Although there has been progress made in moving the order to cash process to a “paperless” environment there are still parts of the process that are lagging and involve an inordinate amount of paper. There is more to be done in moving to “electronic documents” and reaping the benefits of improved receivables management that include:
- Reduced expenses associated with the storage of paper documents (The cost of paper storage is compounded by record retention requirements.)
- Reduced postage expenses
- Improved productivity associated with easier, more efficient accessibility
- Electronic documents are accessible by multiple people from multiple locations
- Electronic documents can be “linked” to transaction histories for quicker access to the backup that supports how transactions are processed.
- Lower paper costs (Positive impact to the environment)
Electronic Data Interchange (EDI) has been the enabler that helped move customer orders and vendor invoices to a paperless process. Most medium to large companies are realizing the benefits associated with orders and sending invoices through EDI transactions. These two components of the order to cash process have led the way in moving toward a paperless overall process.
Although the EDI transactions associated with payment and remittance detail are also well developed, there has been reluctance by some customers to implement these transactions. Some of that reluctance is associated with a perceived loss of “float” associated with the time it takes for a check payment to reach the supplier. With electronic payments, the funds move from the payer’s bank account the day after the transaction is initiated. The fact that customers continue to remit payment and remittance detail via paper check however does not preclude the potential to be paperless. Utilization of a bank’s lockbox process still results in the ability of a supplier to receive payment and payment remittance s in an electronic format. The costs associated with having the bank’s lockbox processing operation are significantly higher than payments received directly from the customer via EDI. Moving customers from check to electronic payment represents a significant cost reduction opportunity.
Much of the supporting documentation related to customer claims still involves paper. Many customers still mail hard copies of supporting documentation that can be hundreds of pages in length. This represents perhaps the most significant opportunity to move to a paperless environment. Very few customers utilize EDI as a means to provide supporting documents. Some customers however are providing documentation in other electronic formats. Unfortunately a company’s internal process often requires them to print paper copies of the backup to facilitate their workflow.
On a positive note, we’re seeing more and more customers that are moving to a process of providing supporting documentation via an internal web-site. The downside of this process however requires company resources to access their customer’s websites and “pull” copies of all the documentation. There is potential however for companies to automate this process and make it paperless. HighRadius has developed a solution for this automation based on a web aggregation engine that can transparently aggregate and collect information from multiple web sites. The retrieved documents can be stored as PDF files on an image server or can be attached to a business transaction in your ERP system helping facilitate a paperless AND automated process. In addition to retrieving supporting documentation from customer web-sites, the same technology can also be used to automatically retrieve POD’S and BOL’s from Carrier Websites to enable a paperless and automation in that part of your order to cash process.
Best Practices to Consider
Leverage EDI as much as possible
- Partner with customers to maximize the use of EDI transactions for orders and invoices. These are transactions are well developed and widely accepted and should be utilized by the majority of your customers.
- If utilizing a bank lockbox to process checks, you’ll want to ensure that all check and remittance detail is provided electronically through an image file in addition to the payment file.
- Convert check customers to electronic payment (including remittance detail). Consider different terms of sale to address customer concerns on “float” and incent them to move to EFT. For example, if your standard discount terms are 15 days, consider allowing 18 days for customers utilizing EFT. It is important that sending the remittance detail (820 EDI transaction) be part of the requirement.
Pursue opportunities to implement “new” technology that enables:
- Moving the customer claim process to a paperless environment and set the stage for further automation.
- Automatic retrieval of customer claim backup documentation from customer websites and POD’s/BOL’s from Carrier websites.
Making the move to paperless a priority in your order to cash process will not only result in short term cost savings, it will also enable you to establish a foundation to further automate workflow and improve productivity while continuing to reduce costs.
Also, make sure to read our whitepaper on: The Imperative for Eliminating Paper from Receivables and Credit
What challenges does your company face when trying to go “paperless”?