"By reading this white paper, SAP customers can learn how to: - Address most common accounts-payable problem areas including liabilities, process control and visibility, approvals, exceptions, and manual processing. - Minimize the impact of processing paper through utilization of document-archive management and OCR/IDR."

1. Pa
Pay tream A D V I S O R S
WHITE
PAPER
IWA
Imaging & Workflow Automation
A White Paper on SAP ® Invoice Management by OpenText
Featuring Insights on...
Pain Points in
Accounts Payable (AP)
What is Imaging & Workflow
Automation (IWA)?
Invoice Handling
Best Practices
IWA and Intelligent
Document Recognition
SAP Invoice Management
by OpenText
For more information
Call your SAP representative or
http://www.sap.com/solutions/solutionextensions/invoice-management/index.epx
Q3
2009
www.paystreamadvisors.com

2. Introduction
Imaging &
Workflow
Automation
“Doing more with less” has become the mantra of the day. In the current recessionary
economic environment, organizations are constantly being challenged get more done
Introduction with fewer resources. Accounts Payable (AP) is no exception. AP departments now
have to process more invoices and pay them faster, all with a smaller staff. And the
biggest stumbling block to accomplishing this has been our continued reliance on
paper-based invoices and people-based processes. We have put men on the moon
What will you and we might even colonize Mars some day, but removing paper from the finance
get in this department appears to be out of reach in the near future.
White Paper?
What challenges are
PayStream Survey Says!
company’s facing in PayStream Advisors conducted its “IWA Adoption Survey” in the last two quarters
their current paper- of 2008 to highlight the overall trends that are shaping the rapidly evolving
based AP operations? AP automation space. The Adoption Survey throws light on the pain felt in the
What best practices AP department. We asked respondents to rate the pain caused by certain AP
and technology processes, on a scale of one to five where five was the highest pain. Manual data
options are available
to address these pain
entry, matching errors and exceptions and routing invoices for approval emerged
points? as the most painful, in that order. These findings are very similar to the responses
What is imaging and
from earlier surveys conducted by PayStream, indicating that there is tremendous
workflow automation potential for improvement by automating the front-end of the AP process - namely
(IWA) ? invoice receipt, matching and approval workflow.
What benefits have
companies achieved
Imaging & Workflow Automation
from implementing Until corporate America goes completely paperless, we need a better way to
IWA? manage the tons of paper that we receive every day. A significant shift is beginning
How can SAP to shake traditional AP operations, starting with the search for automation options
Invoice Management that help them address the hassles inherent to people and paper-based activities.
by OpenText help Our research indicates that Imaging & Workflow Automation (IWA) solutions that
you streamline the
invoice receipt-to-pay
streamline the invoice receipt-to-pay cycle have matured and become mainstream
process? technology and are delivering tangible benefits in the invoice processing cycle.
We asked respondents to rate the pain associated with each of the following
activities on a scale of 1 to 5, where 5 is the highest. Results are a weighted
average of all responses.
Inability to accurately
Figure 1 forecast liabilities 2.57
PAIN POINTS IN
AP OPERATIONS Lost or missing 2.59
The front-end invoices
of the invoice
receipt-to-pay Lack of visibility across
cycle causes the 2.71
invoice-to-pay process
most pain for AP
operations. Routing of invoices
3.08
for approval
Resolving errors
and exceptions
3.17
Manual data
entry
3.27
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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3. Imaging &
Workflow What is Imaging & Workflow Automation?
Automation
IWA solutions compress the invoice receipt-to-pay cycle by enabling organizations to
convert paper invoices into digital images, store them in a central repository for rapid
IWA Universe retrieval, and extract data from them to enhance invoice matching, approval and
posting. IWA solutions may provide document and data capture, workflow, or both,
in order to create an end-to-end imaging and workflow solution that integrates with
enterprise and line-of-business applications.
Components of the IWA Universe
The IWA universe can be defined as follows:
Invoice Receipt
This is the hands-on process that is necessary to prepare paper invoices for
scanning and electronic access. Steps may include removing invoices from
envelopes, removing staples, and making photocopies of smaller items, if required.
In some cases, invoices need to be manually sorted into different batches (by
cost center, business unit, vendor type, etc.), whereas some solutions do this
automatically. Sometimes blank separator pages need to be inserted between
invoices and their attachments.
Document and Data Capture
This is the process of converting paper invoices and other transaction-related
documents (e.g., proofs of receipt) into digital images and index data. Document
scanning and data extraction could be centralized or remote based on the
organization’s needs. Specific steps include scanning, image enhancement, data
extraction based on bar codes, optical character recognition (OCR), and intelligent
document recognition (IDR) and validation, most of which are handled automatically
by the solution being used. In some cases manual data entry or review of extracted
data is required.
Figure 2
IWA UNIVERSE
IWA solutions
improve the invoice-
receipt to payment
cycle by streamlining
how organizations
receive and approve
invoices and make
payments
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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4. Imaging & Vendor Portal
Workflow Most IWA solutions come bundled with a vendor portal, which suppliers can use to
Automation submit invoices electronically. Suppliers have the option of selecting the method that
best suits them from a range of electronic submission options; enter data manually
in the portal, perform purchase-order flips (convert a PO into an invoice), or browse
IWA Universe
and add documents from accounting systems. The vendor portals are also configured
with validation checks and buyer-defined tolerance levels to check invoices for
missing information and exceptions. Suppliers are immediately notified about
Benefits of invoices that fail the validation criteria and are asked to correct the exceptions before
the invoice is forwarded to the AP department.
IWA
Reduce processing Content Management
costs; This refers to the delivery, storage, management, and disposition of electronic
Increase efficiency documents and index data. Some IWA solutions come bundled with a central
and productivity; repository that can store invoice images and data while others rely on third-party
Compress invoice content management solutions for this purpose. The content management system
receipt-to-pay cycle integrates tightly with clients’ existing ERP or back-end accounting systems to enable
Reduce errors seamless retrieval of documents from within the client system to users with the
and accelerate appropriate access rights.
discrepancy
resolution; Workflow Management
The value of an IWA solution lies in its ability to route invoices for review and
Increase early
payment discount approval. Workflow management capabilities handle the electronic approval of non-
capture; purchase-order-based invoices as well as the resolution of any exceptions related to
Strengthen vendor PO-based invoices. Most solutions allow the creation and maintenance of workflows
relations; through a menu-driven, easy-to-use interface, which can be managed by business
Improve cashflow administrators, without the involvement of the IT department. Tasks and pending
forecasting abilities; invoices can be routed to various individuals within the organization according to
Improve visibility predefined business rules. Common features include automatic notifications to users
and control; when specific actions are required, reminder messages, and escalation procedures
Lower storage and based on approval hierarchies.
retrieval costs;
Reporting and Analysis
Improve ability to audit
Analyzing key invoice receipt-to-pay metrics and the ability to monitor individual
invoices and spend;
users’ actions for quality control and load balancing is a key part of implementing an
Enhance ability to IWA solution. Typical reporting and analysis tools include the generation of standard
comply with regulatory
requirements. and ad hoc reports detailing invoices pending approval, past due invoices, and
average invoice processing time. Some solutions offer robust reporting capabilities
bundled with the IWA solution, while others only allow for download of transactional
data to third-party reporting tools.
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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5. Imaging &
Workflow Invoice Handling Best Practices
Automation The key to successful AP automation lies in the redesign of invoice and payment
management processes and a strong strategy to leverage the available technology
Best Practices to meet each organization’s specific business requirements.
Invoice Receipt
There is no doubt that paper invoices are the enemy of efficiency in the AP
department. This challenge is further compounded by the fact that invoices are
rarely sent directly to the AP department. In a lot of cases, suppliers send invoices
to buyers in the purchasing department or field approvers. Sometimes the invoice is
sitting on an approver’s desk for two to three weeks, without even being entered into
the accounting system. Worse, some companies don’t even have a formal policy that
specifies where invoices should be sent.
This results in a number of problems. Senior management does not have visibility
Invoice to all the company’s outstanding liabilities when making investment and borrowing
Receipt Best decisions. Suppliers could stop sending inventory or put your company on credit hold
Practices because invoices are not paid on time. This also increases the potential for duplicate
Centralize invoice
invoices if the supplier sends a second invoice.
receipt; Centralization is the way to go
Institute a formal A formal policy mandating that all invoices should be sent to the AP department is
policy; the first step in addressing this issue. Respondents to PayStream’s “IWA Adoption
Notify suppliers where Survey” understand the value of centralization, with more than two-thirds (67
to send invoices; percent) of respondent companies receiving and paying their invoices from one
Leverage front- central location).
end imaging and
e-invoicing. When placing an order itself, provide the supplier with the address where the
invoice should be mailed. Once invoices are received, they can be entered into the
accounting system, with visibility to all the relevant parties.
Taking it further with imaging and e-invoicing
Front-end imaging ensures that invoices enter the system quickly and are available
to all the parties immediately, irrespective of where they are located. Combining
imaging with automated data capture adds further benefits in terms of quicker entry
of data and fewer errors.
Figure 3
NATURE OF AP
DEPARTMENT
Companies that
had centralized AP
operations dominated
the survey.
67% 8% 25%
Centralized Partly Decentralized
Centralized
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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6. Imaging & An electronic invoicing solution goes a step further in streamlining the invoice
Workflow receipt process. All invoices are submitted via a central solution and go through
Automation stringent validation rules – is the PO number valid, is the invoice number a
duplicate, does the invoice have an approver name on it, etc. If any of the invoices
fail to satisfy the validation criteria, the supplier is notified immediately and asked to
Best Practices
correct the error on the invoices.
In addition to increasing visibility and access to the invoices, this also ensures that
only clean invoices come into the AP department for processing. Another advantage
of this is that the clock on discounts starts ticking only after all the exceptions on the
invoice have been rectified.
Invoice Routing
The AP department typically deals with two types of invoices – purchase order (PO)
Invoice based invoices and non-PO invoices. PO invoices go through a two or three way
Routing Best match before they can be paid whereas non-PO invoices need approval from the
Practices appropriate person in the organization. Sometimes even PO invoices might need to
reviewed by an approver if they fail the match process.
Identify approvers by
type of invoice; What happens in most organizations is that invoices that could not be forwarded
Update approver lists to the appropriate user for review and approval end up in an “exception queue” or
periodically; “red light area” and these exceptions have to be manually resolved by the AP staff.
Train AP operators on It can take days or even weeks for some of these exceptions to be resolved, which
approval chains; significantly lengthens the invoice receipt-to-pay cycle.
Leverage automated
workflow solutions.
Formalizing the Process
Identify all the people in the organization who can approve invoices. The approvers
can be classified by the types of invoices they can approve – invoices from a
specific vendor, certain spend types, up to a dollar limit, for example. All AP
employees who will route invoices for approval should have a copy of the list and be
familiar with who should review what type of invoices. A similar list should be made
identifying the appropriate persons who would be responsible for collaborating with
the suppliers or buyers to resolve exception invoices.
Make sure that these lists are updated periodically or when employees leave the
organization and ensure that old lists are collected and destroyed when new lists
are made.
Taking it further with automated workflow
Organizations can further streamline this process by leveraging an automated
workflow solution. In this case, the approver list is maintained and updated in the
automated workflow solution itself. Invoices, once entered in to the solution, will be
routed to the required approver automatically, based on pre-defined business rules.
The business logic is typically configured at the time of solution implementation and
can be updated as needed.
Employees who have invoices pending their approval receive email notifications
with links to specific invoices. Users have the option of either approving the invoice
directly from the email itself or they can log into the system to view more details
about the invoice. Workflow solutions also come bundled with reminder and
escalation features. If no action is taken on an invoice within a certain period of
time, either a reminder can be sent to the employee or a message can be sent to
the employee’s manager. This ensures timely processing of invoices.
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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7. Imaging &
Workflow IWA and Intelligent Document Recognition
Automation
Tools and technologies that facilitate the extraction of information from scanned
invoice images have had an interesting lifecycle, starting from template-based
IWA and IDR optical character recognition (OCR) to free-form recognition and more recently,
intelligent document recognition (IDR).
Template-Based Recognition
Template-based OCR works by defining zones – x and y coordinates or bounding
boxes – for each field that needs to be captured. The image snippet for each zone is
then sent through OCR and the resulting data is used to populate the specific data
field. Some template-based technologies also utilize text or image-based anchors
that allow zones to “float,” which further improves accuracy as pages tend to shift
slightly when being scanned. Template based recognition works well for structured
forms, however for invoices it requires one template for each vendor’s invoice layout.
This is cumbersome and tedious as vendors also tend to change their document
layout.
Free-Form Recognition
Free-form image technology relies on user-defined keywords, rather than search
boundaries, to recognize and capture required data. Once a keyword is located,
nearby data is examined until other keywords are found. For example, if “purchase
order number” is the keyword phrase, the software searches data around those or
similar words in the document to identify and populate the PO number field.
Typically, free-form image recognition rules include directional clues as well. The
directional rules instruct the software to search in a particular direction relative to
the keyword(s) for other required data. Free-form recognition can be valuable when
handling invoices that may not be captured as effectively using template-based
recognition. Further, there is no set-up time involved, and the rules can be tuned as
required.
Intelligent Document Recognition
The term Intelligent Document Recognition (IDR) denotes a collection of
technologies aimed at extracting information from documents. Going beyond
template and free-forms recognition it comprises sorting and classification
technologies as well as automatic learning algorithms.
All IDR systems extract information without the system having to learn the layout
of the invoice. Rather the systems learn by reviewing a relatively small number of
invoice samples. This helps them scale to large invoice volumes and widely varying
document layouts without requiring a human operator to specify a template for each
one, or explicitly create and tune an extensive library of keywords.
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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8. Imaging &
Workflow SAP® Invoice Management by OpenText
Automation
Given the need to overcome the hassles associated with manual and paper-based
processes and the proven ability of IWA solutions to deliver tangible improvements
Solution Profile in the AP space, organizations are actively looking for solutions that address all their
invoice receipt-to-pay issues. One solution provider in particular, SAP, is attracting
attention based on the ability of its solution, SAP Invoice Management by Open Text,
to provide an end-to-end solution for invoice receipt and approval.
SAP Invoice Management by OpenText
With approximately 76,000 customers in over 120 countries, SAP is the world’s
leading provider of business software, offering applications and services that enable
companies of all sizes and in more than 25 industries become best-run businesses.
SAP resells Open Text Vendor Invoice Management under the name the SAP
Invoice Management by Open Text. As part of this agreement, SAP also resells
Open Text’s document capture solution Invoice Capture Center, from Open Text’s
acquisition of Captaris, under the name OCR option for SAP Invoice Management.
SAP Invoice Management completes the portfolio of finance solutions for SAP’s
enterprise resource planning (ERP) application, SAP ERP, enabling companies to
optimize their entire financial supply chain.
Open Text is an industry leader in ECM solutions for use with SAP solutions,
leveraging two decades of partnership and co-development, and expertise gained
from delivering solutions to more than 3,700 SAP customer sites around the world.
Open Text’s well-established products offer a complete range of capabilities for
managing and archiving business documents—incoming and outgoing invoices,
orders, delivery notes, quality certificates, human resources documents—that
originate from customers’ back-end applications. Open Text’s applications for
use with SAP software help customers improve efficiency in key processes,
manage compliance, consolidate IT systems and reduce costs. The partnership
with OpenText demonstrates continued evidence of SAP’s strategy to deliver
additional choice and flexibility to customers looking to extend the value of their SAP
investments.
Invoice Receipt:
Paper documents can be scanned into Invoice Management through Open Text
Imaging Enterprise Scan. The strength of the solution lies in its strong integration
with OpenText repositories.The solution can be expanded beyond the AP
department to address the imaging needs of the entire organization. As the solution
is agnostic to invoice metadata receipt, invoice information can be brought into the
solution using a multitude of methods, including manual data entry, email, fax, OCR
data capture, EDI, or other electronic means. To add deployment flexibility, data
entry and exception routing may be accomplished off-site, while approval work can
be handled by on-site AP staff.
Document and Data Capture:
With the recent acquisition of Captaris, Open Text not only provides functionality
for the efficient processing of invoices, but now also offers an OCR option for
Invoice Management called Invoice Capture Center (ICC), which further extends
the solution’s capabilities to completely automate the capture of paper invoices. We
were really impressed with “knowledge base”, which comes bundled with the ICC
tool. The knowledge base has been trained on samples of invoices from thousands
of different vendors and multiple countries around the world, enabling ICC to more
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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9. Imaging & intelligently recognize the type and position of invoice data, and extract it accurately
Workflow with minimal human intervention. Once data is extracted it is validated against ERP
Automation and other backend systems to increase the accuracy of data extracted. At this point,
invoices that contain missing or invalid information are flagged as exceptions and
routed to the appropriate individuals or groups for resolution.
Solution Profile
The new version of ICC to be released in September 2009 comes bundled with an
innovative integration concept. Instead of running as a detached front-end process,
the capture process is called from and controlled by the SAP system. This enables
true early archiving and allows for a complete end-to-end control for the AP process.
Content Storage and Management:
Open Text provides a highly scalable and secure repository with its SAP solution,
which enables organizations to create access, manage, and securely archive all
transaction-related content. All user screens include the ability to immediately
retrieve invoice images as well as the ability to open supporting documents such as
purchase orders and receipt documents, where applicable.
Workflow Management:
The system leverages SAP Workflow, which comes bundled with 46 unique business
rules that encase most of the business scenarios a company is likely to encounter.
Additionally, the system is completely configurable, if the client has any other
processes outside the ones that are pre-configured. It is flexible enough to utilize
existing SAP HCM structure or it can also work with other organizational matrices.
SAP role resolution is configurable for all process roles such as AP processor,
buyer, etc. and roles are maintained using standard SAP security profiles.
Invoice Management runs inside of SAP ERP using SAP transaction codes and
functionality such as 2- and 3-way matching. If all issues are resolved satisfactorily
then the invoices can be automatically posted to the GL or routed to AP for final
review before posting. Invoice exceptions are automatically detected. If exceptions
are detected, the invoice is automatically and immediately routed to the appropriate
Role (such as a Buyer) based on configurable business rules for resolution. Invoice
Management automatically determines whether invoices require approval or possible
coding. Reviewers and approvers are sent an email with a link to a portal presenting
all the required metadata and invoice images with process history allowing them to
take appropriate actions. The solution also includes a process monitoring feature as
a standard option, available for continuously documenting every touch point.
Reporting and Analysis:
The solution delivers robust reporting capabilities. Several standard reports are
available to monitor the invoice lifecycle management. The Vendor Analytics module
provides detailed analysis of the process flows and the ability to drill down to
transactional data. Since the solution runs entirely inside SAP, a standard SAP tool
bar with sorting, filtering, printing, etc. is available, as is SAP Workflow Information
System (WIS), which allows users to download the data into spreadsheets for
client specific analysis. The metadata used in the reporting is also structured for
easy export to SAP Business Objects Intelligence. In the next release of Invoice
Management, scheduled for late fall 2009, additional reporting will be provided with a
focus on invoice aging, productivity, and exception analytics.
Implementation and Pricing:
Implementation starts with a blue print session with key stakeholders, followed by
configuration of out-of-the-box rules and related role resolution. Implementation
takes two to three months. Pricing is based on annual invoice volume.
© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
8

10. Imaging &
Workflow About PayStream Advisors, Inc.
Automation PayStream Advisors is a technology research and consulting firm that improves the way
companies plan, evaluate, and select emerging technologies to achieve their business
PayStream Advisors 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.
About the Analyst
As Research Director, Sush Koka manages PayStream Advisors’ overall technology research
effort. She writes research reports, leads client briefings, and participates in consulting
engagements in the purchase-to-pay and order-to-cash functional areas. Her deep experience
both as a market analyst and a consultant enables her to analyze trends in financial services
automation, assess feasibility of products and drive research activities. Her areas of focus
include invoice and payment management, travel and expense management and business
process automation. She has extensively researched and written reports in the above areas
and her work has also been published in trade magazines such as Supply & Demand Chain
Executive and DOCUMENT magazine.
Online Resources Advisory Services
• Free Reports • Assess your current state
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© 2009 PayStream Advisors, Inc. • info@paystreamadvisors.com • www.paystreamadvisors.com
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