Lost Cash Discounts Are a Thing of the Past

Time is money – and that applies equally to the processing of invoices, since many suppliers offer discounts of around three percent for a quick settlement of outstanding debts. These discounts can add up to a considerable saving over the course of a year – especially for large companies who deal with invoices totaling hundreds of millions of dollars.
However, in the absence of a solution for processing incoming invoices automatically, each invoice may take employees an average of up to three weeks to process. As well as having to enter data manually, the main reasons for this include the time-consuming internal approval processes via the in-house mail system. This not only causes discounts to be lost, but late payment may even give rise to interest being charged. And that is without considering the time that employees spend dealing with each individual invoice.

Processing time halved

This is a challenge that chemical giant BASF also faces. This global corporation works with countless service providers both locally and internationally. This means that invoices need to be processed in different formats and languages but also in accordance with relevant national invoicing standards and conditions.

BASF Coatings, Münster
BASF Coatings, Münster

For BASF Coatings AG, a subsidiary of the group, this was reason enough to look into solutions for processing incoming invoices. The company implemented a combined application from SAP partners Ebydos and Readsoft. “The extensive integration into the existing SAP system and its straightforward workflow handling were key factors behind our decision,” explains Ludger Südmersen, head of the costing/invoice verification group and project manager at BASF Coatings AG. Further important criteria were the performance and international orientation of the software provider. Additionally, the company did not want to use a solution that operated outside its SAP system since comprehensive integration into the existing SAP R/3 4.6C application guarantees that all entries can be checked directly against the SAP master data and users notified of any irregularities. Solutions that operate outside the SAP system cannot do this until the end of the process chain. If an error occurs, all previous steps need to be performed again.
Since April 2004 the company has been processing an average of 100,000 invoices per year in Germany, France and Spain with the new solution. After over a year of smooth operation in Germany, it is now clear that the decision was the correct one. The new solution has halved the average processing time for an invoice and there have been no more lost cash discounts.

Positive experiences are here to stay

The quick and successful implementation and ease of use of the solution at BASF Coatings have now also convinced the newly established BASF Services Europe to follow suit. The Shared Services Center of BASF AG, headquartered in Berlin, intends to implement the solution within three years and subsequently process around 750,000 invoices with it. The Ebydos ReadSoft software will be integrated into the existing SAP R/3 Enterprise system.
The internal BASF service provider started the implementation in September 2005 and made rapid progress. Since the beginning of 2006 it has been processing all of its own invoices as well as those from BASF France, BASF Argro France, and BASF Electronic Materials via the Ebydos Invoice Cockpit add-on for SAP, the Ebydos Web Cycle workflow, and ReadSoft Documents for Invoices. “To date the installation has proceeded very professionally,” reports Hermann Eichert, head of accounts payable at BASF Services Europe.
And it looks as though things will continue to move fast. In March 2006 BASF Netherlands will follow, as will BASF Belgium, BASF IT Services and BASF Switzerland in April. In the next three years BASF Services Europe will handle the invoice processing of a total of 110 European companies within the BASF group.

Improved supplier relationships

At BASF Coatings, which pioneered the deployment of the solution, the implementation also proceeded quickly and was completed within just three months. The release change to SAP R/3 Enterprise and the transition to Unicode, with which BASF Coatings prepared the introduction of the SAP solution into its Russian subsidiary, also went smoothly.
“The successful implementation of the Ebydos Readsoft solution at the three international locations enables us to work effectively without paper,” explains Ludger Südmersen. “We can now concentrate fully on the rapid processing of more complex matters. This improves our supplier relationships and contributes to increasing productivity.”
Previously the employees of BASF Coatings had to manually type in the invoice information and reconcile the data with the order and the supplier information. The invoices were assigned routing slips for approval and queries and sent to the relevant contact partner via the in-house mail – a time-consuming process with many possible sources of error.

Three components – one solution

The solution at BASF Coatings covers the three main steps of automatic invoice receipt: optical character recognition (OCR), automatic processing in SAP, and the approval workflow. Readsoft’s Documents for Invoices software records the invoices and submits the data to the Ebydos Invoice Cockpit. The certified add-on is directly integrated into the existing SAP environment at BASF Coatings, meaning that the subsequent data processing is done within the application. In turn, Ebydos Web Cycle supports the internal approval processes.
The accounts payable clerk works with the familiar SAP interface and has direct access to procurement and goods receipt. This “single point of entry” enables the clerk both to view the invoice, the supplier master data and the order data side by side and edit it if necessary. Furthermore, all documents can be called up on screen for further processing. The responsible employee thus retains control over the entire process and can navigate within all relevant transactions.

Automatic reconciliation with SAP master data

Ebydos Invoice Cockpit
Ebydos Invoice Cockpit

The data received by the Ebydos Invoice Cockpit normally corresponds to the SAP master data, enabling the invoice to be posted automatically. The solution automatically supplements missing data wherever possible. If the incoming invoices are inconsistent, Ebydos Invoice Cockpit notifies the accounting clerk of the error. The solution has a number of advantages for BASF Coatings, as Ludger Südmersen explains: “Without the intermediate step via the Ebydos software, full invoice data would be automatically posted in SAP R/3 and not reconciled with the master data beforehand. That could mean us paying for things we never ordered. Incomplete invoices that the system now automatically completes would be rejected – which in turn would have meant additional work for our employees. Furthermore, the accounts clerks do not have to get used to a completely new software application, since the look and feel of the interface is similar to the SAP application.”
The new solution also enables BASF Coatings to handle invoices differently depending on whether they are purchases-related or not. The former are known as material management invoices (MM), and the latter as finance invoices (FI). Here the company set down the posting and approval rules in accordance with internal requirements.

Workflow creates transparency

Ebydos Web Cycle
Ebydos Web Cycle

BASF Coatings implemented the Ebydos Web Cycle workflow for the internal approval processes. This includes options to query account assignment information, request approval from those responsible, resolve differences in goods receipt, or discuss price variances with the purchasing department. Ebydos Web Cycle is the link between the accounting department and other departments in the company. A total of some 25 percent of the staff work with ten different workflow processes.
“When I open my account in the Ebydos Invoice Cockpit, I see all invoices that I need to check at a glance. The system suggests a suitable workflow, depending on whether it is an MM or FI invoice. All I need to do is launch it,” explains Wilfried Epping, project manager for implementation of the solution at BASF Coatings. “The system lets me check at any time whereabouts the invoice currently is in the company, recall it if needed, say if a member of staff is out of the office, or probe further if the discount period is running out. Previously I often didn’t know who was currently processing an invoice and why the processing was delayed.”
When a workflow is started, the recipient receives a message via e-mail shortly afterwards and can process the invoice directly on the screen and approve it automatically via a link. A reconciliation with SAP data is performed at each stage of the workflow, enabling errors to be recognized immediately and duplication of work avoided.

Carsten Nelk