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Enabling the Financial Supply and Demand Chain Re-printed from Supply & Demand
Chain Executive, by Andrew K. Reese Red Bank, NJ May 19, 2005 ePayables at Countrywide Besides implementing purchasing cards, a variety of companies have been exploring other methods of automating more of their purchase-to-pay process, including by implementing solutions specifically targeting the incoming wave of paper invoices. One such pioneer in enabling the financial supply chain is, perhaps not surprisingly, Countrywide Financial Corp., a diversified financial services provider — and eProcurement early adopter — headquartered in Calabasas , Calif. Countrywide made its first move toward an e-financial supply chain in 1999, when it implemented an electronic procurement solution, dubbed PNet eProcurement, from Red Bank, N.J.-based PurchasingNet Inc., along with the solution provider's invoice-matching module. Countrywide did a phased implementation that was first rolled out to some 25,000 employees, with about 98 percent of the company's annual spending on indirect goods and services going through the eProcurement solution. However, according to Brennan Powe, a senior systems analyst with Countrywide, by 2003 the company had begun to experience difficulties from the sheer number of paper invoices coming into the accounts payable department. "We had a team of 12 people that just worked on purchase order invoices, and that's all they did all day," says Powe, adding that this team was processing between 12,000 and 16,000 invoices on a monthly basis. With that volume of invoices, the company found that it frequently was not able to take advantage of early payment discounts and, in fact, was averaging payment in 45 days. To bring that number down, Countrywide elected to implement a process to receive vendor invoices electronically. As an enabling tool, the company chose PurchasingNet's ePayables solution, which has been in a controlled release pending its expected official launch in May 2005. The solution allows a company to receive invoices electronically from suppliers and process those invoices — with a match against a purchase order generated in the eProcurement system, for example — before handing the invoices off to a back-end accounts payable system (such as the A/P module of an enterprise resource planning system) for payment. Getting to Win/Win The move toward ePayables at Countrywide began with meetings held in conjunction with the company's vendor quality improvement program (VQIP). During sessions with Countrywide's top suppliers by volume — which happen to be PC resellers — the company set forth the electronic formats in which Countrywide wanted to receive invoices, how often the resellers should post invoices and the technical details of how the process would work. After working out the kinks over the course of two months — including training the suppliers on what to do if the system rejected an invoice — Countrywide began adding additional vendors to the system at a rate of three or four a month. Within 10 months, the company had about two dozen vendors on the system, accounting for 85 percent of Countrywide's purchase order volume online, and by November 2004 the company was receiving about 90 percent of its PO invoices through the system. While the project is still ongoing and Powe was unable to discuss the financial payback on the investment in the ePayables solution, he did note that Countrywide has been able to take greater advantage of early payment discounts that had previously been left on the table. In addition, the company has reduced the number of A/P staff processing PO invoices from 12 to three, shifting nine of the staff to work on processing non-PO invoices, which add up to perhaps three times the volume of PO invoices. Countrywide is now looking at using a PurchasingNet portal solution to handle the non-PO invoices as well, whether for suppliers like utilities or for smaller, "mom-and-pop" suppliers that send out invoices using QuickBooks or similar desktop applications. (The PurchasingNet solution allows smaller vendors to log into a portal and create and submit and invoice online.) In the meantime, Powe says that the response from those suppliers already involved in the ePayables effort at Countrywide has been positive, particularly since they usually are seeing payments coming in faster and with greater accuracy. "It's a win-win, absolutely," Powe says of the company's enabled financial supply chain. Sidebar: e-Invoicing — The Next Generation There are several types of solutions available to the accounts payable executive looking to enable the company's financial supply chain, says Tim McEneny, president and CEO of PurchasingNet, a provider of eProcurement and ePayables solutions. "For somebody interested in electronic invoicing, there are several options, so it's a little confusing, and a lot of companies are going through an education process right now," he says. McEneny points to three generations of invoice processing solutions. Under the first generation, a paper invoice comes into a company and a clerk keys the invoice into an accounts payable system. In the second generation, an invoice comes into a company and gets scanned, reducing some of the paper floating around the A/P department, but someone still has to rekey the data into the company's back-end system. Finally, there is the electronic receipt and processing of the invoice, completely paperless, with no scanning and no rekeying. Some companies may prefer the scanning option at this time, McEneny says, because they can apply it to most of their invoices, as opposed to a full-fledged e-invoice solution, which might not be able to encompass every single invoice coming into a company — due, for example, to the technical inability of the company's smaller suppliers to provide an electronic invoice. But McEneny argues that these companies should at least consider moving to an electronic invoice processing solution based on the theory that capturing most of their invoices electronically will yield significant benefits. "There are always going to be some invoices that you'll have to key in, or some scanning or imaging that will have to take place," McEneny says, "but if you can take your top 20 or 50 suppliers and have them send or create invoices totally electronically, without paper or scanning, you can streamline 90 percent of the process." About PurchasingNet, Inc. PurchasingNet, Inc. is a leading provider of Web-based eProcurement and ePayables software to mid- and large-sized companies. The company has over 1,400 customers in Financial Services, Retail/Consumer Products, Professional Services, Media/Publishing and a variety of other industries. Founded in 1983, PurchasingNet has focused exclusively on the development and implementation of Procurement and Payables applications since inception. In addition to building an extensive, blue-chip client base, PurchasingNet possesses deep domain expertise in Purchasing and Payables business processes. The average length of service at PurchasingNet is 8 years per employee. PurchasingNet’s customers include Countrywide Financial, US Bank, Navy Federal Credit Union, American Financial Group, Liz Claiborne, HBO, EarthLink, Black & Decker, Kroger, and General Mills. For Details, Contact: Erinn Tarpey |