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August 15, 2006
5 Min Read
"Can you pay me now?" OK, that's not quite the slogan for Verizon Wireless, but having tapped into a Web-based payment network, the mobile phone giant now lets many of its biggest and most active suppliers answer that question in self-service fashion. What's more, Verizon has gained a much better handle on outstanding payments due, and it's taking better advantage of early payment terms.
Companies can save as much as 60 percent on the cost of accounts payable (AP) transactions by using electronic alternatives to paper-invoice processing, according to research firm The Aberdeen Group. In addition, alternatives such as e-invoicing, purchasing cards and ACH (automated clearing house) settlement can help companies gain substantial discounts.
Verizon's hefty volume of 30,000 to 50,000 invoices per month trickled in through an extensive and highly distributed purchasing network, and its AP department often had little idea of what to expect in terms of incoming invoice volumes or totals. Late last year, the company signed on with on-demand, order-to-pay software provider Xign with hopes of improving payment efficiency and visibility. Xign has more than 25,000 suppliers in its payment network, and it's particularly strong in the mobile telco industry, where it also counts Sprint Nextel and T-Mobile as customers.
"Many of our largest suppliers are part of the Xign network," says Joe Selewicz, staff vice president and assistant controller at Verizon Wireless. "The key metric we looked at is that the network represented 50 percent of our purchasing spend, and at least one vendor was clamoring for us to use the service because it felt it would speed our ability to pay them."
Verizon Wireless developed integrations from its PeopleSoft ERP system and pilot-tested the payment network with five major vendors in mid-January. The company then identified 450 major suppliers in the Xign network and another 450 outside the network that it planned to bring onboard.
As of August, more than 650 vendors had signed on. Those suppliers now submit both purchase order (PO) and non-PO invoices to Verizon Wireless electronically through Xign. At the end of the process, the telco also pays those invoices electronically through the Xign network, and it can do so on the most favorable terms because rules on the discount structure of each supplier are applied by the software.
"There will certainly be labor savings for every couple of thousand invoices that are automated," says Selewicz, pointing to the data-entry labor tied to paper-based invoice processing. "More important, we'll be able to manage our cash flow much better because we'll know what's in the system before it's processed, and we'll pay earlier only if induced to do so through discounts. From a treasury standpoint, we can do much more accurate cash forecasting. We know, through vendor terms, when we're going to pay down to the date."
Xign's on-demand software can consolidate all invoicing and settlement transaction information regardless of origin, bringing together ERP, imaging, Web-entry and purchasing card transactions, and creating a single compliance report for accounts payable. Selewicz says it's too soon to gauge the extent of labor and time savings, but he says Xign's approach will also cut down on vendor and internal queries to AP because users can sign into the hosted, Web-based software and see what's pending and what's paid.
Even if Verizon Wireless brings on every supplier in the Xign network, it will still receive plenty of paper invoices from among its total of more than 40,000 suppliers. The company currently relies on an imaging system to capture and share invoices electronically, but it relies on data-entry operators keying from images, rather than automated optical character recognition (OCR) technologies.
Imaging capture vendors such as Abbyy, Kofax Image Products and EMC's Captiva division have come a long way in developing systems that can extract and validate data from variable documents, but the best way around the cost and delays of paper-based processes is to eliminate the paperwork altogether. There's little wonder that Xign and competitors, including Prime Revenue and Ariba, are gaining support from suppliers and customers that have to process tens or even hundreds of thousands of invoices per month.
Driving Force: Self-Service Options Sell Online System
With more than 50 million voice and data customers and revenues of $32.3 billion in 2005, a company the size of Verizon Wireless certainly has clout with its suppliers, but the move to an online invoicing and payment approach still required a bit of diplomacy. To woo suppliers to give up paper invoicing and enroll in the Xign order-to-pay network, Joe Selewicz, staff vice president and assistant controller, says the company is using the carrot rather than the stick.
"Our vendors can use the network to accelerate payments," he explains, adding that "it's not uncommon for vendors to call us near the end of a quarter or fiscal year and make us offers to accelerate payments. There's also a self-service aspect in that if vendors use the network, they can go into the system and check the status of payments."
Vendors weren't the only ones that had to be sold on the move as success also depended on internal adoption. "We had to put on our marketing hat and go out and sell it to the departments and the procurement organizations that would have to deal with the vendors and contracts," Selewicz says. Here again, the accounts payable group sold the benefit of letting internal users go into the system and check the status of payments at will, which has meant faster answers as well as a lot fewer phone calls to accounts payable.
Sensitivity about auditing and Sarbanes-Oxley compliance also helped convince internal customers to adopt a more automated approach, Selewicz says. "In the past, these invoices were going directly to the field and there was no visibility until they were processed," he says. "Now when an invoice comes over, we know it's in the system, we can quantify what has been received and we can make our auditors much happier about the accuracy of our accruals."
About the Author(s)
Executive Editor, Enterprise Apps
Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of Transform Magazine, and Executive Editor at DM News. He has covered IT and data-driven marketing for more than 15 years.
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