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Optimizing Accounts Payable and Accounts Receivable in SAP: Q&A on Designing Solutions for Evolving Near-Cash Workflows

by Brian Shannon

December 11, 2014

Brian ShannonThank you for following our Q&A with Financials 2015 speaker Brian Shannon, principal consultant for BPM Solutions at Dolphin. Brian took readers' questions on global AP and AR processes - and treating these as integrated "near cash" processes - in a one-hour online Q&A.

Download an excerpt from Brian's Financials 2014 session for an overview of the opportunities for integration within AP/AR and SAP systems.

Then, to review the full discussion, view the chat replay below along with the edited transcript.

Live Blog Q&A with Brian Shannon on AP and AR Optimization | Dec 11 12:30pm ET

SAPinsider: We’ll kick off our live Q&A on optimizing near-cash processing and AR/AP workflows in SAP with moderator, Financials 2015 conference producer Allison Martin, and Dolphin’s Brian Shannon. Looking forward to a great discussion!

Allison Martin, Financials 2015: Thanks to everyone for joining us today!

I’m pleased to have Brian Shannon here for today’s Q&A on designing AP and AR solutions to better meet changing demands on order-to-cash and accounting workflows.

Brian Shannon is a principal consultant at Dolphin and presented a session on this topic at last year’s SAPinsider Financials 2014 conference and will also be presenting at the Financials 2015 event in Las Vegas this Spring. We’re looking forward to your questions for him today!

Welcome, Brian! Great to have you here.   

Brian Shannon, Dolphin: Hello and thank you, Allison.

Allison Martin: Before we begin with questions from readers, can we chat first about the importance of AP and AR as ‘near-cash’ processes? I know you’re a big proponent of a holistic look that combines both. What do you see as the benefits of integrating the two processes?

Brian Shannon: 'Near-cash' processes are accounts receivable and accounts payable. There is significant opportunity to optimize these processes to reduce cycle time and eliminate inefficiencies. Most times, organizations look at these processes in isolation. The approach of looking at both processes from a more strategic view offers an opportunity to leverage infrastructure, provide improved transparency to the processes, and improve cash flow while reducing risk.

Brian Shannon: Since a picture is worth 1,000 words or so, perhaps we can show you what we mean by some integration similarities.

Brian Shannon Chat on Near-Cash Processes

As you can see from the graphic, there are many aspects to each of these processes, and there are certainly similarities, such as the capture of documents, workflow components, analysis, etc.

Allison Martin: Thanks, Brian. I’m sure we’ll circle back to this topic again, but I know that our readers already have some questions for you, Brian, so I’ll let you get to those now!


Comment From Augustine

I would like to understand what you mean by design in SAP AP & AR? What are the steps involved in this design?  

Brian Shannon: Let’s start with this one – an introduction to design in AP and AR. SAP provides basic functionality for these processes, but the workflow necessary for an efficient process is not pre-defined. The Dolphin solution enables a seamless integration with up-front document capture with pre-defined workflow models that make the design process much easier. Best-practice processes are delivered in the solution.


Comment From Guest

Any suggestions on improving invoice processing when there’s no PO or goods receipt?

Brian Shannon: The Dolphin solution provides a tool for identifying non-PO transactions from specific vendors, such as utility companies, that enables pre-defined coding to be applied. The transaction can even be routed directly to an approver for review prior to posting, eliminating an unnecessary hand-off via Accounts Payable. Ultimately, procurement processes should be a part of the overall procure-to-pay solution, but not every transaction will have a PO. The Dolphin solution is geared towards workflow and integrated capture components. In general, you could classify them as optimization toolsets for these processes.


Comment From Guest

How ‘touchless’ can invoice processing really be? How accurate can OCR get, and when do we still need manual review?

Brian Shannon: Touchless is a relative term. It can mean many different things it seems. For us, there is the notion that whatever detail is found on an invoice must be accurately processed into SAP. This can be done in a very highly accurate means through e-Invoicing and EDI types of transmissions. But there is still paper.
If one is to use OCR to manage this, it will still take someone to ‘verify’ that the software captured the contents accurately. Time spent in the verification process can pay big dividends downstream for straight-though processing and posting.
So transactions can really be touchless if they are received electronically, but then you are dependent upon your upstream purchasing processes.


Comment From Guest

Any general metrics about what proportion of AP invoices can be read successfully with OCR?

Brian Shannon: OCR success is dependent upon a variety of factors. Most important is the quality of image. Centralizing receipt of invoices and controlling the scan process is key. Once you have high quality images, the OCR tool must be able to correctly identify characters, and more importantly, put them into a business context. PO transactions are more successfully captured than non-PO as there is a reference point.

As far as metrics and the success of straight-through processing with OCR, it is also dependent upon upstream processes, such as POs, availability of goods receipts, etc. But as we always say, OCR is not magic. So manage your expectations about how effective this will be.


Comment From John

Pinning down the correct workflow in a complex organisation is like trying to herd cats, often because there are no clear-cut rules and processes. Does Dolphin have any special tricks for tackling this?

Brian Shannon: Workflow solutions must be flexible to address a variety of situations. But for the most part, in our experience once the various business transactions and related rules are correctly identified, a majority of workflow routines can be correctly mapped. It is about accurate requirements gathering up-front with all relevant constituents.


Comment From Ram

Is Dolphin using SAP-delivered workflows and tools or do you have something home grown?

Brian Shannon: The solutions we are discussing all use the SAP Business Workflow engine, perhaps the most robust workflow tool there is.


Comment From Guest

For analytics on cash flow, what are best practices and what measures should we be monitoring?

Brian Shannon: Transparency is key. SAP provides some insight into this already, but only for posted documents. Large enterprises could at any time have a significant volume of invoices that are in-flight and thus not visible to standard SAP forecasting tools. So first, ensure all transactions are included in your view.

Second, early payment cash discounts are significant for the impact they can have on an organization’s bottom line. Way too many AP teams think they are capturing all discounts. The problem is that most times they are not capturing all discounts that are available, and then secondly they don’t have visibility to transactions that are not using discount terms. Insight into these aspects can mean a big difference for discount contribution.


Comment From Elizabeth

Brian, what do you see out there as far as thresholds for non-PO invoice approvals (i.e., invoices under $1,000 do not need approval)?

Brian Shannon: All non-PO invoices need to be reviewed for compliance to standards. One option is the ability to review prior transactions to look for trends, variance, etc. So the rent that is paid every month for the same amount could be auto-posted, but the lawn service that varies from month to month must be reviewed.

Greater analytical functions that are looking at posted transactions can help to identify rogue spenders or inconsistencies in approvals. So these audit controls must be in place for review, but ultimately certain transactions must still be reviewed prior to posting and/or payment of the invoice.


Comment From Guest

Looking at the image of integration touch points [see screenshot above], and there are a lot. Where is the biggest gap/opportunity for integration between these two processes? What are the most challenging to integrate? Where do we start?

Brian Shannon: The biggest challenge is acceptance of the need for change within your organization. As AP and AR typically both roll up ultimately to the CFO, getting buy-in to look at these processes is key.
Once the concept of need has been socialized, the key process deficiencies need to be identified. What are you trying to fix?
In my experience, the lack of visibility to unposted transactions, the inability to accurately identify process bottlenecks and inefficiencies are great places to look.
Finally, are you posed for growth? Is the process scalable?
If it has many manual touch points and is predominantly burdened by too much paper, that is a good place to start.


Comment From Guest

What options can Dolphin offer with regard to AR processes, specifically for cash application and deduction/dispute management?

Brian Shannon: The opportunity within AR is rapidly showing itself as more organizations move away from paper checks to electronic payment media. This means that if the bank was keying data from remittances received at a lockbox, this ‘outsourcing’ of this data entry is likely to come back in house as your customers sending you pdf images of the remittance details that then need to be entered by your AR staff.

So the solutions should look to minimize the impact of this new workload. Automating the capture using pre-defined capture tools or OCR can help significantly to reduce non-value-added data entry work.

There is also the issue of ‘de-coupled’ transaction in this new business paradigm. Treasury receives notification of a deposit, but may not know to which customer account it should be posted. So there may be a lag in time between when the credit for payment is made to the customer account, and when the remittance advice details are received. Automating this verification of deposit is an important consideration in this process.

Finally, on the issue of deductions and disputes: Here simple case management tools can be used, or much more robust capabilities can be deployed. The key is to simplify the process, reduce the handoffs, and get resolution to the dispute as quickly as possible to reduce the aging process which after a while inevitably leads to write-offs. SAP’s workflow engine can be employed here, as can SAP’s Receivables Management toolset which we integrate with.


Comment From John

To obtain buy-in, should you look at AP processes to promise benefits from claiming prompt payment discounts? What cash benefits are typically achievable?

Brian Shannon: There are many ways to get buy-in for improving AP processes, John. Cash discount is certainly one way, but I’ve seen companies that refuse to permit that in the ROI evaluation.
One way is to stress that while AP might not be strategic – who is in business to pay bills? – it does support strategic initiatives, such as improved cash flow, reduced risk, and overall cost reduction.
Bury the old ‘back-office’ label and show that AP matters. Leading organizations are optimizing processes no longer just for efficiencies, but for readying themselves for growth.


Comment From Guest

From the overview slide, can you talk about where the integration points are with SAP?

Brian Shannon: For both of these processes, the integration with the greater Procure-to-Pay and Order-to-Cash processes is important. It’s like an analogy of an avalanche, and AP and AR are sitting innocently at the bottom of the mountain. Upstream processes impact most and these are pure SAP processes.
Ensure the PR/PO process is sound and correctly used. Billing is the biggest issue for AR – so it must be accurate.
Then within the processes of AP and AR, it is the processing of the transactions prior to posting that matters – elimination of non-value-added work, reduction of cycle time – and these are direct integration issues for the greater business process.


Comment From Guest

Do you think SAP is the best place for scanned invoices to reside – or is it better for them to be in something like SharePoint, which is more searchable and visible to a wider audience within the organisation?

Brian Shannon: All attachments must be stored in a cost-effective repository, linked to the business transaction via ArchiveLink tool in SAP. I believe SharePoint has an ArchiveLink capability. That is the simplest way to think of this: If the repository is ArchiveLink compliant, you are set.


Comment From Ram

We are using a ReadSoft bolt-on to process non-PO invoices. Actually, it also processes PO-based invoice and does three-way match.

Brian Shannon: I’m not sure specifically about your question, Ram, but the solution should be capable of processing all types of invoices – PO, non-PO. And it should be able to manage service- and goods-based PO invoices.


Comment From Guest

Do you have any examples of standards that customers have set with vendors to reduce manual processing? That seems to be a key first step ...

Brian Shannon: Vendor compliance to your stated invoice terms is one way to view this. Rejected invoices that are missing PO numbers, have incorrect PO numbers or pricing, or other issues creates a lot of non-value-added work. Eliminate the paper and manual data entry.
You can ‘suggest’ that vendors move to your preferred means of invoice receipt. Self-service portals for vendors are a great incentive, and it eliminates more non-value-added work.


Allison Martin: Thanks again, everyone, for all your great questions. For more on this topic, I invite you to view our Financials channel on and to join us at Financials 2015 this March in Las Vegas, where Brian will be presenting on the topic. We have planned a full track dedicated to cash, treasury, and receivables management, including a session from Brian Shannon on order-to-cash processes!
And thanks to Dolphin’s Brian Shannon, who is joining us from Las Vegas, for taking the time for these questions today!


Brian Shannon: Thank you for all of your wonderful questions. Look forward to hearing from you in the future. Feel free to contact me at, or via our website at

Thanks, Allison, for the opportunity.


Allison Martin: Brian, thanks again, and we’re looking forward to seeing you in Vegas this Spring! 

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