Business Process Services. White Paper. Touchless Procure-to-Pay Processing: The Robotics Way

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Touchless Procure-to-Pay Processing:

The Robotics Way

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About the Author

Pradeep Kumar Kalaimani

Pradeep Kumar Kalaimani leads the Finance Center of Excellence for global CFO operations within the Business Process Services (BPS) unit of Tata Consultancy Services (TCS). He has been managing transformation and digitization initiatives for multiple

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Abstract

An eﬀective accounts payable function can contribute strategic business value to

an enterprise. While CFOs had attempted to revamp the AP organization by

using enterprise resource planning (ERP) platforms, Optical Character

Recognition (OCR), Intelligent Character Recognition (ICR), Electronic Data

Interchange (EDI), and other technologies, these initiatives often did not yield the

anticipated results. With mounting pressure to reduce costs and achieve greater

pro tability, CFOs are counting on emerging technologies such as robotics to

bring transformative changes in the payables function.

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Modernizing the Accounts Payables Function

with Robotics

CFOs across industries are on a mission to build lean accounts payable (AP) functions that enable strategic business value for enterprises. For many years, AP organizations functioned in silos and leveraged manual processes that often resulted in inefficiencies, errors, and lack of visibility into operations. The result? Accounts payable was perceived predominantly as a cost center. However, increasing globalization and competition forced CFOs to reimagine AP as a strategic function that contributes to overall business objectives. Automation emerged as the key enabler of such a shift. CFOs have tried to automate and streamline processes by leveraging ERP platforms, OCR tools, EDI, e-invoicing, purchase order (PO) flip, vendor portals, and other bolt-on solutions. However, these initiatives often failed to deliver true business value, as they did not address the basic issues underlying the payables function.

CFOs are now looking beyond traditional automation to robotic process automation (RPA), also known as autonomics, to close the gap between expected and desired results. By mimicking human actions at the user interface level and interacting with multiple applications, RPA provides advanced automation capabilities for organizations that currently have a manual procure-to-pay process (P2P) cycle. Deploying it in combination with relevant tools, technology, and platforms helps businesses effectively reengineer the procure-to-pay process. This will help AP organizations drive reduced costs, improved efficiency, greater on-demand scalability, regulatory compliance with smooth audit trails, and real-time visibility into operations. In essence, RPA can help address many of the basic issues in the procure-to-pay process, laying the foundation for a touchless end-to-end AP process.

A Look at Robotics in Action in P2P Processes

RPA can be used across the procure-to-pay cycle. It leverages configurable computer software or robots that work on multiple AP processes by interacting with systems and applications including ERP systems, documents, and databases through virtual machines and specific logins. They operate as a virtual back-office processing center, automating repetitive, rules-based processes that are prone to human error. Three questions play a key role in identifying P2P processes that are suitable for robotic automation:

1. What is the degree of robotic automation possible? This can be classified as low, medium, and high. 2. What is the potential speed of execution? This depends on the current process maturity, the level of

technology intervention deployed in the process, and dependency on human effort and judgment.

3. How much value will RPA generate? This can be categorized as low, medium, or high.

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Figure 1 indicates that transactional P2P processes such as vendor master data management and invoice processing offer greater opportunity for robotics deployment with a higher degree of automation and high speed of execution. Processes that require a set of business rules and exceptions fall in the medium category of adoption, since these need artificial intelligence.

It is more difficult to use robotic process automation for processes that are analytical and call for greater human discretion. However, certain aspects of such processes can be managed by robots with some human intervention. For instance, enterprises can deploy human touch points alongside robots to effectively manage vendor relationships. Supplementing RPA with smart vendor communication can help businesses quickly and intuitively resolve some of the persistent issues related to non-PO invoices. Robotics can be applied by integrating a repository tool with the ERP solution to store invoice and PO data, and enable automated posting of non-PO invoices after business units update their service entries.

Common Pitfalls in Procure-to-Pay Processes

In order to unleash the power of RPA, enterprises first need to understand the underlying issues associated with P2P processes. We discuss some common challenges below.

Lack of standardization: Invoices may be in different formats – handwritten or printed invoices, faxes,

and PDFs attached in emails. This makes it difficult to validate inputs and quickly process invoices that match the PO.

Inconsistent and unstructured data: AP organizations typically handle large volumes of varying and

inconsistent data and documents across the lifecycle – from PO generation to invoice receipt and approval. This leaves them with the tedious and repetitive task of transferring the data to a standard and

Speed of execution Propensity in terms of % eﬀort reduction Value –bubble size 1- Low 1- <10% 1- Low 2- Medium 2- 11-30% 2- Medium 3- High 3- >30% 3- High Speed of Robotics A utoma tion

Propensity Towards RPA – % Eﬀort Reduction Invoice Processing

Vendor Master

Vendor Reconciliation

Invoice

Exceptions _{and Expense}Travel

Payment Run Issue Resolution

Figure 1: Suitability of RPA for P2P processes (TCS internal research)

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structured format, increasing the risk of errors.

Process inefficiencies: These may include missing vendor codes or data discrepancies between POs and

non-PO invoices. Another impediment to efficiency is the presence of a manual approval process that leads to delays, and in some cases, increases vulnerability to fraud through the possibility of

post-approval modifications. For non-PO invoices, post-approval with the general ledger (GL) code and cost center becomes critical for timely and correct payment to vendors.

Without effective process discipline, enterprises struggle to ensure 'first time right invoicing.' The result is an increased number of exceptions, requiring time and research for effective resolution. Exceptions are typically triggered due to data that does not conform to standards or mismatch with other data (price, quantity variances being top contributors of invoice exceptions) and there's an underlying need to use of specialized workflows for routing approvals, setting dynamic tolerance limit to negate price/quantity variances and ensure no/minimal follow-up actions for timely invoicing.

Manual, error-prone controls: In a manual set up, the effectiveness of AP processes depends on the

team's discipline, skill sets, and experience. The use of manual controls instead of systemic controls increases the chances of making duplicate, wrong, delayed, or excessive payments.

Reactive process fixes: Most AP organizations resort to reactive fixes by deploying a dedicated team or a

process owner to manage ageing invoices, delayed payments, and increased vendor queries. However, permanent and proactive fixes to the upstream processes in the vendor master system are essential to address persistent P2P problems. This ensures that price, quantity, and tax variances are addressed.

Robotic Process Automation to the Rescue

Many transactional and rules based processes can be easily automated to drive greater efficiency and accuracy. Let's explore how this can be done.

Streamlining Invoice Processing

Invoice processing involves receiving the invoice, indexing key fields, and posting the invoice in the ERP or legacy system through three–way or two-way match between the PO, invoice, and goods received note (GRN) for PO and non-PO based invoices respectively. These data entry processes can be easily automated. In order to apply robotics, it is essential to first migrate manual invoices to e-invoices. Manual touch points are then replaced by robots to handle invoice receipt and allocation, and ensure accurate processing to achieve first time right invoicing. By enforcing well-defined business rules at a granular level, RPA drives effective automation.

Enterprises also need to invest in robust supplier education programs to drive standardization of invoices across geographies and vendors supporting different lines of businesses. If standardization is not viable, enterprises must equip robots to collate invoice data across different modes of invoices. Robotic

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referenced to 'proto invoice models'. The proto invoice model allows vendors to enter data in predefined fields of proto invoices and generate invoices automatically based on the nature of supplies and invoice category.

Digital workflow solution tools play a key role in streamlining invoice processing. Paper invoices can be

scanned via the FTP server, mail, file or share folder. Multiple printed or e-invoices can be captured at a line item level, and sequentially allocated to robots for greater efficiency. Furthermore, a combination of several tools such as desktop automation, navigator, and script tools help post data extracted from multiple sources to the ERP.

The approval activity can also be simplified through rules based, auto-approved, workflow criteria limiting human involvement to specific approval situations. Robotics can thus minimize and eventually eliminate approval delays, leading to higher efficiency and timely payment to vendors.

Simplifying Invoice Exceptions Management

Exceptions are one of the top reasons for late payments, higher operating costs, and unhappy customers. Pre-defined rules are typically used to check and remove invoices from the ERP system based on

exceptions that may range from lack of funds and price or quantity variance to PO mismatch and existent vendors. The primary reasons for high exceptions are standardized practices and non-automated processes that cause slowdowns and errors.

Rapid automation helps address this complex issue by enabling the deployment of tighter upfront controls such as a dynamic tolerance limit for quantity variances. However, AP functions should not fail to analyze the top reasons for increased exceptions at a granular level. Robotic cognitive intelligence, if applied systematically, can be used to differentiate, learn, and build invoice exception patterns. A robust RPA solution can be used for real-time monitoring of invoices to flag exceptions for rule reviews and fraud detection. Well-defined redistribution rules can be designed to identify and escalate exceptions to

employees with the right skill sets. Enterprises can further address the root of the issue by educating suppliers on best practices to reduce mismatch and streamline invoice data.

Making the Most of Invoice Discounts

By effectively utilizing vendor discounts, enterprises can not only gain cost savings but also enhance vendor relationships. Robotic automation components can be used in conjunction with the ERP workflow to quickly track and process vendor discount invoices. RPA helps streamline vendor invoices and enables enterprises to avail all available discounts through faster scanning, indexing, and processing.

Robotics can be used to design robust AP controls at every stage of the process within the ERP or design the bolt-on workflow to drive better process compliance and discipline. However, it is important to evaluate and fix the failure of controls that halt or slow down processes to ensure that robots function independently over time. In the example listed below, robots with business rules can be used to gather relevant data from the invoice in predefined formats. In addition to that, robots with Artificial Intelligence can be used for invoice exceptions that require analysis (such as issues related price or quantity

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Figure 2 provides a comprehensive picture of how RPA transforms invoice processing, exceptions management, and vendor discount management processes.

Gaining More Control over Vendor Data

AP functions need to focus on fixing upstream master data processes of vendor master, PO management, and the Purchase Receipt (PR) to PO cycle – rather than downstream processes involving invoice and payment. The vendor master creation process starts when a request is received for vendor code creation along with a set of input documents. Vendor maintenance entails managing details such as change in address, banking details, or payment terms based on business volumes. Robotics plays a critical role in these upstream processes.

Rapid automation leverages business rules and linkages across other processes to help set up upstream processes accurately, identify differences effectively, and ensure timely fixes right at the time of creation. By drawing upon a highly automated flow of structured data between buyers, the AP function, suppliers, and third parties such as scanning vendors, enterprises can drive robust reporting, analytics, and

decision-making.

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Before RPA

Invoice Processing, Exceptions, Discounts

 Reduction in cycle time from invoice receipt to payment

 100% use of vendor discounts

 100% accuracy and on-time payment  Increased vendor satisfaction  Reduction of human dependency/manual efforts  Effective query management/reduction in vendor queries Benefits of RPA Organization receives scanned invoice copy in work ow OCR updates invoice data in

ERP and does 3-way match Matched records are automatically updated in ERP Organization pulls exceptions and analyzes reasons System checks for dynamic discounting and makes payments Matched records are approved and pushed to payment queue Work ow based query resolution is done for unmatched records Invoices are automatically updated in ERP Receive vendor invoice in physical /scanned form Ensure 2/3 way match with PO/invoice/ GRN Identify exceptions and reasons Research and analyze exceptions Finalize list of invoices to be paid & make

payments Approve invoices and update details in ERP system Verify vendor details – remittance, discount terms Contact procurement team to resolve issues After RPA

Robots built with business rules

Robots built with Arti cial Intelligence

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Here is a breakdown (as shown in Figure 3) of how robotics can be used to streamline vendor data management:

Creating standard template, vendor portal, input requests: A standard vendor request template is

required to extract data and create vendor code in the ERP using robotics. It is also essential to follow a structured process to provide the option of receiving input requests in different forms and modes. This will enable robots to pick all the relevant data fields.

Evaluating and reviewing critical input documents: Setting up RPA with a workflow or document

solution with extracts allows robots to check critical parameters containing defined business rules. Alerts can be triggered for exceptions, ensuring accurate and timely setup of RPA.

Updating records: Requests for change in vendor records can be sent through specific templates used

for creation, indicating the nature and type of change. These can be updated by robots quickly, resulting in the maintenance of an updated vendor database.

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Before RPA

Invoice Vendor Master Maintenance

 100% consistent , reliable, and accurate vendor master records

 Improved turnaround time for creation and

maintenance of vendor master with real-time updates  Reduction in query management timelines  Increased vendor satisfaction levels Beneﬁts of RPA After RPA Receive Request on email for new vendor creation Manually update data in ERP Call/email vendor for queries Perform

month-end reporting Delete vendors from database Check unused/duplicate vendors lying in database Receive request in work ow for new

vendor setup

Verify vendor details, updated

directly by vendors

Verify and identify exceptions and send emails Generate month-end reports Perform system validation & generate list of unused/duplicate vendors Vendor replies in work ow, attaches

documents

Robots built with business rules

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Tomorrow is Here: Gearing up for Intelligent

Autonomics

The stage is set for robotics to play a bigger role in the P2P process cycle. As AP processes continue to mature at a rapid pace, they will greatly benefit from the growing breed of robotic solutions. The next wave of transformation will see automation extend beyond transactional to high-end processes such as generation of exception triggers and subsequent resolution, reporting, and decision-making support. From merely automating repetitive work, RPA will gradually enable the human workforce to work smarter by enhancing their creative problem solving abilities. Enterprises will thus be able to achieve business benefits beyond cost savings. New capabilities such as payment reviews and authorizations via mobile devices will further evolve, complementing the advantages offered by robotics.

The most important result of robotic automation is the generation of large volumes of process data. While robotics reduces inefficiencies, data analytics will empower enterprises to deliver greater business impact by discovering and applying smarter insights. This means enterprises must anticipate a data rich scenario and be prepared with relevant skill sets and expertise to gain real value from information. The adoption of robotics in the AP organization is largely dependent on senior leaders' interest in incorporating robotics as an integral part of their vision for the organization. As they include robotics as one of their top business priorities, senior management will need to enable and support change management across the

enterprise. The success of this technology – as of all transformation initiatives – hinges on the collective cooperation of internal and external stakeholders. It also depends on an enterprise's commitment towards making essential changes to processes and practices, and its ability to establish strong process and data governance.

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