GRC
HR
SCM
CRM
BI
Expand +


Case Study

 

Traversing a Mountain of Accounts Payable Invoices

by Dave Hannon | insiderPROFILES

October 1, 2010

One goal was clear for petroleum products distributor TransMontaigne in streamlining its accounts payable process: Provide full visibility into the invoicing process by centralizing it in a single system. Learn how TransMontaigne succeeded, see the project’s dramatic results — from lower invoice turnaround time and transaction costs, to an improved credit score and vendor relations — and get advice from the company’s accounting manager.
 

In many companies, business processes grow and change over time until they become too complicated and expensive. Petroleum products distributor TransMontaigne came to that realization about its invoice processing system three years ago. But by introducing the right blend of process change and new technology, the company produced a more effective accounts payable process that brings benefits to both its top and bottom lines.

Colorado-based TransMontaigne provides transportation and storage of refined petroleum products to a wide variety of customers throughout the US and Canada, from small gasoline stations to major players in the oil and gas industry like BP and Exxon. While the company has been on a single instance of SAP ERP since 1999 (it runs SAP ERP 5.0 today), its distribution terminals operate fairly independently, functioning as “very large gas stations,” explains Roy Oliver, Accounting Manager at TransMontaigne.

That decentralized operational strategy allowed the terminals to cater their services to the needs of their local customers and suppliers. But at the enterprise level, the strategy created an overly complicated and paper-based accounts payable process, which provided little visibility into invoices and very limited reporting capability. Suppliers would send invoices to a local TransMontaigne terminal, where they were reviewed and coded before being mailed to TransMontaigne’s operations department in Atlanta, Georgia, for another review. Ultimately, the paper invoices were forwarded yet again to the accounts payable department in Denver, Colorado, for final processing and payment. Not only was the manual process time-consuming — on average, TransMontaigne processes more than 56,000 invoices in a year — but it produced a high error rate with so many touchpoints along the way. 

 

Roy Oliver of Transmontaigne

“Providing full visibility into the invoicing process helps improve our vendor relations and some of our broader processes.”
—Roy Oliver, Accounting Manager, TransMontaigne
 
Setting Goals for a New Process

In 2007, Oliver was tasked with streamlining the accounts payable process at TransMontaigne. “Our number one goal was clear: to provide full visibility into the invoicing process by centralizing it in a single system,” he says. “That would help us improve our vendor relations and give us a jump toward improving some of the broader processes.”

A more measurable goal in streamlining the invoicing process was a reduction in the number of invoices paid late. Under its decentralized accounts payable process, TransMontaigne was paying up to 90% of its invoices late because each invoice took an average of 32 days to process — at a cost of more than $30 each.

When the company decided to move to electronic invoicing, it weighed the options very carefully, realizing that much of its diverse vendor base may not be prepared to migrate to fully electronic invoicing. To achieve the goals of centralized visibility and streamlined invoice processing with minimal impact to its suppliers, TransMontaigne selected invoice-scanning technology from SAP partner ReadSoft.

Since the project went live in early 2008, suppliers can now send invoices directly to the Denver accounts payable department where they are scanned into the new system. The electronic invoice data is brought into SAP ERP Financials through the invoicing system’s cockpit, which works as the “control center.” From there, invoices can be electronically routed to users at terminals via email for review and approval. System users also have access to vendor master data, purchase order data, or past invoices for reference. Once the invoice is approved electronically, the accounts payable department posts it for payment.

TransMontaigne

The Results Speak Volumes

According to Oliver, the results of the project are obvious and dramatic. By centralizing and automating its invoicing system, TransMontaigne has:

  • Decreased the average invoice turnaround time from 32 days to 6 days
  • Reduced the average cost per transaction from $30 to less than $7
  • Increased the accounts payable department’s productivity due to less “paper pushing”
  • Improved its Dun & Bradstreet credit score by 20 points
  • Dramatically reduced the number of duplicate payments by nearly 90%
  • Cut the percentage of paper checks down from 95% to 40%, with 60% of vendor payments now being done electronically
  • Increased volume-based vendor discounts enough to cover the cost of the new technology

 According to Oliver, choosing an SAP-certified partner expedited the project in several ways. For example, the ReadSoft screens are more intuitive to TransMontaigne’s users, who were already familiar with SAP applications. The back-end integration with SAP ERP is also streamlined and allows for a new set of reporting capabilities. With the data now electronically available, the accounting team can more easily review accruals, track invoice payment times, identify volume discount opportunities based on contract terms, and review the vendor database for inconsistencies.

“I can’t imagine ever going back to a manual process now,” says Oliver. “In addition to the improved visibility and ease of use, there is less human error in the invoicing process. In 2009, the department error rate for invoices was at 0.43%, meaning there were almost no keying errors and a total reduction in duplicate payments. And now when there are errors, they are more visible.”

The automation also allowed accounting and purchasing employees to focus on more strategic issues such as compliance, internal customer service, and vendor relations. In fact, the impact automated invoicing had on vendor relations was perhaps the most surprising to TransMontaigne. Vendors were pleased with the speed of the electronic payments, but there were “soft” benefits as well. For example, Oliver says that with all of the invoice data easily accessible in a centralized repository, if a vendor calls to inquire about the status of an invoice, the accounts payable team can provide a quick and accurate response.

Those efforts combined to produce the 20-point increase in TransMontaigne’s Dun & Bradstreet credit score, which makes TransMontaigne a more attractive company to do business with. In short, automating the accounts payable process not only reduced costs, but helped drive top-line business.

Advice on Training

“My biggest recommendation for a project like this is to focus on setting a plan for change management,” says Oliver. “Our training teams traveled to the terminals before and after go-live and then again two months into the project to do follow-up training, focusing on getting user acceptance and understanding of the system,” he says. “Our biggest challenge was training terminal managers who are more accustomed to using paper-based processes. We dedicated a lot of time following up with them to make sure they understood the processes and the controls that are in place.”

For more information about ReadSoft’s invoice automation solution for use with SAP applications, call 888-READSOF(T) or visit www.readsoft.com.

An email has been sent to:






More from SAPinsider



COMMENTS

Please log in to post a comment.

No comments have been submitted on this article. Be the first to comment!


SAPinsider
FAQ