By Howard Frear, Director of Sales and Marketing, EASY Software UK
We like to think that DM has gained full acceptance – that it would be a rarity to see an organisation that hasn’t caught on to the idea yet and which still relies on manual approaches to key business tasks and ‘the paper chase.’
In many ways this is true … but you may still find this a bit shocking: according to Deutsche Bank and Gartner, no less than 95% of the 30 billion invoices processed across Europe in the year 2010 were done so in a way that involved manual data entry.
You may also be a bit taken aback to realise the impact on European business of that fact. The brutal truth is that manual processing can push the cost of processing that invoice by a factor of 20 over doing it electronically.
That equates to £80,000 for 20,000 invoices at £4 each (done manually) versus the much lower £4,000 if they were done electronically (so at 20p each). And 20,000 invoices isn’t really a lot if you are a multinational.
75% of the time idle
This is something that should concern everyone in business, as despite all the cheerful headlines about a recovering UK economy, most businesses are still not upping their spending – which means that money spent carelessly like this if there really is no need is not really on. (Recent analyses of the Eurozone suggest it’s still languishing in the doldrums, so this is doubly true for our biggest trading zone – the EU.)
The issue of cost, though, isn’t the only negative aspect of this continuing reliance on antiquated ways of dealing with invoices. Independent industry research has made clear that of the time an invoice is working its way through the system, 20% of that time is transport processing time, 5% actual processing – and an astonishing 75% of the time it’s, well, doing nothing.
Nothing, I mean, because too many company (and public sector organisations – even Third Sector, too) workflows that are so designed as to need lots of supervisor or managerial attention to get things done. Last year, EASY’s commissioned third party, in-depth research that looked at the use of DM in UK businesses. We found that Finance is blazing the trail here, with 52% of respondents in such teams confirming they were going paper-lite compared to just 20% of their colleagues in IT (and 26% in Operations/Manufacturing). One FD we interviewed, in fact: “Cost reductions and increased efficiencies for purchase ledger when distributing supplier invoices throughout the company.”
The rest of the business isn’t keeping up with us
That’s the side of things we tend to see, I think, in the DM market: thanks to the progress of the market, there are a lot of Finance teams that have really ‘got’ DM, giving us perhaps a bit of a false impression that the rest of the company has. But here’s the problem: Finance is great at using technologies like DM, EDI (electronic data interchange) and even email to distribute invoices, as well increased use of Optical Character Recognition (OCR).
But the rest of the business isn’t keeping up. The paper may get into to the company more quickly, it may get turned into electrons quickly (or even arrive in that state), but there’s a big lag here when it gets out of Finance, it seems.
Some organisations, of course, do like to guard their cash flow – and there is often, in SME contexts (but also for enterprises) policies to push payment out as far as possible to protect that. That’s understandable, especially in a time of tightened budgets.
But there will be consequences if you insist on parking invoices and keeping them idle for 75% of the time (I still can’t get over how high that figure is!)
Core suppliers and partners may not be as tolerant of delayed or inefficient payment cycles as you may be, for example. You won’t have real visibility of your actual, day by day cash position. You could be missing out on deals and discounts by being such a slowcoach. You may suffer if suppliers see that you pay them late, so why should they settle with you as a priority?
To return to my earlier optimism, then: yes, we have more DM out there and the market is still a very healthy one. There is great scope for selling more of our sector’s wares.
But unless we start working with customers – new and old, frankly – on the need to get the efficiency beyond the Finance office to the rest of the office, making the internal handling of the payment cycle a much slicker process and close out the situation where invoices can spend three quarters of their time in a company doing nothing…
Then, my friends, we really haven’t achieved that much with DM!