Developing An E-Invoicing Strategy That Works
So you say you want an e-invoicing revolution? Meet Terry Kohn, director at the Hackett Group. As a consultant specializing in e-procurement and e-invoicing strategy for companies in the $1-$15 billion range, Terry is a veteran of many such transformations. Since he often leads execution of the strategies he develops, Terry is a pragmatist, not a theorist, formulating strategies that are tailored to each company’s needs and capabilities. We sat down with Terry to get his thoughts about how organizations of any size may best approach developing an e-invoicing for maximum success.
Coupa: How do you go about developing an e-invoicing strategy?
Terry: It all starts with a dialogue around the facts of the business. It’s one thing to talk about the e-invoicing market and how things generally work and how others have done this. It's quite another to take a look at a specific company’s technology foundation, the people they have working in this area, the cycle times involved with their manual invoice management, the hard costs, and the cultural challenges that are specific to them. Is doing this sort of transformation going to be a new experience, or have they done something like this before? If you aren't experienced in this, the strategy is going to be very different.
I look at what their homegrown capabilities are. What can they do themselves, and what do they need support on? And, somebody has to operate this after it’s implemented. Who will do that and how? The strategy is based first on evaluating these facts.
Coupa: So, you shouldn’t just run out and get a tool.
Terry: Yes. It's all about operating the business, and that combined with the challenges of doing a transformation are pretty daunting when you get down to a realistic view of this. Transforming your invoicing methods and tools is
big change, and getting change up on its feet and running forward isn't easy to do.
Coupa: What are some unique challenges different companies might face?
Terry: Let's say you're in the building industry. There's a lot of bidding and decentralized activity around choosing your suppliers, giving them work, and getting them paid. When you start to talk about how to change any aspect of the payment part, which is critical to the daily lives of the people who are building the buildings, they get pretty involved and they get pretty concerned.
If you don't pay your suppliers in that industry, suppliers will not work for you, and if they’re already on a job sometimes they'll stop working for you, putting your entire building schedule at risk. Getting the hands-on employees in the field to understand the vision and contribute means that you have to really be careful in thinking about how you're going to be improving their lives and how you communicate that. It's an important part of the success in all of this.
Another example would be the news industry. Again, you have a lot of people who are decentralized, working all over the world and they're putting in invoices to get paid for the articles they're writing and the expense associated with their work.
Getting those people their money sounds pretty straightforward, but when they're working in Uzbekistan or somewhere out in the rural regions of China, it gets complicated. There are parts of Asia where invoicing is handled in a different way than in the United States or Europe. Being able to understand that, and stand up that international invoicing capability adds another layer of complexity.
It sounds simple, developing an e-invoicing strategy. After all, it's just a piece of paper called an invoice. How hard can it be to make it electronic and get it paid? But it is pretty complex when you get right down to it.
Coupa: What are some of the common challenges for companies in any industry?
Terry: One is understanding how data has to move between systems in order for invoices to be electronically captured, routed, approved, and paid.
There's a challenge associated with understanding how intelligent OCR today deals with how various invoicing formats are ingested and read. It sounds simple but it's really not intuitive.
There are challenges with the supplier community. How do you approach them, explain what's going on, get their commitment, their AR information, and get them to change their invoicing process? How do you work with your suppliers versus just telling them what to do? That's a challenge and an art.
There's one final challenge. That's the, "That will work for me except..." part of the discussion. In these big companies, every division, every separate part of the business, has developed their own manual or semi-automated approach to invoices. How can you create a single overarching process that meets the needs of all divisions when they're used to doing it their way, it works for them and it has for many years? Breaking through on that is one of the major challenges.
Coupa: How do you do it?
Terry: It always helps to have a strong executive sponsor who has a vested interest in helping communicate what's going on, why we're doing it, and what to expect out of it. Without that, this is an order of magnitude harder.
Having access to people in the accounts payable and procurement organizations who are knowledgeable about their suppliers and how they are paid, is a huge and very necessary part of this.
Developing a good set of facts and analysis of how spend really works in the organization and what the buying behavior looks like helps you understand and identify the suppliers that represent the biggest challenges as well as the largest volumes of invoices, so that you can tackle them first to get the learning curve under your belt.
You need to identify the parts of the business that might be the best candidates for early adoption, because you can do an e-invoicing roll out in two ways. You can do the big bang approach, where you flip a switch and all divisions and all business units, all locations, all employees, from day one are on your new process, or you can do a phased adoption.
Phased adoption gives you risk mitigation. It gives you the ability to bring in the divisions that will give you the greatest amount of success and use that leverage with other divisions and tackle the ones that are most difficult last.
You have to understand the process and the culture and map out who is going to be impacted by this change. Communicate with the people who are going to be the easiest to work with and have the most interest in making this a success. Then make them the early adopters. That goes for the suppliers as well. There are going to be some suppliers that you will want to bring on board first because they're technically sophisticated and they are strongly attached to the business. Those will help you also drive success very quickly.