This article focuses on Measuring the Savings and Return on Investment (ROI) of Implementing an Electronic Invoice Presentment and Payment (EIPP) solution.
To calculate ROI, you’ll need to find the cost of implementation and quantify the benefits in term of cash and when they occur. It is critical for your organization that you properly quantify the benefits. “Fewer errors”, “fewer disputes on the phone”, “fewer match errors” — these are benefits that are not quantifiable or useful for ROI calculations. So what are some appropriate elements needed to calculate ROI?
You can spend a lot of time trying to calculate costs to process the invoice in your organization. Or you can just start from an average. The Hackett Group created a benchmark for this, determining that moving from a paper-based process to electronic will save you $4.77 each time.
If we take an organization that produces around 100,000 invoices per year, the savings can be substantial. Over a 3-year period, the benefits will add up to around $1.4 million!
According to a report by the Aberdeen Group, only around 17% of the settlement cycle time is spent on approving invoices for payments. The remaining 83% is spent on mundane Functions, such as keying-in paper invoice data into AP system and disputing discrepancies. Just imagine how much you will save if everything was done electronically. Suppliers will be able to see invoices and resolve online disputes in the product like eSettlements.
Another source of cost is the time your AP team spends answering supplier calls regarding invoices and payments. Electronic Invoice Presentment and Payment solutions eliminate the need for your supplier to call your organization to get the information. Instead, they can see everything online! eSettlements deliver Dashboards and inquiries that will free your Accounts payable team from supplier calls. Enabling online access for suppliers will help reduce their dependence on your teams and could save you another 3%.
From our experience with clients, the best approach is to start with your top vendors and turn them electronically using cXML, OAG format. It should be a quick win. You should work with several suppliers at the same time from the very beginning of the implementation. This will allow you to Go –Live with a good set of suppliers and see a quick ROI early on.
Using Electronic Invoice Presentment and Payment Solutions will also help you to improve performance in purchasing. The payment terms discount will be better utilized. It will also improve transparency and decision making in the Procure to Pay process and can save another 14%.
Finally, Electronic Invoice Presentment and Payment will also help you to save an extra 3% by reducing duplicate invoice and payments, and accelerate data availability for reporting and analysis. The organization that turns to EIPP has now more time and use the AP resources , ot to key data but analyses data.
Now you have some important information, to begin with in order to measure ROI! Implementing an Electronic Invoice Presentment and Payment solution can help you achieve the following tangible benefits:
– Cost reductions from reduced headcounts for key invoices in the system, reducing the cost of printing and mailing;
– Compression of the Procure-to-pay cycle resulting from the reduction in the mail and check floats;
– Increased ability to capture early payment discounts offered by suppliers due to shorter processing cycle times;
– Improved visibility into invoices, payments, and overall procure-to-pay translations, leading to better cash flow forecasting and risk management abilities;
– Positive impact on the environment: Going Green (invoice and payments), which can have a large impact on your brand recognition.
If you’re currently using PeopleSoft 9.1, you can leverage a feature called Dynamic Discounting to get an even higher ROI.
Contact Ataway today and learn how we can provide Solutions for your business in Electronic Invoice Presentment and Payment.