Invoice Automation Adoption Survey 2011 Paystream

IWASURVEYREPORT

Invoice Automation Adoption Survey ReportBased on the Results of PayStream’s Survey

www.paystreamadvisors.com

Q32011

Featuring Insights on:

AP Challenges and Automation Goals

Reliance on Paper for Invoice Receipt

Front-end Imaging Adoption

Automated Workflow Adoption

Impact of Company Size

Underwritten in part by: Basware

Invoice Automation Adoption

© 2011 PayStream Advisors, Inc. • [email protected] • www.paystreamadvisors.com

Table of Contents

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Table of ContentsIntroduction .........................................................................................1 PayStream Invoice Automation Adoption Survey ..............................................1 Survey Methodology ..........................................................................................1 Research Library .............................................................................................. 1

AP Challenges and Automation Goals..............................................2 Key Insights ......................................................................................................2 Factors Driving Interest in Automation ..............................................................2 Top AP Automation Goals for 2010 ................................................................... 3 Surge Toward Adoption .................................................................................... 4

Reliance on Paper for Invoice Receipt .............................................5 Key Insights .....................................................................................................5 Paper Chase ..................................................................................................... 5 Barriers to Invoice Automation .......................................................................... 6

Front-end Imaging Adoption ............................................................. 7 Key Insights .......................................................................................................7 Usage of Imaging Solutions ..............................................................................7 Barriers to Imaging Adoption .............................................................................8 Maturity of Imaging Solutions ...........................................................................8 Automated Data Capture with Imaging Solutions ..............................................9

Automated Workflow Adoption ....................................................... 10 Key Insights .....................................................................................................10 WorkflowAdoption ..........................................................................................10 BenefitsofAutomatedWorkflow .....................................................................11

Impact of Company Size .................................................................. 12 Key Insights .....................................................................................................12 ClassificationbyCompanySize ......................................................................12 Invoice Processing Costs ................................................................................13

Solution Providers Profiles ..............................................................14 BaswareProfile ...............................................................................................14

About PayStream Advisors .....................................................15

Introduction


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PayStream Invoice Automation Adoption Survey

IntroductionFront-endinvoiceautomationandautomatedworkflowadoptionarethenewfrontiers,asmorecompaniescatchontothemanagementbenefitsofelectronicdataprocessing versus the back-end archiving of paper. With more than 84 percent of all invoices still received on paper there’s still a long way to go, but electronic invoicing was top of mind for AP professionals in this year’s Invoice Automation Adoption Survey, and 78 percent of those surveyed said they were likely to act on their top priority in 2011.Anotherencouragingsign:Thenumberofcompaniesindicatingthattheyweresatisfiedwith their old paper systems and not considering electronic invoicing at all declined tojustalittleover10percentfromalmosttwicethat.Thesearesignificantresults,underlined by the fact that the number of companies using front-end automated data capture for the majority of their invoices doubled, while the number of companies processing most of their invoices manually decreased by almost the same margin.In this report, the analysts at PayStream Advisors examine electronic invoicing, imaginganddataextractionandautomatedworkflowsolutionsatUS-basedenterprises. The analysis in this report is based on survey results and more than eightyearsofresearchfindings.

PayStream Invoice Automation Adoption SurveyPayStream Advisors conducted its “Invoice Automation Adoption Survey” in the second quarter of 2011 and developed this report to highlight the overall trends that are shaping the rapidly evolving AP automation space. The “Invoice Automation Adoption Benchmarking Report” is designed to: - Helpaccountingandfinancialpractitionersfamiliarizethemselveswiththe electronicinvoicingandautomatedworkflowlandscape; - Enable them to better understand the extent of adoption of the various forms of accountspayableautomation;and - Allow companies to benchmark their operations against similar businesses.

Survey MethodologyThefindingsinthisreportarebasedontheresultsofPayStream’s“InvoiceAutomation Adoption Survey 2011.” Participants to the survey included approximately 300APandprocurementprofessionalsintheretail,healthcare,insurance,financialservices, automotive, telecommunications, defense, manufacturing, consumer products, utilities, and automotive sectors. Based on the number of respondents, we believethatthesurveyhasaconfidencelevelof+/-5percent.

PayStream Research LibraryFor more information on accounts payable automation, go to our corporate research libraryatwww.paystreamadvisors.com,whereyouwillfindanumberofreports,including: - Electronic Payments and P-Card Survey: Bottom Line Savings from Procurement to Finance - Imaging&WorkflowAutomation-TheEmergingInvoiceManagementRevolution - Electronic Invoice Management: Your Passport to Paperfree Accounts Payable

AP Challenges & Automation Goals


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Key Insights

AP Challenges and Automation GoalsKey Insights

• The biggest invoice management challenges remain an overreliance on people and paper-based processes, and the high number of discrepancies and exceptions associated with such a system.

• Emerging concerns include discount capture and visibility of spend.• While increasing electronic imaging remains a top goal, followed by

automatedapprovalworkflow,implementationofinvoiceimagingandERPapplicationupgradesbothshowedsignificantmomentum.

•Factors Driving Interest in AutomationAlthoughinvoiceautomationremainspredominantlyaccuracyandefficiencydriven,momentum is building for broader application as a management information tool providing greater visibility into spending, improved cash management, and an increased ability to capitalize on early-payment discounts.Significantprogresshasbeenmade,yearafteryear,inprocessimprovements–withonly 43 percent of practitioners surveyed citing manual data entry as a challenge, compared with 51 percent in 2010. That’s most likely due to a corresponding increase in the number of companies using front-end imaging to eliminate paper invoices.

Figure 1CHALLENGES IN THE INVOICE MANAGEMENT PROCESS

Companies are makingsignificantstrides in reducing manual data entry

Travel & Expense Management Benchmarking




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Top AP Automation Goals for 2011

Top AP Automation Goals for 2011Building on a tactical base of productivity and process improvement, today’s practitioners see the strategic value of the improved analytics, cash management, and vendor portal possibilities created by converting ink on paper to searchable electronic data. Although 84 percent of all invoices at surveyed companies are still received in hard copy, or via fax and email, there is an accelerating trend toward converting analog data to digital as quickly as possible, or ideally driving paper out of the system altogether through vendor self-service portals.Top-ranked automation priorities for 2011 include (percentages in Figure 2 do not add up to 100 percent as companies could select up to three options):

• Increasing electronic invoicing, a perennial favorite, was a priority for 37 percent of this year’s respondents, about the same as a year earlier, reflectiveoftheongoingeffortbythosewhohavealreadyembracedeInvoicing to make the most of their investment.

• Automated approval of workflow for invoices, a logical next step for companies that have implemented front-end electronic invoice systems, is abellwetherofamaturingprocessascompaniesbegintoreapthebenefitsof their AP automation investment. At 18 percent, this was the second-most frequently listed automation priority.

• Implementation of invoice imaging,thefirststepintheautomationofapaperprocess, surged to 16 percent from 11 percent as more companies stopped thinking about investing in invoice automation and actually made the leap.

Figure 2TOP FINANCIAL AUTOMATION GOALS FOR 2011

Increased focus on invoice imaging





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Top AP Automation Goals for 2011

While the adoption of AP automation technologies has been limited to larger companies until recently, we are evidencing this trend trickling downward to small and medium-sized businesses because:

• A competitive business environment is prompting organizations, especially small and medium-sized ones, to focus on reducing processing costs and increasingefficienciesassociatedwithinvoicesandemployeeexpenses.

• Streamlining the AP process has become vital in a tough economy where adequatecashflowandgreatercontroloverpayablesarecriticaltomaintaining liquidity and sustaining business operations.

• An increased interest in early payment discount capture is driving smaller organizations to investigate tools and technologies that enable them to compress their invoice receipt-to-approval cycles.

• The evolution of on-demand and Software-as-a-Service (SaaS) delivery modelshassignificantlyloweredtheupfrontcostofimplementingAPsolutions and reduced the hassle of maintaining them.

• The convergence of electronic invoicing and front-end invoice imaging presents organizations with a single, comprehensive solution that can manage both paper and electronic invoices through a common process.

• Value added-services delivered by solution providers around supplier recruitment have enabled buyer organizations to bring suppliers onboard more quickly.

Surge Toward AdoptionAlmost 80 percent of the executives surveyed said they had either already launched an invoice automation initiative or planned to within a year. Even more encouraging, the number of executives planning to implement within six months almost doubled to 21 percent from the 2010 survey.

Figure 3TIME FRAME FOR IMPLEMENTATION OF TOP AUTOMATION INITIATIVE

More projects underway, even more on deck



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Key Insights

Reliance on Paper for Invoice ReceiptKey Insights

• Paper,andpaperequivalents–suchasemailandfax–arestillthepredominant methods for conveying supplier invoices. But automation is making great strides. Paper invoices dropped below 70 percent of total invoices in our 2011 survey, down from 77 percent a year ago.

• Lack of supplier buy-in, internal resistance to change and system integration are the primary roadblocks.

Paper ChasePaper invoices still dominate the AP landscape, but when AP practitioners say that in a single year they’ve seen the volume of paper invoices arriving in the mail drop from 77percentofallinvoicesinthesystemtojustalittleovertwothirds,that’ssignificant.Only about half of vendors switching from paper made the quantum leap to electronic invoicing, portals, and EDI. The others were just saving postage by switching to email or fax. But when you combine that trend with the fact that 40 percent of companies surveyed nowdigitizepaperinvoicesuponreceipt,you’vegotabonafidetippingpoint.For more information on eInvoicing, download PayStream’s recently updated complimentary survey on the subject from our website at www.paystreamadvisors.com.

Figure 4BREAKDOWN OF INVOICES VIA RECEIPT METHOD

Paper invoices are still prevalent, but they’re waning





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Barriers to Invoice Automation

Barriers to Invoice AutomationElectronicinvoicingismoreefficientthanpaper.Sowhyispapersoprevalent?PayStream analysts asked practitioners, who offered the following insights:Business Practices Change can be frightening. Invoice automation heralds a tremendous change in the way buyers and suppliers conduct business. Internal resistance to change and senior management perception that current paper-based processes work, even though theyarenotthemostefficient,meanthatsolutionprovidersmustclearlyidentifythetangiblebenefitsofautomationandcommunicatethemeffectively.Technical Challenges Once a formidable obstacle, the challenge of integrating new applications with legacy systems is becoming less daunting as older legacy systems are replaced with more accommodating architecture. Most applications on the market today integrate easily with systems on both the buyer and supplier sides, resulting in secure and seamless datatransfer,aswellasstreamlinedprocessesandmoreefficientworkflows.Supplier Resistance Ifgettinginternalbuy-inoninvoiceautomationissometimesdifficult,gettingsuppliersto submit invoices electronically can be like pushing a rock up a hill. Technology providers offering supplier onboarding services are at a competitive advantage.



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Key Insights

Front-end Imaging AdoptionKey Insights

• Asignificantsurgeinthepercentageofcompaniesusingfront-endimagingsolutions suggests a sea change in AP business processes.

• Demand for electronic invoicing is likely to increase with paperless processing approaching 50 percent.

• Back-end scanning and storage remains constant at just under 20 percent, suggesting a growing market awareness of the lower costs and increased productivity achieved by eliminating paper at the front-end.

• Faced with years of positive results from early adopters, the number of companies with no plans to implement an imaging solution dropped to 18 percent, from 22 percent.

Usage of Imaging SolutionsWith 82 percent of surveyed companies indicating that they have already adopted or areatleastconsideringanimagingsolution,thedaysofpaperinvoicesmayfinallybenumbered, which probably explains why the percentage of companies that only use imagingtoarchivepaperinvoicesatthebackendwasflatinthefaceofanalmosttenpercentage point increase in front-end imaging.Back-end imaging remains useful for eliminating physical storage requirements and facilitating document retrieval. These days, however, companies are looking for the more dramatic process improvements and analytics facilitated by converting invoices to digital form as they enter the system.

Figure 5ADOPTION OF IMAGING TECHNOLOGIES

Back-end holds steady, but front-end imaging is on the rise)





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Barriers to Imaging Adoption

Barriers to Imaging AdoptionThe marked growth in lack of executive sponsorship, the barrier over a quarter of thecompaniesreport,reflectstheneedfortheinformingof,andbuy-infrom,theexecutive suite. Of course, as the budget resources free up (one third less cite budget constraints as a barrier than last year), lack of budget still remains the biggest barrier to imaging adoption.

Maturity of Imaging SolutionsPayStreamresearchidentifiedadipinimplementationsoverthepastyearasthe percentage of imaging solutions in service for a year or less dropped to 24 percent,from29percentintheprioryear.Systemsinusemorethanfiveyearsalsodecreased,however,suggestingafive-yearreplacementcycle.

Figure 6BARRIERS TO THE ADOPTION OF IMAGING SOLUTIONS

As purse strings loosened, a lack of executive sponsorship emerged as a significantconcern

Figure 7MATURITY OF IMAGING SOLUTIONS

Decrease in percentage of solutionsoverfiveyears old suggests 5-year replacement cycle

Automated Data Capture with Imaging SolutionsOne reason for the recent implementation surge in front-end imaging solutions may be recent improvements in data capture tools. A year ago, almost 40 percent of companies using front-end imaging had to manually key data on more than 75 percent of scanned invoices, with almost half of all users having to correct invoices more than half of the time. What a difference a year makes. The 2011 survey found a dramatic jump in accuracy, with only 23 percent of users still experiencing that level of error, and 35 percent reporting 100 percent accuracy.

With accuracy improving, the percentage of companies relying on automated data capture — Optical Character recognition (OCR) or Intelligent Data Recognition (IDR) — for more than half of their invoice volume increased to 21 percent, from 13 percent in the previous year, and the overall percentage of companies using front-end imaging increased to 35 percent from 30 percent.





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Automated Data Capture with Imaging Solutions

Figure 8FRONT-END IMAGING WITH MANUAL DATA ENTRY

Increased electronic capture accuracy reduces need for manual corrections

Figure 9FRONT-END IMAGING WITH AUTOMATED DATA CAPTURE

As technology improves, companies aregainingconfidencein invoice image capture

Automated WorkflowAdoption


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Key Insights

AutomatedWorkflowAdoptionKey Insights

• Automatedworkflowsolutionsarematuringastheshareofcompaniesemploying or deploying systems rapidly approaches 50 percent.

• Growth in this category, to date, has been operations driven, with quicker approvalofinvoicesbeingthemaincitedbenefit,followedbylowerprocessing costs and increased productivity.

• Emerging opportunities include improved visibility over liabilities, better regulatory compliance, and reduction in interest and late payment penalties.

WorkflowAdoptionWhen three quarters of AP professionals surveyed say they’ve implemented an approvalworkflowsolutionorareatleastconsideringit,that’sanideawhosetimehascome, especially when you consider that the naysayers - those who didn’t have any planstoimplementaworkflowsolution-havedwindledfrom36percentto27percentin just a year.One reason for the rapid decline in skeptics: Glowing reports from early adopters, who reportacross-the-boardworkflowimprovements,particularlyquickerinvoiceapprovals,increased employee productivity, and lower processing costs.

Figure 10ADOPTION OF WORKFLOW TECHNOLOGIES

Documented results are winning over skeptics

BenefitsofAutomatedWorkflowAnyonestilldealingwithskepticswhodoubttheROIofautomatedapprovalworkflowshould take heart from PayStream’s 2011 invoice automation survey results. Not only did 75 percent of all adopters report quicker invoice approval, but many were able to increase employee productivity and lower processing costs. In addition, 30 percent reported improved visibility of liabilities, 18 percent reported a reduction in late payments and penalties, and 15 percent reported better regulatory compliance. That should turn heads in the C-Suite.



Automated WorkflowAdoption


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Benefitsof Automated Workflow

Figure 11BENEFITS OF APPROVAL WORKFLOW

Adopters looking to win over executive champions with improved visibility of spend and improved compliance



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Key Insights

Impact of Company SizeKey Insights

• Mid-sized companies have automated at the same pace as their larger peers, except when it comes to back-end imaging.

• Small companies, where AP personnel tend to wear a variety of hats, are showingadisproportionatefondnessforautomatedworkflowsolutions.

• Large companies, with their greater resources, not surprisingly lead the way.

ClassificationbyCompanySizeWeclassifiedcompaniesthatparticipatedinthesurveybasedonannualrevenuestoidentify whether this parameter had any effect on the functioning of the AP department as well as the organization’s adoption of technology. For further analysis, organizations thathadlessthan$500millioninrevenueswereclassifiedasSmall,thosewithrevenues between $500 million and $2.5 billion were Medium, and companies with revenues over $2.5 billion were categorized as Large. Almost two thirds of survey participants (63 percent) were from Small companies, 23 percent were from Medium companies, and the remaining 14 percent were from Large companies.

Figure 12ADOPTION OF IMAGING AND WORKFLOW TECHNOLOGIES BY COMPANY SIZE

Small companies quick to embrace automatedworkflow

Invoice Processing CostsOne of the inconvenient truths of manual systems is that it is hard to accurately calculate the average cost of processing an invoice. Only about half of the companies in our survey were able to answer this question. Of those that did, it was not surprisingtofindaconsiderableeconomyofscalebetweenbigandsmallcompanies.More surprising was the fact that big and medium-sized companies were statistically identical. This may be because the two categories are at similar points in the invoice automation process. Supporting this hypothesis is the fact that small companies, which admittedly have the most room for improvement, showed the biggest year-over-year drop in average invoice processing cost, although averages dropped across the board.





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Invoice Processing Costs

Figure 13PROCESSING COSTS BY COMPANY SIZE

Big companies have an advantage, but small companies are closing the gap.

Basware


BaswareSolutionProfile

SolutionProfile

Basware is the global leader in purchase-to-pay solutions with more than 1,000,000 users in over 60 countries. The Basware Open Network for e-invoice and purchase message transactions today connects more than 320,000 companies globally. With Basware, an organization can reduce the cost of buying and paying for goods and services and gain visibility and control of its entire spending process by automating manual processes, from sourcing, contract management, purchasing and supplier collaboration, to invoice automation. Basware solutions and services enable a company to improve its cash position, optimizeworkingcapitalandmaximizetheagilityofitsfinanceoperationacrossthepurchase-to-pay cycle. The solutions are distributed and implemented, either on site orasaservice,inEurope,theUS,andAsia-PacificthroughanextensivenetworkofBaswareofficesandbusinesspartners.

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Headquarters Global HQ: Espoo, Finland, NA HQ: Stamford, CT

Founded 1985

Website www.basware.com

Employees 1,000

Number of Customers 1,500

End Users 1,000,000+

Industry Segments All

Partners/Resellers Basware has a network of partners and resellers located in North America and worldwide.

Awards/ Recognitions

Best EIPP Provider by Global Finance Magazine, Accounts Payable Innovator at Financial-i Awards Top Innovator in Annual Supply & Demand Chain Executive 100 Awards, 2010 Software Magazine Top 500 Software Companies, Green Supply Chain Award by Supply & Demand Chain Executive

Table 2BASWARE COMPANY AND SOLUTION INFORMATION

About Paystream


About PayStream Advisors, Inc.PayStreamAdvisorsisatechnologyresearchandconsultingfirmthatimprovesthewaycompanies 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.

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