Eight Strategies for Winning the A/R Game with Automated Capture and Workflow

By Ian Llado and Laurel Sanders, Optical Image Technology, Inc.

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In Monopoly ®, if you leave your game to chance, you do not pass GO, do not collect $200, and may get stuck in jail. In the real game of processing invoices, leaving your processes to chance could cost you much more…

Introduction

The eternal paper chase involved in collecting receivables is not unlike the game of Monopoly. It’s a never ending runaround. The ultimate goal is to collect money in a timely fashion and invest funds in operations and plan for success, all while keeping revenues ahead of expenditures. The human capital required in this chase presents significant challenges. In a company that sells products (including insurance and financial packages), items are ordered, generated, delivered, and an invoice follows. Each step generates papers and action items. Even in businesses where this information is stored electronically, multiple departments may be involved, each with their own information silo. Most systems are not designed to share their critical data with other departments that need it.

More costly products (or services) stand like Monopoly Boardwalk hotels – they offer more potential profit, but carry greater risks. Missteps at any point in the invoicing process may result in uncollected monies that jeopardize your business. How can a company ensure that it will stay ahead of the game?

The product to payment cycle: order, build, process, ship, invoice, collect, repeat

Businesses often have separate ordering, processing, shipping, and accounting departments, making it difficult to track where an item is in the process, when an invoice should be prepared and sent, and the status of collectables. Invoices may need to be matched with orders of items manufactured (tangible goods), items generated (e.g., loans, policies or claims), and services rendered. Inventory receipts, contracts, shipping receipts, and bills of lading or delivery slips may also be required. These are just some of the challenges of document management and invoice processing in a paper world.

Rules-based capture and workflow alleviates these challenges, enabling businesses to store information centrally, improve data accuracy and consistency, and standardize processes. Robust products integrate with line-of-business applications to maximize the value of information stored in each system. Communication improves.

Digital storage of critical business information ends the paper chase. It provides secure access of information to the right people at the right time. Order status, shipping, delivery, invoicing, and receipt of payment are available instantly, and thorough audit trails can be provided quickly. With the addition of automated workflow, processing delays are reduced, duplicate billing is eliminated, and collection is facilitated. This results in a stronger revenue stream, enabling quicker investment. Eight common ways of expediting the process with capture and workflow are given below.

1) Communicating about billable goods: prerequisite for invoicing

Products (or services) are ordered or purchased in diverse ways, from direct purchases through on-line orders. Regardless of the source, information about the customer, order number, payment terms, and even shipping has to be tracked. Customized items may require approval before production and invoicing. All of this information has to be tracked and communicated promptly to ensure timely delivery and invoicing.

Digital capture enables companies to store all relevant information in one centralized location that can be accessed securely over the Internet by those who need it. Eliminating paper at the source means papers are no longer misfiled, waylaid, or lost when the accounting department needs them. Large volumes of orders can be stored centrally within moments of their receipt and indexed in ways to simplify retrieval. As such, instant access to data helps organizations to collect funds faster.

With the addition of automated workflow, captured documents can send messages to inform the production, inventory, and accounting departments that an item needs to be created or removed from inventory or that an invoice is needed. In the event that authorization is required, automatic signatures can be requested through workflow to expedite their receipt. This enables companies to shorten turnaround times from days to hours, or even hours to minutes, getting products out the door and revenues in the door more quickly.

2) Project completion: tapping into workflow to calculate costs and finalize billing

Multiple numbers need to be tracked during the production and invoicing process, and a finished product number may be listed on the invoice with a brief description. Behind the scenes, a bill of material may be created to calculate the total cost, capturing the real costs to the company and ultimately helping to determine the cost of goods sold. The cost data may cause management to reevaluate the invoice, depending on expectations regarding potential changes.

With digital storage and workflow, material costs can be extracted from the database, and an executable can be run automatically to calculate total costs. The arrival of new database information can send automatic alerts to the invoicing department or management, indicating that a bill may need to be reviewed or adjusted. If the invoice requires communication with a customer, workflow can alert the appropriate department and generate customized letters on demand. By automating these processes and centralizing decisions around the stored data, processes can be completed promptly. The consistency of information gathered and indexed in digital form, as well as the process automation, removes the elements of chance and streamlines your operations.

3) Shipping and delivery: using automation to get invoices out the door on time

Shipping logs, bills of lading, and delivery receipts are required for many companies to generate invoices, especially in business-to-business sales. Automation helps managers to perfect and orchestrate the process, eliminating delays that result from misfiling, employee absenteeism, human error, and other common challenges. If a company has bar coded products, workflow can send a message that an invoice is needed, and at the same time update the inventory. Bills of lading and delivery receipts, when read with barcodes and automated signatures, can provide the digital backup that your accounts receivable department needs for an invoice.

If a receiving department at another business receives the goods or services, these receipts and signatures can be captured electronically to expedite invoice generation. When the signature or scanned information enters the database, this can launch an automatic message to the accounting department that the invoice should be sent, and all of the information relating to that specific invoice can be pulled from the database. At the same time, since shipping dates determine the year and month in which receivables are recorded, digital information can provide a clear and easily accessible trail, thereby assisting in GAAP compliance and saving many staff hours (or days) searching for information in the event of an audit.

4) Integrating disparate silos of information: putting the pieces on the same game board

One of the greatest advantages of digital capture and workflow is the ability to maximize the use of critical business information that is stored in line-of-business systems and leverage the data for other applications such as invoicing. Integration of these systems means customer and order numbers, completion and shipping dates, and other information can be accessed or pushed quickly to other departments for action. Workflow pushes information to people who are authorized to act upon it. Since security can be configured, each user can only view or act according to his or her levels of authorization. Sensitive information is no longer at risk on paper, and disparate information from diverse business areas can be used to generate entirely new processes.

5) Gaining a bird’s-eye view: workflow puts management on top of the game

Workflow gives managers an overview of the entire process, enabling them to monitor invoice volume, status, and delays as well as productivity. If invoices are not generated within the timeframe that management sets for items to be produced and shipped, worker productivity reports enable management to make adjustments to the workflow. This enables quicker delivery of products and invoicing, which results in better service. In addition, workflow reporting enables management to anticipate bottlenecks in productivity, and to re-engineer and further streamline their processes accordingly.

6) Expediting payment of receivables: the rush for the finish line

Automated workflow and digital storage take away the headaches involved in collecting and matching shipping and delivery receipts, billing information, and other materials that provide data for an invoice. Failure to locate data from any of these sources promptly can result in financial penalties and additional processing that disrupts your business continuity. Some late payments may require exception handling, resulting in a separate letter or notice. These can be flagged to enter a separate work queue that automatically generates the appropriate communication.

7) Getting money in the bank quickly: winning the game

Everyone has surely experienced the frustration of receiving late notices and erroneous penalties for bills that were paid on time. Although there are indeed late payments, some of these notices result from the fact that in a paper-based system, large volumes of receipts can take several days to prepare. Receipts may need to be logged, staples and clips may need to be removed, or copies may need to be made before monies can be deposited. Even if deposits are made quickly, it takes time to record large volumes of checks so that erroneous letters to customers about late payments can be avoided.

By using digital capture of checks or check information that is properly indexed, the process is significantly faster. Check data is entered into the database upon receipt, and then indexed; updated records enable late notices to be withdrawn from the queue at the last minute. With workflow, the receipt of payment can put the customer in a queue to receive thank-you letters automatically, without losing a minute of staff time. Letters can be customized from data in the system without the errors that occur when they are created manually. The timely acknowledgement of a customer’s business will most likely be noticed and appreciated.

8) Complying with regulations: do not go to jail!

Electronic storage of documentation related to each sale provides companies with a detailed trail of information. This enables management to extract reports about each purchase in an instant. In the event of an audit, you hold the monopoly over your information, and can replay the game for the auditors with ease, step by step.

Sarbanes-Oxley, Gramm Leach Bliley and other regulations necessitate that strict rules be in place regarding the access to, and sharing of, information. Workflow reporting enables management and auditors to show who accessed, viewed, annotated, authorized, and signed materials, and provides the critical time stamp needed for each step. This gives auditors the irrefutable proof they seek, which may be difficult to obtain with paper processes. In a paper audit, vast amounts of time are spent searching for receipts and other materials. Digital storage means staff only has to query the system to receive a clear trail for every purchase. An infallible memory and exhaustive manual searching are no longer required. The elements of chance are removed.

Summary

Electronic workflow, when coupled with digital capture, facilitates your invoicing process from start to finish. By integrating workflow into your accounting system and other line-of-business applications used in the production and shipping process, you can leverage your existing investment in technology, gain an overview of your processes at any time, and provide better service. Managers can react to deficiencies and inefficiencies quickly, continually improving their processes. Through automation, the invoicing process becomes more accurate and timely, and receivables are turned into cash much more quickly.

By putting all of a company’s critical information in one place, the invoice processing game leaves players at the end with the more money in the bank, well ahead of the other players in the game. Customers are better informed and better served with accurate and complete information about their orders and payments, whenever they request it.

Digital capture and automated workflow put you in control of your invoice processing game…. and ensure that you win.

To learn about Optical Image Technology’s integrated suite of document management and workflow software, visit the website at www.docfinity.com, call 814.238.0038 or email us at info@docfinity.com.

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