Optimizing Accounts Payable Automation Solution - Whitepaper by BancTec - BPO Services Provider

Featuring Insights on ...
Q4 2012
Underwritten in part by
Optimizing Accounts Payable
Improving Performance & Creating Added
Value Through Outsourcing
AP Functions Suitable for Outsourcing
The AP Outsourcing Universe
Various Benefits of Outsourcing
AP Outsourcing Paradigm
Impact of Outsourcing on Discount
Capture
How to Ensure AP Outsourcing Success

© 2012 PayStream Advisors, Inc | www.paystreamadvisors.com | info@paystreamadvisors.com
Executive Summary.......................................................................................................1
The APO Universe...........................................................................................................2
Benefits of Outsourcing...............................................................................................5
AP Automation Paradigm............................................................................................7
Outsourcing and Discount Capture.........................................................................11
Ensuring AP Outsourcing Success............................................................................13
BancTec Profile................................................................................................................17
BancTec Case Study.......................................................................................................21
Questions to Ask Prior to Making a Decision.......................................................23
Evaluating Outsourcing Solution Providers..........................................................24
Additional AP Functions Suitable for Outsourcing............................................27
Research Methodology................................................................................................30
About PayStream Advisors.........................................................................................30
Table of Contents

Executive Summary
As companies search for ways to improve overall performance and create added value,
outsourcing non-core business processes such as low-value functions in the accounts
payable (AP) process is a perfect place to start. The market for AP outsourcing (APO)
has witnessed many changes in recent years and what was once an emerging trend
is now becoming a natural element of corporate services. Organizations are now
exploring AP outsourcing services that can turn a cost burden into a competitive
advantage that provides significant potential to reduce costs, leverage capabilities and
deliver sustainable business value. While outsourcing the entire AP process may not
be practical for most organizations, many companies are choosing to outsource certain
functions, while keeping full control of other more strategic AP functions in-house. This
modular approach to outsourcing is gaining momentum in the market and is helping
more companies improve the overall performance of their AP department.
Accounts payable outsourcing services are now recognized as an effective
management tool that works to streamline and optimize AP operations and
deliver operational and strategic benefits. Companies are looking for ways to
harness value beyond cost reduction through consolidation and automation, in
addition to achieving the commercial benefits including accessing and building
capability, scalability and flexibility that support the company’s core business
strategy. More and more companies now incorporate outsourcing as a strategy in
business planning. A strategy that lets the company focus on providing improved
client service, produce better products, and do a better job overall, in a more cost
effective way, by outsourcing non-critical business functions.
AP outsourcing can transform manual, paper intensive AP functions into a fully
automated process. Per invoice processing costs and cycle times are reduced while
increasing visibility and control of the entire business process. These tasks are
accomplished without the expense of acquiring, deploying and managing additional
technology and resources. AP outsourcing solution providers have the functionality
to tailor a solution to address individual company business rules and integrate with all
leading Enterprise Resource Planning (ERP) and enterprise-wide financial systems to
deliver a unique set of benefits.
This report examines the current demand for AP outsourcing solutions and
serves as a reference guide for AP decision makers considering an Accounts
Payable outsourcing solution. This report also includes an overview of leading AP
outsourcing solution providers and case studies, organized for easy comparison.
For more information on this and other research reports available from PayStream
Advisors, visit the PayStream Research library:
http://www.paystreamadvisors.com/eResearch/

The APO Universe
This technology insight report covers outsourcing functionality around the front-end
of the invoice receipt-to-pay process. Figure 1 outlines the functional components
offered by accounts payable outsourcing solution providers profiled in this report
including invoice receipt, document imaging, data extraction, content management,
approval workflow, and reporting and analysis. Other outsourcing functions including
check management, utility payments, and post payment audits fall outside the scope of
this report; however, they are briefly discussed at the end.
Outsourcing the front-end of the AP process makes sense for two reasons. The
first is that prepping and scanning invoices and entering data into an ERP or
accounting system is non-value adding to the approval and payment process. The
second is that, even if an organization decides to use automated data capture
technologies to extract data from paper documents instead of relying on manual
data entry, these are tools that need continued monitoring and are often cost
prohibitive for organizations, especially smaller than Fortune 1000 companies. The
low value of the process combined with the complexity of advanced tools makes it
appealing to leverage the expertise of an outsourcer. Outsourcing companies can
provide service level agreements that guarantee a 99 percent plus accuracy rate
in data extraction and a quick turnaround time. Outsourced invoice scanning and
data capture will provide the following benefits to companies:
»
» Improves and accelerates the visibility of invoices to enable improved
accrual reports and control processes
»
» Eliminates the paper at the beginning of the AP processing cycle
»
» Provides a secure central repository for invoices and supporting documents
»
» Reduces document storage and retrieval costs
»
» Eliminates lost and misplaced invoices and supporting documents
»
» Provides access to invoices and supporting documents by multiple business
units (vendor and supplier), enabling them to resolve issues
»
» Reduces manual data entry and full time employee (FTE) requirements of
AP invoices
»
» Enables the integration of workflow driven automated processing
»
» Accelerates the invoice entry into a company’s approval queue
Invoice Receipt
The accounts payable process starts with invoice receipt – whether in paper or
electronic format. All outsourcing providers offer some level of mail room services for
accepting paper invoices, with some providing dedicated PO boxes for each client.
APO solution providers also accept invoices via fax and email, with some providers
offering client-dedicated fax lines. Others even go to the extent of allowing suppliers
to directly input invoices via an online supplier portal. Irrespective of the channel of

delivery of the invoice, they are all routed to the client though a single process in a
common format.
Document Imaging
Once invoices are received and sorted in the processing center, paper invoices go
through a prepping process (removing documents from envelopes, smoothing
creases, removing staples, etc.). Invoices are then scanned. The types of scanners
used for invoice imaging as well as scanner speeds and quality vary among APO
solution providers. Most solution providers utilize multiple scanner types in the same
processing center and scanners are allocated to clients based on their specific needs.
Data Extraction
Data can be extracted from invoice images in a number of different ways. Some
solution providers utilize sophisticated image recognition technologies like optical
character recognition (OCR) and intelligent character recognition (ICR) to automatically
extract data. Once OCR has been performed on invoices, the data will be verified to
ensure accuracy levels. Other providers prefer to manually enter the data and may
use double blind keying, also called two pass verification, as a quality control method
used to input invoice data. Two data entry operators key in the data and if there are no
discrepancies in the data comparison, it is then verified. The goal of the data extraction
process is to deliver high accuracy levels, which is critical for the transactional level
quality required for the AP process. After the data extraction process is complete,
invoices are routed for business rules, matching and approval based on key words and
predefined business rules.
Content Management
Content Management refers to the delivery, storage, management and disposition
of electronic data and invoice images. After data extraction, invoice information
is transferred to the workflow or ERP system and invoice images are archived in a
centralized electronic repository. Depending on client needs, APO solution providers
can either provide a central content management system for invoices or integrate with
a clients’existing content management system. Either way, the content management
system is tightly integrated with the ERP or accounting application, so users can easily
search for and quickly access invoice images and information from a single interface.
Approval Workflow
This step involves routing of invoices according to pre-defined business rules based
on individuals’roles and access rights. Workflow tools are required to review and
approve non-PO invoices that do not go through the matching process as well as
handle exceptions that arise as part of the PO-based invoice matching step. Workflow
provides a tool to track and manage approval processing at the invoice and aggregate
level. Common features offered as part of the workflow functionality include automatic
notifications to users when specific actions are required, (e.g. invoice review and

approval) and reminder messages and escalation procedures when no action has been
taken.
All these actions are based on approval hierarchies that can be configured and changed
without the need for programming or IT involvement. Solution providers offer approval
workflow functionality as a Software-as-a-Service (SaaS) solution (also known as cloud-
based), which decreases upfront costs and maintenance fees since no hardware or
software installation is necessary. SaaS solutions provide immediate access to the latest
features and functionalities without IT intervention, and functionality is available from any
location instantly via a web browser.
Reporting and Analysis
The process of analyzing key invoice receipt-to-pay metrics is important and this function
is not lost when working with an AP outsourcing provider. Providers deliver robust
reporting functionality including the ability to generate standard and ad hoc reports
detailing the process from the time the invoice was received at the APO provider’s
processing center, to the time it was transferred to the client’s ERP or accounting
application for approval. These metrics can include how many invoices were scanned in a
given period of time, how long it took to extract data from the invoices and the accuracy
levels of data extraction, while others only allow for download of transactional data to
third party reporting tools.
Figure 1
APO Universe
APO solutions streamline
and optimize the invoice
receipt to pay process
and deliver tangible
results around processing
efficiencies and cost
savings.
Invoice
Receipt
Open Envelopes / Remove Stamps
Sort / Batch Invoices
Insert Separator Pages
Invoice Scanning
Image Enhancement
Work Queue Mgmt.
OCR / OMR / ICR
Indexing / Data Validation
Manual Data Entry
Invoice Image Storage
Invoice Meta Data Storage
Search & Retrieval
Approval Routing
Multiple Levels of Approval
Escalation / Alerts / Notifications
Standard Reports
Custom Reports
Audit Trails
Reporting
&
Analysis
Approval
Workflow
Content
Managment
Data
Extraction
Document
Imaging

Benefits of Outsourcing
Most organizations look to outsourcing accounts payable functions to deliver benefits
around cost containment. While outsourcing may result in lower costs, it is important
to understand the full breadth of benefits that APO can deliver. Outsourcing allows
organizations to reap the following benefits:
Reduce Upfront Costs
In-house technology options, especially licensed software models, have an upfront
investment followed by ongoing maintenance expenses. In contrast, outsourcing
providers usually charge per transaction based on transaction volume, which are
payable over the period of the contract. In this way, outsourcing not only enables
companies to convert the fixed costs into variable costs but also allows them to defer
the costs over a longer period of time, freeing up capital for other purposes.
Deploy Systems Sooner
As a service delivered via a web browser, outsourced AP automation solutions may
be deployed more rapidly and less expensive than software solutions that require
extensive integration with enterprise and legacy systems. These Software-as-a-Service
(SaaS) models eliminate the need to purchase hardware and software. This is an
important consideration for buyers who are eager to bring the benefits of automation
into their organizations as quickly and painlessly as possible. Another compelling
advantage of outsourced solutions is that the buyer is not burdened with the periodic
expense and effort of upgrading to new versions of the solution and paying annual
maintenance fees. SaaS solutions are automatically updated without the need for IT
resources or new software.
Go Live Quickly
Even after implementation, it can take considerable time to go live on technology
projects because the system needs to be tested and users need to be trained.
Depending on the complexity of the system and the technical savvy of the end users,
this process can take anywhere between a few days to many months. However,
outsourcing solutions can go live almost immediately because most of the staff used
on the project are trained employees of the outsourcing services provider who are
already familiar with the technology and only need minimal training on the client’s
specific business processes.
Increase Efficiencies
The rationale for outsourcing is that it is usually better for an expert service provider
to perform non-strategic activities than to manage these repetitive, low-value tasks
in-house. Using an outsourcing provider enables companies to do more with fewer
internal resources. Under the outsourcing model, organizations leverage a third party
provider’s technology and expertise to offload transactional functions and gain the

ability to focus more sharply on higher value, analytical activities. An outsourcer’s
economies of scale and cost structure can deliver a valuable competitive advantage to
companies, particularly in low-margin industry verticals.
We all know that paper is the enemy in any AP department. Research shows that
eliminating paper increases efficiency and drives cost savings. AP outsourcing is one of
the fastest ways to eliminate paper. It can be difficult to convert suppliers from paper
to electronic invoices; however, if every supplier is instructed to mail or fax invoices
to the AP outsourcing provider’s location rather than the AP department, the AP
department quickly becomes 100 percent paperless.
Decrease Labor Costs
Companies that have high employee turnover or those that have seasonal or cyclical
spikes in invoice volume and need to hire temporary employees for short periods
of time understand that hiring and training employees is an expensive and time-
consuming task. Further, temporary employees may not always live up to expectations.
Even companies that do not fall under these categories have limited capital, human
and technical resources that need to be allocated appropriately. Therefore, companies
would find outsourcing an appealing option as it allows them to maintain steady
internal staff levels.
Minimize Risk
Every technology investment carries a certain amount of risk – risk of not functioning
as expected or being more expensive to maintain than originally planned. Further,
changes in organizations’business environments and government regulations as well
as technological advances increase the risk involved in in-house implementation of
automation options. In the case of outsourcing, the third party provider assumes and
manages the technology risk. However, it is important to note that even outsourcing
contracts might not work out as planned. Organizations should therefore be aware of
switching costs and penalties for ending a contract early.
Manage Solution Provider Relations
One of the biggest barriers that hinder AP automation initiatives, especially in the
case of electronic invoicing and payments, has been supplier adoption. Persuading
suppliers to change their processes to align with buyers’needs can be a costly and
time-consuming process, and success depends largely on the buyers’ability to
present a compelling value proposition to suppliers. Many buyers fail to effectively
communicate the value of AP automation initiatives to their suppliers, and as a result,
struggle to generate the expected results. Outsourcing the supplier onboarding
and enablement process, allows buyer organizations to leverage the best practices
and expertise from their provider. In addition, it provides the necessary resources to
communicate to suppliers while the company focuses on daily tasks.

AP Automation Paradigm
Organizations are now seeking AP outsourcing services that can turn a cost
burden into a competitive advantage that provides significant potential to reduce
costs, leverage capabilities and deliver a sustainable business value. PayStream
research suggests that these forces have increased an organizations’interest in
automation solutions that work to streamline and optimize AP operations to deliver
operational and strategic benefits.
A 2012 IDC study highlights key assumptions and drivers that are creating
significant changes in the Business Process Outsourcing (BPO) market. At
a worldwide level, IDC expects that the BPO market will grow at a five-year
compound annual growth rate (CAGR) of 5.3 percent, reaching $202.6 billion in
2016. The U.S. market is expected to grow at a five-year CAGR of 4.2 percent,
reaching 92 billion in 2016.
Organizations recognize that the transition from manual, expensive paper-based
processes to more efficient and cost-effective Straight Through Processes (STP) is
usually achieved through multiple small steps, rather than a“Big Bang”approach.
The first step towards achieving this goal lies in removing the paper from the source.
PayStream research shows that while paper still dominates the AP landscape, more
AP departments are getting out from underneath the paper piles and are utilizing
electronic invoicing. Invoices received via paper have dropped as eInvoicing increases.
There is no doubt that the market is moving in the right direction as companies realize
that in order to achieve strategic goals such as improved working capital, they must
first streamline their invoice processing in order to accelerate the accurate approval and
payment of invoices.
Figure 2
Challenges to the
Adoption of Electronic
Invoicing
AP Outsourcing can
eliminate the pain points
of eInvoice adoption.
18%
25%
20%
16%
15%
6%
Lack of budget
We do not think there
will be an ROI
Lack of understanding
of current available
solutions
Lack of resources to
manage automation
Supplier resistance
Current processes work

AP outsourcing services can eliminate many of the key barriers to automation. A
2012 PayStream survey found that Supplier Resistance is the number one challenge
to invoice automation (25 percent). Eighteen percent of survey respondents reported
that Lack of Resources to Manage Automation also posed as a challenge. Many AP
outsourcing providers include supplier onboarding as part of their service package and
needed resources to manage automation can be kept at a minimum. AP outsourcing
providers are now helping companies transform their AP operations through
automation to generate bottom line improvements, monitor and manage spend,
strengthen working capital and build stronger trading relationships by reducing errors
in their AP processes and gain control over their entire AP business operation.
Figure 3
Benefits of Electronic
Invoicing
2010 2011
20%
23%
Fewer supplier
inquiries
27%
24%
Improved vendor
satisfaction
31%
26%
Fewer duplicate
invoices
37%
35%
Increased ability to
capture discounts
39%
46%
Increased on-time
payments
46%
52%
Reduction in FTE /
processing costs
46%
50%
Quicker approval cycles
47%
32%
Reduction in exceptions /
discrepancies
47%
38%
Better visibility across
the transaction lifecycle
63%
51%
Fewer lost or missing
invoices

In addition to aiding supplier resistance and the lack of resources to manage automation,
AP outsourcing can help to successfully overcome all of the challenges listed in Figure
2. The lack of a budget challenge can be avoided due to the lower costs associated with
AP outsourcing. Budgets should also increase due to the increase in captured supplier
discounts. The return on investment (ROI) in AP outsourcing can be substantial as fewer
resources are utilized on non-core back office AP tasks.
Different Stages of AP Automation
Until recently, automation efforts in the accounts payable area were focused on invoice
and document management, and reporting functionality and the operational benefits that
technology delivers. PayStream defines this as the first and second stages of automation.
While these first steps in automation provide many rewards, companies are looking for
ways to expand their level of automation and efficiency with automated matching of
invoices against purchase orders and contracts. PayStream defines this as the third stage
of automation. As companies move up the automation curve they are likely to incorporate
outsourcing in their automation efforts. Figure 4 outlines the various stages of automation
that an organization can experience in its quest to transition from mere tactical benefits to
more strategic objectives.
More and more companies are now entering the third stage of AP automation where
they are leveraging automated matching and approval and collaborative online dispute
resolution functionalities offered by innovative solution providers in this space. Savvy
organizations have moved to the fourth stage of automation where they have eliminated
paper to a significant extent and are primarily receiving invoices via electronic means.
Figure 4
Different Stages of AP
Automation
As companies move
up the automation
curve they are likely to
incorporate outsourcing
in their automation
efforts.
Type Of Solution
Stage of AP Automation
Working Capital
Outsource Data
Capture
PO Flip
Automated Matching
Online Dispute
Resolution
OCR and Key
From Image
Online Matching
Approval Workflow
Automated Reports
Centralized
Scan Invoices
Manual Indexing
Manual Approval
100% Electronic
Invoices
Supplier Self
Service
Superior Onboarding
Integrated
Purchase-to-Pay
Processing
Straight Through
Processing
Collaborative
Tactical
4
3
2
1 Cost
Per
Invoice
Level
Of
Automation

Given that a significant barrier still hindering adoption of eInvoicing is changing
supplier behavior, this is one area where automation providers are delivering
tremendous value by offering robust supplier onboarding and enablement services.
Solution providers work closely with buyers to segment vendors and also develop
campaigns such as email, direct mail and telephone campaigns in an effort to migrate
identified vendors from paper to electronic.
These innovative buyer organizations have also considerably reduced the number
of invoices flowing through the approval workflow process and are relying heavily
on STP or touchless processing to manage clean invoices – invoices that do not
contain any errors or those that meet certain pre-determined criteria. This enables
organizations to direct valuable AP resources toward managing exceptions and
accelerating dispute resolution with suppliers.
As companies progress from the first stage of AP automation to the fourth stage,
the benefits of automation continue to increase – moving from lower processing
costs to encompass more strategic benefits that automation delivers including
increased supply chain visibility, improved working capital requirements and better
trading partner relationships. This evolution often encompasses outsourcing non-
value add tasks.

Outsourcing and Discount Capture
Accounts payable departments have the ability to turn their cost center into a
profit center by capturing early payment discounts. A series of trade payables
and payments innovations in the past few years are improving traditional supplier
payment terms, including 2% 10, net 30, and 30 or 45 days net to create a
more elastic, powerful mix of working capital tools for innovative organizations.
Organizations who have embraced these new innovations have created new
sources of profits, while maintaining full control of their cash flow.
Dynamic Discount Management (DDM) is an emerging discipline that provides new
flexibility on how and when corporate buyers pay their suppliers, typically offering
mutual benefits for both parties. The potential rewards for early supplier payments are
great. Even the standard discount of two percent for payment within 10 days translates
to an annual percentage rate of 36 percent. With returns like that, it’s a no-brainer to
pay suppliers early if they are willing to offer a discount. Further, the availability of
advanced technologies such as dynamic discounting is enabling companies to extend
the discount window and capture incremental discounts. Despite the opportunities
in payables to capture discounts, PayStream research shows that only 28 percent of
companies are able to always capture discounts offered by suppliers, see Figure 5.
Dynamic discounting solutions provide suppliers with the option of accepting early
payments against any or all of their approved receivables, at any point, up to the
maturity date for a discount fee. Through web-based buyer-supplier networks, buyers
are able to project compressed settlement terms through supplier discounts. Suppliers
are able to pick and choose among an array of payment options for each outstanding
invoice. The transaction can be self-funded by the buyer or a bank can stand in as a
short-term lender. Buyer organizations receive a portion of the discount fee (similar to
the rebate earned on a purchasing card transaction).
Figure 5
Discounts Captured
Despite the opportunities
in payables to capture
discounts, only 28
percent of companies are
able to always capture
discounts offered by
suppliers.
13%
28%
59%
Sometimes
Always
Never

Many payables departments are unable to capture a high percentage of discounts
due to lengthy approval cycles. According to PayStream 2011 statistics, the
average invoice cycle time (from receipt to approval) is 21 days. This cycle is
much longer for laggard companies. The longer the approval cycle, the fewer
discounts an organization are able to capture. On the other end of the spectrum,
best-in-class companies are able to complete the invoice approval process in only
five days, and are therefore able to capitalize on discount capture.
Discount management goes hand-in-hand with automating the invoice and
payment management process, which enables companies to compress the
entire cycle and capture not only pre-negotiated discounts but also incremental
discounts. Outsourcing the invoice management process affords companies the
following benefits, which in turn allow them to compress the processing cycle and
increase their discount capture capabilities:
»
» Centralized invoice receipt to a single location, which reduces the time
typically wasted in desk float.
»
» Service Level Agreements (SLAs) that ensure data is entered into the ERP
or accounting system in a timely manner.
»
» Robust workflow capabilities to ensure timely routing and approval of
invoices.
»
» Visibility into invoices and discount terms, so invoices with expiring
discounts can be prioritized.

Ensuring AP Outsourcing Success
Companies currently investigating AP outsourcing options should consider the
following ten steps to ensure AP outsourcing success:
1. Building a Business Case
One of the key decision metrics around whether or not to outsource accounts payable
functions is a return on investment. Calculating the cost of outsourcing non-value
added processes is an important step in ensuring the success of an AP outsourcing
program. The simplest way to compare multiple options – each of which has diverse
cost components – is to use the cost per invoice as the least common denominator.
The cost per invoice also works because it is how outsourcing service providers
typically price their offering. Table 1 shows a quick model, which can be used to
compare the following three processing solutions:
»
» In-House Processing
»
» Acquiring a Solution
»
» Outsourcing
In-House Invoice Processing (Manual)
A. Number of Full Time AP Staff (FTE) Number
B. Fully Loaded Cost / FTE / Year Dollar
C. Total FTE Cost / Year A X B
D. FTE Cost Loaded by 30% to Account for Soft Cost C X 30%
E. Fully Loaded Cost for Invoice Processing C + D
F. Total Invoices Processed / Year Number
G. Cost / Invoice E / F
On-Demand Technology Implementation
H. Annual Subscription Fees Dollar
I. Hardware Cost / Year Dollar
J. IT and Internal Support Cost / Year Dollar
K. Total Technology Costs Dollar
L. Reduction / Redeployment in FTE Number
M. Total FTE Cost / Year (A - L) X C
N. Fully Loaded Cost (AP Staff + Soft Costs) M + D
0. Total Processing Cost K + N
P. Cost / Invoice O / F
Outsourced Invoice Processing
Q. Cost / Invoice Quoted By Vendor Dollar
Table 1
Comparing Multiple
Invoice Processing
Options

2. Getting Senior Management Support
PayStream research indicates that more than 15 percent of projects fail due to lack
of support from senior management. To increase the chances of an outsourcing
project’s success, establish a steering committee comprised of senior members
from various departments including accounts payable, procurement, supply chain
and in some cases, even treasury. The steering committee would be responsible
for participating in periodic meetings with the project sponsors and evaluating key
milestones as they are achieved in the project lifecycle. Obtaining executive buy-in
early in the process helps increase the chance of success.
3. Documenting Your Requirements
Before searching for the right outsourcing services provider, organizations have to
thoroughly document their requirements – what functions would the in-house AP
department be accountable for versus what functions the APO provider would handle?
Who would be responsible for document imaging, data extraction, data entry and
validation? All of these questions will be part of the requirements document and
should be completed prior to looking for an outsourcing partner.
The next step is to create an outsourcing roadmap that includes key milestones
and deliverable dates – preferably for a three to five year period. Milestones can
be established based on invoice types, business units, geographic locations,
or a number of other parameters. For example, the roadmap can state that the
objective is to outsource all PO invoices in Year 1 and then extend the project to
include non-PO invoices in Year 2.
4. Selecting the Right APO Partner
The requirements document can be used to develop a Request for Proposal
(RFP), which will be delivered to select solution providers that have already been
short listed based on their capabilities and presence in the market. The RFP
typically includes three sections:
»
» An outline of the requirements identified and proposed future state models.
»
» A list of questions around the service provider’s capabilities that they should
answer.
»
» A separate section where they can detail their commercial terms based on
the assumptions provided.
Objective score cards should be developed to evaluate the provider responses for
the RFP questionnaires, so solution providers can be narrowed down and a decision
made as to the provider of choice. Never forget to ask solution providers for client
references and talk to existing clients of the short listed providers to understand their
current satisfaction with the solution, any challenges they are facing, how smooth the
transition process was, etc.

5. Negotiating a Contract
Commercial terms submitted by providers are not written in stone and there is
always room for negotiation. One thing to keep in mind is balancing fixed costs
(annual subscription fees or license fees) against variable costs (per transaction
fees). APO providers may also enter into gain share agreements as well – passing
on the savings accrued from outsourcing to the client – in order to reduce fixed
costs. SLAs and some guarantees and penalties should also be included in the
contract to ensure that the provider delivers as promised.
6. Conducting a Pilot Project
PayStream recommends conducting a test pilot before rolling out any full scale
project. Pilot projects typically range from six months to one year and the scope
for the project can be determined based on a number of parameters – business
unit or invoice type, for example – and closely aligned with the milestones outlined
in the project roadmap. Doing a pilot allows organizations to test the performance
of the chosen outsourcing partner before deciding whether they are comfortable
entering into a long term contract with that provider.
7. Segmenting the Supplier Base
Once a decision has been made, segment suppliers based on how much they will be
impacted by the pilot project launch. For example, if the pilot project is going to cover
all invoices of a specified business unit, suppliers can be classified based on transaction
volume, transaction value, strategic relationships, etc., and decide whether all these
groups will be targeted simultaneously or one at a time.
8. Communicating to Suppliers
As with any initiative, which impacts suppliers, do not forget to bring them into the
loop as early as possible. Communicate to suppliers about the outsourcing project
and the changes they will be expected to make on their end – such as sending
invoices to different mailing address or addressing them to a different person. Make
sure that the right point of contact has been identified at each supplier location and
communications are sent to the correct contact. Creating a help line and making it
available to suppliers for a period of time during the transition, where suppliers can call
in with any questions or concerns will go a long way in helping to create a seamless
transition.
9. Evaluating the Pilot Project Performance
Prior to embarking on the pilot project, develop key metrics with the service
provider, which will be used to evaluate the performance of the pilot. Some
widely-used metrics are number of invoices scanned and digitized per day,
accuracy of invoice data captured, average time taken to receive and approve an

invoice and percentage of on-time payments. These established metrics can be
compared with the actual performance halfway through the pilot and again at the
end to determine whether the project is on the right track and whether to enter into
a long-term contract with the chosen provider.
10. Monitoring Your Partner’s Activities
It’s tempting to think that once the long-term contract is in place and the
outsourcing partner is handling all invoices, the AP department does not have to
concern itself with those invoices. This is not the case. Just as evaluation of the
service provider’s performance during the pilot is critical, periodic monitoring of
performance and service levels is important to ensure continued success of the
project.

BancTec Profile
Website www.banctec.com
Founded 1972
Headquarters Irving, Texas
Number of Employees 1800+ Full time employees
Number of Customers 1600+ in 55 countries
(includes all software and hardware customers
worldwide as well as BPO services)
Key AP Outsourcing
Clients
Concentra, Hajoca, Cape Cod Hospitals, Bill &
Melinda Gates Foundation, Simplex, Linde Gas,
UltraLife, GateHouse Media, Sealy, Safety Kleen
Target Verticals Banking, Insurance, Government, Healthcare,
Transportation & Logistics, Utilities &
Telecommunications, Manufacturing
Awards/Recognitions 2012 FinTech 100
2011 FinTech 100
2010 FinTech 100
2008 and 2009 Blackbook of Outsourcing for AP
(Top Ten)
Client (Concentra) awarded PayStream ePayables
Excellence Award in 2010
Solution Name AP Automation
Frequency of Upgrades Every six months
BancTec is a global leader in business process outsourcing (BPO) and transaction
automation for the most demanding business challenges. The company
processes $3.5 trillion in transactions annually. Headquartered in Irving, TX,
BancTec has a large global footprint with clients spanning 55 countries. BancTec
operates 19 BPO centers in the United States and worldwide, leveraging a
common technology open platform to deliver reliability, security, and consistently
high levels of performance.
Providing payment and document processing solutions since 1972, BancTec
has consistently stayed ahead of the technology curve to better serve its clients.
BancTec’s history in managing payment processing and document processing
gives the company an in-depth understanding of client businesses, which
facilitates the transfer of critical business processes from the client to BancTec.
Starting in 1999 with the delivery of remittance lockbox services, BancTec
has expanded its BPO services to other financial transaction and document
management processes.
As part of the financial transaction portfolio, BancTec provides fully hosted invoice
processing and AP Automation services including mailroom processing, scan
and capture, receipt of electronic invoices (EDI, eInvoice, direct upload, email

and fax), automated workflow, electronic invoice archive, vendor portal and AP
administrative support.
BancTec’s AP Automation service provides a multi-tenant environment for AP
and purchasing automation and can be integrated with all major ERP systems. It
works to leverage and enhance the functionality of the ERP platform by utilizing
a disconnected data model to interface with ERP systems. A copy of required
subsets of master data is stored and refreshed periodically. The BancTec service
provides a web-based, modular procure-to-pay solution, with a wide range of
functionality from requisitioning and order management to invoicing and vendor
self-service. In addition, the solution is highly configurable and handles multiple
languages, currencies and tax calculations out of the box, with no programming
necessary. The BancTec solution also provides mobile functionality for clients on
the go.
BancTec partners with Palette, headquartered in Stockholm, Sweden, to provide
the leading software solution for end-to-end automation for each stage in the
AP process. Branded AP Master by BancTec, the automated workflow, approval
and reporting software is based on Palette Arena, and is offered by BancTec as a
hosted Software as a Service (SaaS) solution.
Invoice Receipt
BancTec supports the acquisition of invoices in multiple formats including paper, EDI,
XML, email, fax and PO flip invoices. All mail and packages are opened, bar coded,
attachments removed and sorted into work streams prior to scanning. Paper invoices
are scanned using BancTec manufactured IntelliScan XDS high-speed scanners and
data is captured using state-of-the-art OCR/ICR technology. Invoices are matched by
cascading logic and filtered into queues. Fully matched invoices can be passed straight
through to a client’s ERP for payment. Non-matching invoices flow to end users
based on suggested matching routines/flow proposals. The system suggests default
coding routines for non-matching invoices, which reduces the burden on AP staff and
approvers. BancTec is the only provider that provides an end-to-end service from
receipt of invoices to invoice booking, all hosted and serviced by a single vendor, which
offers advantages to their client base in that it ensures a high level of service.
Imaging and Data Extraction
BancTec scans all batched documents at industry standard levels (300 dpi) to
produce a high quality, double-sided, bi-tonal (black and white) digital image in
TIFF format for subsequent data extraction and document review process. During
the scanning process, an audit trail is included on the front of each document for
tracking purposes and each scan is reviewed automatically for quality. Documents
that fail the quality check are out sorted for further review, rescan or handling
via an exception process. All certified document images are then transferred to
the BancTec data capture application software for automated indexing and data
extraction.

Invoice data is captured according to the client’s defined business rules. Any
data that is not recognized automatically is entered manually to complete the
invoice record. All data is validated against data repositories such as the Open
PO file, Vendor Master, etc., utilizing BancTec standard look up capabilities and
checked for accuracy using client’s specific validation rules. Validated invoice
and exception data and images will be transferred electronically to AP Master.
Exceptions are processed using BancTec’s standard operating procedures
which flag exceptions prior to being transferred to the customer. In an effort to
increase Straight Through Processing, exceptions are analyzed to locate recurring
mistakes and new workflows can be easily created, ensuring continuous process
improvement.
Content Management
Data and images are available online for a period of 7 years and access to data,
images and workflow function commands can be accessed through a browser-
based secure https connection. Data and images are hosted on a mirrored,
high-availability storage system that is backed up daily. The AP Master software
includes a feature-rich query engine, built upon a state-of-the-art document
repository. All document data and metrics can be searched using a simple drop
down menu and all query results can be exported for offline research and retrieval
purposes. BancTec utilizes a disconnected data exchange model to interface with
ERP systems, so there is no direct access to the data repository from the client’s
ERP system.
Invoice data is transferred from BancTec’s processing center to a client’s back-end
ERP via an automated transfer agent that handles all bidirectional communication
in and out of the ERP. Files are continuously monitored and notifications are
sent if scheduled transfers are interrupted. Data transfers are scheduled per the
individual client’s requirements, with most transfers occurring on a daily basis.
BancTec’s supplier portal is standard and is available at no charge. Clients can
determine and assign secure vendor access to the portal. Vendors are granted
read-only ability on active AP invoices which include a color coded progress bar
for invoice status updates. The vendor portal provides a two-way communication
via a chat room environment with AP, in addition to full credit/debit memo and
invoice submission capabilities to support and expedite invoice exception
handling.
Matching and Workflow
The BancTec solution features an out of the box, highly configurable workflow
system for invoice approval and inquiry. The system provides default workflows for
all invoices based on the cascading matching routines that attempt to match PO
and non PO invoices to specific workflows and accounting proposals. Users can
quickly override the flow proposals and create ad-hoc workflows that can be based
on business specific variables such as amount limits, departments and accounting
codes, PO number, contract number, etc.

Approvers receive email notification when they have invoices to approve. The
BancTec system allows for email approval which negates the need to log into the
AP Master system, speeding up the approval process. Reminder settings are
configurable and invoices can be automatically routed to an approver’s supervisor
or routed back to AP if an approver fails to act within a specified interval. The
system provides roles and permissions-based access, which define the behavior
and appearance of the system as well as who has access to specific modules and
business data.
AP Master has robust reporting capabilities and includes a wide array of standard
and ad hoc reports that can be easily generated through user-defined, on-demand
searches. Reports can be exported to Excel for data analysis that can be utilized
to help make critical business decisions. AP analysts, managers, controllers and
other key business users can select data elements from checkboxes to report on
specific data of interest. Data can be formatted in a number of ways including
CSV for additional offline modeling or PDF for read-only publication. Audit trails
are easily accessed that track all actions and editing of documents in the system.

BancTec Case Study
GateHouse Media
Challenge
GateHouse Media, Inc., headquartered in Fairport, New York, is one
of the largest publishers of locally based print and online media in the
United States. The company’s portfolio of products, which includes
494 community publications and more than 250 related websites and
seven yellow page directories, serves over 233,000 business advertising
accounts and reaches approximately 10 million people across 21 states
on a weekly basis. With more than 150 locations receiving and coding
invoices, GateHouse Media decided to undertake a project to improve and
automate their accounts payable process, enabling them to reduce costs,
cycle times and manual processing.
Solution
Datrose, a US-based Business Process Solutions Company, was chosen by
GateHouse Media to conduct an analysis of its AP process, and was selected
to serve as lead vendor for the AP automation project. To form the technical
backbone of its AP automation solution, Datrose selected technology from
BancTec, including its high-speed IntelliScan scanners and enterprise-class AP
automation software, AP Master. Because AP Master is an application and not
a toolkit, integration required configuration only, not a lot of programming. In
addition, the solution seamlessly integrated with GateHouse Media’s existing
ERP systems, while the clear user interface and built-in reporting and metrics
make it significantly easier for staff and senior management to monitor the AP
process and make adjustments as necessary.
“When trying to decide whether to outsource the scanning or bring it in-
house, we evaluated what we wanted our department to be, IT or AP. The
Datrose/BancTec partnership allows us to focus on what we do best –
accounts payable – while they handle the scanning, and more importantly,
our users have really embraced the technology. It’s working very well
for us at GateHouse Media,”says Laura Williams, Director, Centralized
Accounting Services, GateHouse Media, Inc.
Result
The joint Datrose/BancTec solution enabled GateHouse Media to realize
the following benefits:

»
» 40% plus overall savings realized
»
» Streamlined process that allows invoices to go directly to AP
lockbox
»
» Invoice information is scanned and captured, eliminating manual
invoice entry
»
» Invoices are automatically sent to approvers via web-based
workflow system
»
» Users receive email notification alerts about invoices needing
special attention
»
» Greatly reduced expenses for overnight shipping as paper invoices
no longer have to be sent from each location to the central office
»
» AP staff as well as site personnel have increased visibility into
processed invoices
»
» A significant reduction in workload for central accounting
»
» A new process for critical invoice handling
»
» Reduced onsite storage of paper invoices

Questions to Ask Prior to Making a
Decision
»
» Process – Is the process a core component of our business?
»
» Skilled Staff – Do we have the required staff or can we hire the needed
people to manage the process or are we better off leveraging the expertise
of an outsourcing provider?
»
» Security of Data – This becomes extremely important when dealing with
financial processes. How comfortable are we handing over our data to an
outsourcer?
»
» Ability to Customize – Are our processes unique and cannot be handled
by a one-size-fits-all approach?
»
» IT Resources – Do we have the IT staff needed for hosting and maintaining
an in-house solution or should we consider a SaaS solution?
»
» Financial Resources – Do we have the budget to cover the upfront costs
associated with a technology solution?
»
» Control – Are we giving up any control if we decide to use an outsourcing
partner?

Evaluating Outsourcing Solution Providers
Selecting the right AP outsourcing partner can be tricky. It is critical to look at what
various outsourcing firms offer and how exactly those services line up with your
specific business needs. Below are some questions that can help organizations
find the outsourcing company whose offerings best suit their needs.
Company and Product Reputation
In addition to learning how long a company has been in business, it is helpful to
know whether accounts payables outsourcing is a core offering for the company
and to understand the growth plans and future vision of the service provider.
»
» How long has the company been in business? Since when has it been offering
accounts payable outsourcing services?
»
» What percentage of its business/revenue comes from APO?
»
» How is it funded? If it’s a public company, look at the prospectus.
»
» How many customers does the solution provider have and who are they?
»
» How does the company plan to grow and are there any mergers or
acquisitions on the horizon?
»
» How will the company manage growth and the resulting increased customer
demand on its systems?
Performance and Value
The solution provider must be able to deliver on its promises regarding systems,
scalability, security, service, and support.
»
» Does the solution provider provide Service Level Agreements (SLAs)? What
metrics are covered as part of the SLA?
»
» What security measures are in place to protect the integrity of client data?
»
» What training and ongoing support are provided as part of the solution?
»
» Does the provider promise an ROI?
Solution Delivery Model
Since different outsourcing firms offer different outsourcing tools, it is important
to look at exactly how the solution is delivered and how well it meets each
companies’needs.
»
» Does the solution provider offer the solution as licensed software or a
hosted model or a combination of both?
»
» What are the different modules of functionality available?
»
» Does the provider offer any configuration and customization of the solution,
as needed?

»
» How does the solution integrate with existing ERP/accounting applications?
Invoice Receipt, Scanning and Data Extraction
It is important to understand what hardware and technology the outsourcing
provider has at its processing center to handle incoming invoices.
»
» What formats of paper and electronic invoices can the provider accept?
»
» How scalable are the provider’s operations? What transaction volumes can
it handle?
»
» How quickly can invoices be entered into the system once they are received
at the solution provider’s processing center?
»
» What scanners are used in the processing center? What are the scanner
characteristics in terms of speed and quality?
»
» How data is extracted – OCR or manual data entry? What are the accuracy
levels?
Document Classification and Routing
Once documents are in the system, they need to be sorted, classified and sent to
the appropriate queue before any work can be done on them.
»
» How is invoice data validated against client back-end databases?
»
» How will invoices be classified into different queues and routed for
approval?
»
» How can business rules and thresholds be configured?
»
» Can certain invoices be prioritized for routing and approval?
Approval Workflow
Some outsourcing providers offer approval workflow functionality as part of the
solution, whereas others merely transfer the invoice image and information to the
client’s workflow system.
»
» Does workflow functionality to approve invoices and manage exceptions
come bundled with the solution?
»
» Can workflow be configured and changed within the system without
programming or IT effort?
»
» How are users notified about pending invoices?
»
» Does the solution have mobile functionality?
»
» What reminders and escalation procedures can be configured in the
system?
»
» How are invoices transferred to the client’s ERP and content management
systems?

The ability to track and measure performance is critical to monitor the success of
an outsourcing project.
»
» What reports come standard with the solution?
»
» Does the solution offer a wizard to create and save custom reports?
»
» How does the solution integrate with external reporting tools like Cognos or
Crystal Reports?
»
» Can the data be downloaded in multiple formats (.csv or .xls, for example)
for further manipulation?

Additional AP Functions Suitable for
Outsourcing
In addition to the front-end AP functions that have been discussed throughout this
report, there are other functions in the accounts payable process that can also be
outsourced. These include:
Check Printing and Mailing
While most organizations are moving towards automating the AP process on the
invoice receipt side, a significant number of business-to-business transactions
are still settled using paper checks. Outsourcing the check printing and mailing
process has a number of advantages, including security of payment data and the
physical checks themselves. Outsourcing companies also run address validation
and duplicate check processes on transactions and customize the checks with
their clients’logos and addresses. Additionally, check writing providers are able
to leverage favorable postage rates due to the high volumes they process, further
lowering costs.
Outsourcing the check printing and mailing process has a number of advantages
including:
»
» Increased security of documents
»
» Increased efficiency of print and mail processes
Figure 6
Methods Used to
Exchange B2B Invoices
Paper still dominates, 64
percent of invoices are
traded via paper.
64%
14%
13%
9%
Paper
E-Invoice
Email
Fax

»
» Ability to reconcile data from file receipt to mailing
»
» Increased visibility through online document viewing
»
» Ability to receive full postal discounts
»
» Elimination of bank reject charges
Expense Report Auditing
Scrutinizing expense reports and receipts is an almost fool-proof way to identify
and eliminate expense fraud. However, a lot of organizations tend to overlook the
importance of the auditing process, especially those with a small AP staff or one
with a large number of business travelers and high annual transaction volumes.
Outsourcing helps organizations take advantage of the technology and resources
of a third-party provider to overcome the hassles of fraud. Organizations can
choose to have all expense reports audited or specify the parameters to audit only
a portion of the reports submitted. Depending on client requirements, providers
can audit a percentage of transactions randomly, audit reports from specific
individuals or groups or scrutinize all transactions over a certain dollar threshold.
Benefits of outsourcing expense report auditing include:
»
» Increased control over employee spend and ensure compliance
»
» Proactively reduce waste, misuse and abuse
»
» Decrease audit timeline and redirect employee efforts to other tasks
»
» Ensure expenses are classified properly for taxes and capital expenses
Utility Payments
Although utility bills are cyclical and arrive in the mailbox at regular time intervals,
there can be significant variances between one bill and the next, unlike recurring
lease payments. A company that has multiple office locations, especially ones
that are geographically distributed can find it challenging to keep track of rate
plans, capture detailed usage and cost data and identify errors in the bill before
payment is made. Outsourcing companies take on the responsibility of receiving
bills, entering them into a central repository and running a series of checks against
the current bill and historical data to identify anomalies and errors – all prior
to a payment being made. Outsourcers will even handle billing discrepancies.
Benefits of outsourcing utility payments include:
»
» Improved processing time for utility bill payment
»
» Reduced late fees and shut-off notices
»
» Ability to electronically capture detailed consumption and cost data at the
meter level
»
» Produce usage reports for facilities, facility groups or enterprise level

Tax Compliance
It is often stated that there are only two certainties in life: death and taxes. Part
of the problem with taxes; however, are the uncertainties surrounding regulation.
Every enterprise in the U.S. must address the issue of sales and use tax. The
more goods and services a company buys and sells, determines the number
of tax jurisdictions in which it has nexus. The larger the customer base and the
greater their geographic disbursement, the more complicated the sales and use
tax collection and reporting becomes. Further compounding the issue, tax rates
are constantly changing. Given these complexities, managing the tax compliance
process can be time consuming and costly. The burden of tax penalties and
audits can be even more costly if the job is not done correctly. Outsourcing
providers take the burden of ensuring tax compliance and ensure that the most
accurate and up-to-date rates are utilized. Benefits of outsourcing tax compliance
include:
»
» Improved control, accuracy and timeliness of tax functions
»
» Improved efficiency and reduced tax risk
»
» Enhanced visibility and control over the entire process
Post Payment Audits
In spite of all the due diligence and the technology in place to identify erroneous
payments before they go out the door, any company that has been through a
recovery audit is aware that there is always money to be found by looking at
historic transaction data. Missed discounts, duplicate payments, and un-captured
rebates go unnoticed each day. The AP department usually does not have the
time or the resources to audit past transactions in an effort to identify sources of
profit leakage. Recovery audit service providers use sophisticated technology and
algorithms to identify these issues, some providers will even collect the money for
your company on your behalf. The added benefit of post payment audits is that
clients typically pay a percentage of monies collected based on errors identified,
which means no out of pocket up front expenses are incurred. Benefits of post
payment audits include:
»
» Recover funds paid in error
»
» Prevent future payment errors
»
» Enable management to have confidence AP measurements
»
» Increase bottom line profitability

Research Methodology
The findings in this report are based on the results of PayStream Advisors 2012 Invoice
& Workflow Automation Adoption and Electronic Invoice surveys. Participants in the
surveys included more than 300 AP professionals. Based on our experience and the
number of respondents, the survey has a confidence level of +/-5 percent.
About PayStream Advisors, Inc.
PayStream Advisors is a technology research and consulting firm that improves the
way companies plan, evaluate, and select emerging technologies to achieve their
business objectives. PayStream Advisors assists clients in sorting through the growing
complexities of IT applications related to business process automation with the goal
of making objective, analytical, and actionable recommendations. Wherever business
process automation technology is an issue, PayStream Advisors is there to help. For
more information, call (704) 523-7357 or visit us on the web at www.paystreamadvisors.
com.

Optimizing Accounts Payable Automation Solution - Whitepaper by BancTec - BPO Services Provider

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