Extending the value of ERP with document management

6th November 2006

Changing ERP systems is a major undertaking, and not something that management of any organisation takes lightly. Furthermore, with rampant consolidation of suppliers in the marketplace in recent months, many organisations are more content to stick with the ERP suppliers they know and trust rather than risk a completely new direction, particularly as the functionality and technical foundation offered by different vendors often appears to be very similar.

Pragmatically speaking, organisations that have invested considerable effort in establishing well-oiled processes, training staff and honing management information are reluctant to move away from their current systems unless an upgrade or conversion to another system really offers a step-change in capability. No wonder that many businesses first seek to extract the maximum value from their existing investment in business systems rather than invite the potential disruption of a major systems change.

One of the simplest and most productive ways that management can build on their existing accounting infrastructure is to implement a document management and imaging solution. Surprisingly, it is one of the least exploited areas of synergy despite the compelling benefits. Furthermore such investments can pay for themselves in a matter of months, particularly when document management is deeply integrated with an existing accounting or ERP system. Not only do such systems reduce paper generation and handling, but they also streamline business processes, making staff more productive and organisations as a whole more responsive to their customers and suppliers.

In broad terms, document management systems digitise paper documents and store them electronically on computer systems. So, for example, sales invoices can be delivered electronically to customers and stored on a system so that they never need to be printed. Likewise, inbound supplier invoices can be scanned and held on the system as electronic images.

The simple expedient of reducing paper handling saves significant sums of money. For example, experts in document management, such as Version One, say that w hen the full impact of labour costs, storage and waste disposal are taken into account then it is not unusual for organisations to be faced with typical direct processing costs of around £5 per transaction for outgoing documents such as purchase orders and sales invoices, and as much as £50 for incoming documents such as supplier invoices - which can all be saved through automation.

But apart from the high transaction costs, business documents such as these, whether inbound or outbound, share another element in common, namely they share information with the core accounting and ERP systems in which they are recorded. For example, suppliers' invoices contain name and address details, order line details and prices. Similarly, sales invoices contain data elements which mirror the purchase invoices. Yet bizarrely, organisations spend vast sums of money and resources manually re-keying information already held on their ERP systems rather than taking advantage of information which could be automatically validated and posted.

This is one of the reasons that Nichols plc, best known for their Vimto branded drinks, took the decision to make the company's Sage system the only source of supplier and customer records in the organisation and tightly integrate Version One's document management system. Inbound purchase invoices are registered on the accounting system, bar-coded, batched and scanned and on the outbound side, images of all accounting documents, such as, sales invoices, remittances, statements and even payslips are automatically archived.

But with recent research estimating that the average office worker spends a quarter of their day just looking for information, then document management provides some particularly welcome additional benefits. In Nichols case, the tight integration with Sage means that scanned images of the invoices can be retrieved from within the accounting software using a number of search criteria, such as date ranges, unique supplier or transaction reference.

Even more time is saved because workers do not have to leave their desks, trudge the corridors or make extra telephone calls to get invoices approved. Once the invoice details are captured on the system, the Version One system routes the invoices through an authorisation and approval process to individual budget holders. Each authoriser can see lists of invoices awaiting approval, together with an accompanying image and can be reminded via email of outstanding transactions as appropriate.

Butcher's Pet Care Limited, a privately owned company that manufactures pet food for the UK and European market, is another business that benefits from improved process efficiency as well as a reduction in costs. It processes over 600 purchase invoices a week, which are bar-coded, batch scanned, automatically indexed and stored as images on the system. Jeff Martins, Financial Controller at the company told FSN, "A small modification to our ERP system means that we can retrieve and view supplier invoices from anywhere in the company over the web. There is no paper flying around the company any more."

Similar business considerations appealed to Coolair plc, a supplier and installer of air conditioning systems, which uses specialised forms software from Version One to generate sales invoices and statements using plain A4 paper in laser printers rather than expensive and cumbersome multi-part stationery. Coolair sends most of its business documents automatically by email and fax using Version One's electronic document delivery systems, which is a huge benefit in the construction industry which is always asking for copy invoices in support of retentions.

The additional good news is that document management and imaging systems are also surprisingly easy to integrate with ERP systems. In fact, a major supplier like Version One, which has specialised in the accounting and ERP market, has taken the 'hard work' out of integration by linking their solution with all of the major ERP packages. It means that document management and imaging software can be up and running in days rather than weeks and contributing to bottom line saving.

Unlike many software purchases it is relatively easy to quantify a return on investment (ROI) in a document management system and with savings of up to £50 per transaction a simple pay-back calculation justifies the expenditure in months or even weeks. Whilst the money savings steal all the headlines, the process and efficiency gains are very significant and should not be overlooked.

For example, DbCapture, the latest addition to Version One's portfolio of 'paperless office' solutions, enables automated data capture by using advanced Optical Character Recognition (OCR) technology. By scanning-in a batch of documents, such as invoices, DbCapture automatically recognises document type and supplier by each document's unique characteristics. It then highlights and extracts the relevant references and amounts and validates the extracted data against the accounting system which can then be automatically uploaded into the core financial system.

Automating data capture in this way eliminates manual errors and substantially reduces clerical effort and labour costs. It also liberates staff from the drudgery of paper handling and allows them to follow up queries quickly and efficiently, making the very most of their knowledge and the information held within the ERP environment. Life not only becomes easier and more fulfilling for employees but the organisation becomes more responsive and capable. Finally, by getting invoices processed more efficiently, late payment penalties are dramatically reduced.

So, whether it is cash savings or productivity improvement, the business case for document management is compelling. Few other IT investments can promise such a rapid ROI and deliver such a marked change in process efficiency and organisational effectiveness at the same time.

Related FSN articles

How document management can revolutionise the 'purchase-to-pay' cycle

Are accounting and document management systems converging?

FSN Whitepaper Document Management in the Finance Function