolutely agree with you. As a manager in the utilities area, I have great trouble with utility bills normally from my own organization and we do actually use direct debits because that is a very clear way to remove them from the purchase order field.

Massimiliano Di Renzo: Again with utilities, this depends on the country. For example, for some countries it is true that you use direct debit but in some countries they pay by wires. I’m thinking about North America - the USA in particular, where normally they prefer using checks. So in this case, for example, I think it is still a good option. The problem is these are orders without goods receipts, in my point of view. The main problem that they see sometimes is that it may be an acceptance by the purchasing organization. It is understandable because they require verifying every invoice but then - and I understand this point - it is difficult. If I receive an electricity bill, I can’t block the payment because I am not happy with the invoice. I have to pay and then afterwards I get a credit note. These are my concerns regarding this point.

Keith Miller: I can relate to that comment because we are rolling out into 120 countries. We have Iraq and Israel as a couple of the migrations going on at the moment, and direct debit is the best practice that we are driving it towards but we are obviously being left with alternatives. For the utilities, I don’t think there should ever be situations where somebody needs to take any decision at all as to whether the lights should get switched off or not. At the end of the day that can get resolved in the way of a credit claim. These really should be non-event invoices in the utilities area.

Frans Bouwmeester: I am not an expert on services invoices so I am taking some notes on what I have heard. However, I have worked in the past with an end-user in the US who had an issue with getting these service invoices - actually coming in from an energy provider so it was the opposite way around. The energy supplier was sending out invoices via EDI and we helped them streamline the EDI and all the paper invoices into one system. The main benefit was they had one matching process at the end, electronic and for paper-based invoices so they could apply the same business rules for the matching.

Percy Kirkman: We’ve had similar challenges in the services area. For us, most important is matching the business case with the solution. For utilities, we do use 2-way match (no GR), with post event reconciliation of the billings vs. the meter readings. We prefer this solution to direct debit, because it allows us to place responsibility for executing the controls with the requisitioners on site. For business cases like Artwork, where it’s hard to predict in advance the final invoice cost due to rework cycles, we have a "suspend" functionality for invoices which allows the requisitioner 5 days to confirm the invoice after it arrives in the system. From our point of view, since this requires zero payment services intervention we consider it "Right First Time".

SSON: What are the technical obstacles and the tangible reasons that are preventing you from reaching the first time match?

Keith Miller: I think the variety of suppliers - I think it was mentioned earlier from one of the other attendees. We are talking about a large supplier base in a lot of cases, particularly in the area of consultants. Trying to change-manage those suppliers into one way of working in one system is extremely challenging and to have simple and effective ways to connect those suppliers in an EDI-type environment where suppliers are coming and going etc is very tough. Also, areas such as timesheets and movements between two organizations are tough - and the financial climate is not exactly helping with regards to companies wanting to invest in these functionalities. I think there are a number of technical constraints in this area, but it means you have to work very hard to be quite flexible towards the supplier which ultimately means less first-time match.

Peter Wrapson: I think Keith has hit the nail on the head there. It is very difficult; we do have to be very, very flexible in the dealings with the suppliers. One of the technical problems I have and perhaps it is particular to my organization, is that, although there is quite high purchase order compliance, users aren’t particularly good at receipting. First-time match is prevented purely because of the receipting and in the fault of services; your first hit at it is of course seeing the invoice. So I think - was it Keith who asked "what is the definition of a first-time match?" - well, sometimes the first-time match is when the user has a look at the invoice. There will always be prevention from the touchless seamless process, but it is getting to a point where users can easily see and easily identify and move through swiftly.

Keith Miller: One other comment to that. For two years now, we have run now what we call AQI - Accounting Quality Index, which has basically within the financial targets, either bonuses of a number of employees, a large number of employees in the organization monitored GRIR and parked documents as part of a four or five measurements. We are only now, two years later, starting to see that element under control and now we are looking at developing it even further to look at the timing of GR and the quality. It has taken a long time with management attention to get it onto people’s agenda. Now we are looking back into the areas of payment hit rate with regards to the suppliers and bringing the sourcing people into that. [This is] an area now, primarily because they have been focusing on savings so I think there has to be an element of this which is just about telling the business and driving the business to just do the right things at the right time.

Massimiliano Di Renzo: Just a consideration: something that may not be tangible, but a question about the communication between, in some cases, purchasing organizations and the suppliers. In many cases we have mismatches, which are due to price or quantity meaning that there were maybe some problems during the communication between the customer and the supplier. How can we improve this communication between them? Because I have this feeling that in some cases it is just a communication problem, maybe?

Frans Bouwmeester: When you say communication: is that typically the accounts payable department picking up the phone and calling the supplier or do you do this through your workflow that actually the purchaser has to take care of this issue?

Massimiliano Di Renzo: The purchaser should take care of this.

Franz Bouwmeester: So it means that the invoices are waiting for that issue to be resolved but you have to send out reminders and all those things?

Massimiliano Di Renzo: Exactly

Franz Bouwmeester: And is that all done through your workflow already?

Massimiliano Di Renzo: Yes, through the workflow. I think the problem is the origin. This is the end of the process - so at the end of the process we have this mismatch and in many cases we have these differences. The main problem is to find out why we have these differences - because through our workflow we send the invoices to be approved, or to have the PO changed or adjusted. But the problem is with some invoices we have the price per unit and in the PO the price is per package, for example. The communication from the supplier and the purchasing organization could be improved, and between accounting and the purchasing organization. This is important. To the person who was talking about GRIR control and monitoring: how do you perform it? Do you organize a weekly teleconference, or is there an automatic system to analyze the GRIR? How do you manage it?

Keith Miller: That was me. Over the period of two years we are now at a stage where every local company has a red, amber, or green status on their GRIR - and there are 120 of them, bear in mind. We have very clear working instructions on what should be cleared automatically. I think everything over 90 days becomes a judgment or an influence whether they are red, amber or green so we have a reasonable timeline for them to resolve the issue. We’ve shrunk that down originally from 120 days. It has taken and it still does take individual conference calls coordinated by the Shared Service Centers to review the results of what we term AQI every month. It has also forced a lot of the responsibility into the buyers themselves to make sure they solve the issues in a timely fashion. It has taken a long time. Your comment about the relationship between purchasing and finance: when I started my role I worked for finance. I originally came from sourcing and I brought the AP process back into sourcing we now have an end-to-end from contract all the way to payment and we are now working with sourcing managers to educate them in how to implement an agreement so it then becomes, as a consequence, ultimately a first-time match and driving them by having actual payment days and actual hit rate targets within their financial targets each year. It’s a slow but steady progress that we’re making to make sure that those who cause the problems ultimately feel responsible for the results.

Frans Bouwmeester: What I am typically hearing is that when an invoice comes in and it cannot be matched, that workflow is more internally-facing. So it goes to the procurement department and they need to figure it out. Are you escalating from an accounts payable perspective these non-matching invoices back to your suppliers and have them resolve it with your procurement?

Massimiliano Di Renzo: No, normally it’s an internal workflow, so we send the invoices to the purchasing organization but it is not normally sent back to the suppliers. It is normally solved within the purchasing organization.

Peter Wrapson: The same for us. The only difference to that is if it came in without critical information - potentially the order number - where it would automatically get sent back to them. All our workflow is internally generated and will go towards the purchasing organizations or the originator of the requisition.

Keith Miller: The same principle as the last. We have seen and kept in the back of our mind that there are products coming onto the market that put barriers up, i.e. they stop the invoices coming in until there is a match. But as I see it at the moment, in this current climate as well that needs exceptionally strong supplier relationships and a clear buy-in from the sourcing organization to set that kind of structure up. Although I would like to set it up, I can’t see us going that way for a couple of years yet.

Frans Bouwmeester: I want to ask Keith: what do you see as the main restrictions for implementing? You mentioned vendor relationships and you mentioned the timeframe of two years.

Keith Miller: I think one of our biggest problems is because we have migrated over 80 different countries into Manila, our biggest focus of all is going to be stabilizing that so that’s going to be more our prioritization. But secondly, it is really only in our large mature countries such as Sweden and perhaps the UK and a few others - definitely the US - where we have maybe four or five key relationships where maybe we can justify spending the time establishing that flow in the same way that we would look at self-billing or other such functionality such as certain vendors. One thing we are looking at now is obviously EDI. In certain countries like the US we are all the way up to 60-70%, in Australia we are zero. It’s very mixed and dependant on the culture and individuals in the organization. We are trying to bring that up to the same level but only based on our existing functionality because we have quite a lot already. To add to that one at the moment, we don’t necessarily have the budget.

Peter Wrapson: On the same subject, we are really in the same place as Keith. We are looking at electronic invoicing which will obviously reject things that aren’t correct so that will put an onus on our suppliers. Again, we have a budgetary issue in that area to bring that up although we are confident to get between 60-70% if we could bring it in. My issues are that there is also another area which causes concern and that is the retrospective ordering. This is where people order things without order numbers and we get invoices coming in. This possibly is not so prevalent in the more mature organizations, but my organization is a merger of seven different organizations in the last four years and we just acquired British Energy which will provide another one where there isn’t that maturity and where a lot of reactive purchasing is done to solve faults. However, I suspect it will take two years plus for us to get to the position which Keith is now beginning to find himself in.

Keith Miller: I would like to add one other thing: in reality if I look back four or five or maybe even eight or nine years, a number of companies were on the dot-com-type areas promising one format with big marketplaces where all the suppliers would go in with their catalogues and send invoices. The reality is there are loads of people in that environment with loads of different formats all saying that they’re the best, confusing the supplier, confusing the buyer and also charging different rates for that. I think the overall market is quite a mess, which makes it very difficult for a buyer to really establish with a supplier-base the business case and a good structure that is going to be around for the next three or four years which justifies the investment. That is a real issue which I have seen emerge over the last ten years.

Frans Bouwmeester: I just want to take a closer look at electronic invoicing and what you just said on these networks. Kofax has been looking into this and we actually acquired a company who provided an electronic invoice solution as part of their portfolio. We hit on those two major concepts. One is the invoice networks: you have to pick one and you have to hope all your vendors will pick the same or else you have the situation where you have to go to multiple networks and that will only increase the mess. The other thing is this involves more interaction between you and suppliers which clearly has some organizational challenges. Could you elaborate more on that? What you have done? What you have investigated? Do you have any preference for one model over another - or maybe you have come up with a different model?

Keith Miller: We’ve had to, in effect, take stock of the various options that we have and try to map them into our organization which has ended us up with having EDIFACT, self-billing, file uploads, PDF which I guess is a competitor to Kofax and also with our marketplace where we use our e-procurement system. We really have to try and map that in. We’ve touched things like RosettaNet in the past and that came and went without any real success so we have had to try and take stock and try and map, or - how can I put it? - try and have a toolbox that we can map into the right suppliers because I don’t believe there is or ever will be a one-fits-all solution and you could even add direct debits to that toolbox. Particularly when you are dealing with India and the US, two extremes, you have to be quite flexible. The US is high-volume EDI, everybody believes in it, the business case does not become a discussion. India is just thinking about talking about it. We have to manage those two extremes as well.

SSON: What experience do you have in your organizations with credit cards being able to handle low-cost items?

Peter Wrapson: Low-cost items for us is a bit of an issue because it does cloud the whole performance of our organization and we are trying to develop our card systems to provide the main channel for low-cost items. We have had some success in that - although we have had business kick-back from suppliers and users that don’t particularly like it. However, the controls, if properly exercised, do give us a real chance of lowering our cost per invoice by handling transactions through credit cards.

Keith Miller: We have a global policy around the use of credit cards and where they are applied to things such as hotels and it’s pretty much 100% that hotels would be used through a credit card. We do get into areas of countries where credit card is not something readily used or the employees are of an income level that does not support this; but in the main we have moved quite a long way forward in that, alongside the role as a global travel and expense application. The US has a purchase card program running successfully. We did run - and unfortunately have to close a procurement card system in the UK (because it conflicted at the time with our e-procurement solution); but I think, maybe in the future, with the example in the US who has a very high level of efficiency; I think a 90% payment hit rate, we may well look at a procurement card in the future. But in the current financial climate, I cannot imagine our CFO is going to support very heavily that we encourage another credit card to be rolled out in the organization. I think what we have is what we will be sticking with for some time. Credit cards are definitely a part of our toolkit.

Massimiliano Di Renzo: Unfortunately I do not have direct experience in using credit cards because it is managed by another department in my organization. But one thing I do see, and speaking with people who work with credit cards: it’s a risk as well. I think it is efficient in terms of timely payment and no purchase order and so on but there is risk in using a credit card, how it is used by the organization and the people, and this is a downside.

Peter Wrapson: In terms of a procurement card: we currently run a joint solution along with our travel and expense policy of hotels and expenses and you can use the same credit card for purchases as well. We have not had the risk experience of other people. In fact we find it is reasonably well-controlled and as we move forward we are looking at credit card suppliers to give us Level Three SAP data which will give us full transparency. So we haven’t had that experience of risk. It is probably easier in some areas to defraud the purchase order system than it is the credit card system.

Keith Miller: I would definitely agree with that last statement. For us, because we generally haven’t taken the global step towards procurement cards when it comes to using a normal American Express credit card and because people know they have to try and claim it back through our expenses system, the level of fraud in the area is very, very, very low if not non-existent. It is just seen as a tool that is covered by the expense claim approval and if it doesn’t get approved, then they are liable for paying the bill.

Percy Kirkman: We’ve had credit cards established for travel & expense, as the mandatory solution for along time. We’re currently piloting a procurement card solution in the Nordics for spend up to 2,500$’s. The key challenges for us are: i) Implementation of a scalable VAT recovery process, and ii) Driving the behavior change with the users. We’re very excited about procurement cards as being far more appropriate for low value, non-sourced spend than either forcing users to use purchase orders or receiving invoices from a high number of low value vendors.

SSON: In terms of health & safety, environmental and ethical values; how are your organizations increasing the need to qualify suppliers?

Keith Miller: Maybe not so much in P2P but in the overall sourcing process which I am part of, we have a code-of-conduct project which has been running for over a year particularly focused towards the issues we have in areas such as China and South East Asia. We have gone through education programs and audit reviews, quite extensively, with the suppliers and it’s on our global balanced scorecard the monitoring of that program. So it is extremely high on the agenda because we have had one or two particular problems which have made the press in Sweden, and has also driven the need to deal with this in a professional way - so yes it is very much on the agenda.

SSON: Can you share those issues with us Keith and explain how you overcame them?

Keith Miller: The prime thing that was established was the code of conduct program with five or six individuals working globally who went round to the sourcing managers, showed them the extreme examples of what goes on in suppliers, visited a few suppliers and found some scary pictures around what was going on in some of our supplier base and really worked with the suppliers on the audits, brought the majority up to the required level - and in some cases remove the suppliers from being Ericsson suppliers. Pretty much as simple as that.

SSON: Peter, is this something you are very selective about?

Peter Wrapson: It’s a massive issue for EDF Energy. The qualification of suppliers - certainly in terms of health and safety where we are working out in the public domain on very scary pieces of equipment that can potentially kill - is very high. We also have particular issues, much along as Keith has just said regarding certain supplier practices. This wasn’t visible two or three years ago and perhaps people didn’t want to look. It is now becoming visible. We are beginning to try and kick off a supplier management process and management of contractors. I think when it first kicked off people did not give it the importance they should have done and didn’t realize how deep it would go - and perhaps we have not really fully realized the depth of that and what it means in terms of holding on to a vision of what your supplier base should look like, not allowing too many suppliers to be involved. But then when I listen to other speakers, and when you are working on an international basis far more than I am - I’m happily pan-European but I’m not much more - it is difficult to understand how you keep that standard of quality up and how you make sure you get buy-in from the users who are basically just wanting services or products.

Massimiliano Di Renzo: I completely agree with the previous statement. I would say that we have a global approach regarding the environment. I know there is a big program of investment regarding safety and the environment - but I’m not really in a deep relationship with our suppliers there so it’s something that should be verified further with our purchasing organization.

SSON: How advanced are you with automation, and how does this drive straight-through processing allowing your organization to achieve a touchless, exception-free environment?

Keith Miller: I don’t think the environmental element, to be honest with you, has been used as a driver at all in this area. I think at least within Ericsson the main driver for automation has been a simple business case behind having an SSC and having a cheaper cost per invoice. And also a better step towards quality within the process as a consequence of having a Shared Service Center where the more you limit the amount of times you touch the invoice, the higher the quality - because it’s very difficult to establish an SSC that can be competent in multiple countries, multiple languages etc. So I would say at least where I’m sitting the two perspectives have never really come together.

Peter Wrapson: I think much the same; I think things are coming together. The agenda has been set, although - and it sounds like I’m talking cryptically - it’s a difficult journey and often you arrive at certain things that are conflicting. It is something that we do recognize, it is an agenda item, but we have to drive them both equally.

SSON: Frans, what are you seeing from your clients; how advanced are they in their automation in terms of driving straight-through processing?

Frans Bouwmeester: Well, invoice automation has grown enormously in our customer base; we’ve seen a lot of companies having interest in this, at different stages. It started with the implementation of late archiving - so making sure that all the invoices are in a central place for reference. The next step was clearly moving to early archiving - so the moment the invoice comes in, making it available to the organization so that exceptions can be handled quicker and also before the matching takes place so the moment the person who’s ordered it sees the invoice. If we look at the customer base, I think that’s where the majority is today. The next step is getting the data automatically from the invoice. That’s been the fastest growing part of the business, and we’ve seen good things there.

Electronically - it was mentioned here a couple of times - that’s currently the hot topic; from a Kofax perspective we’re focusing on that and we’re getting a lot of traction with one of our solutions there. Another part that was touched on briefly is the early exception detection and pushing detected exceptions back to the vendors and letting them resolve them - not even bothering the internal organization with these issues. That’s very new and obviously there are only a few companies that are far enough along with the automation process to start adopting this. It’s not that companies don’t want to do it: as was also expressed by Keith, it’s that you have to go through a couple of other stages first; you have to make sure that certain things are very mature, and then you’re ready to go to the next step.

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