Johns Hopkins Reduces AP Backlog with Automated Invoice Exception Handling
- ~50% of all invoices post automatically
- 80-90% of electronic invoices auto-post
- 50% reduction in invoice duplicates
- 50% reduction in invoice processing cost from $3 to $1.50
Business Need
As a world leader in research, 30,000 invoices are being processed per month through a shared service center (SSC) for both the Johns Hopkins University and Health System. The organization was inundated with paper as almost half of the invoices it received came in by mail and had to be processed manually. An automated invoice exception handling was missing. As a result, the AP team could only process two-thirds of what it received, which created an increasing back log of 7,000 invoices every month.
Challenges faced by the AP team included:
- Highly manual, paper-based process that required the AP team to touch every invoice that was received
- Large number of duplicate invoices by mail, often sent in multiple formats (e.g., paper, PDF and digitally via the GHX network), by vendors who were eager to receive payment
- Large number of invoice approvers (8,000) added even more complexity to the process
- Different business rules and individuals responsible for approvals, exception handling and managing master data updates or vendor inquiries for each business unit
- Complex invoice exception handling with international research partners
- Faster invoice processing for more complex tasks
The company wanted to find a solution that would enable them to handle these challenges and provide more control and visibility over invoice processing across the two business units.
Solution
Johns Hopkins chose to implement the SAP-integrated FS2 AccountsPayable solution from Serrala to automate as much of the invoice processing as possible. The solution enabled invoices to be matched to purchase orders using defined business rules and auto-posted. Using these business rules, the organization could automate a 3-way match for PO-based invoices that had both purchase orders and goods receipts. It also defined rules to auto-post a selection of invoices with a 2-way match, for example, when there is a price or quantity difference between the invoice and the purchase order (PO).
The goal was to:
- Minimize touches by the AP team for all invoices with a goal of touching each invoice only once
- Automate the validation of invoices to detect invalid with missing information or other exceptions as early as possible
- Centralized digital storage of invoices, including a human-readable version of any EDI invoices, to expedite approvals and invoice exception handling
- Automated approvals and invoice exception handling workflows that would enable a high degree of touchless invoice processing
Results
AP Automation and the renewed processing structure enabled the SSC to keep their headcount consistent while reducing the regular backlog of invoices to almost zero. The restructuring with the new intelligent solution not only eliminated deficits caused by delays but also smoothed the collaboration with vendors. Automated invoice exception handling improved the AP processes.
- 50% of all invoices are processed automatically, with 80-90% of electronic invoices auto-posting
- 50% reduction in invoice duplicates
- 50% reduction in invoice processing cost from $3 to $1.50
- Eliminated invoice backlog, as AP staff were able to process more invoices
- More vendors have moved to electronic invoices
The payment optimization helped the organization handle changing business conditions much more quickly than they could have in the past. For example, it was able to quickly add many new international vendors of Personal Protective Equipment (PPE) to ensure they could supply the Health Center and the University during the coronavirus pandemic. According to Renee Genco, “I’m thankful we started down the automation path before the pandemic hit. I cringe to think how all those paper invoices would have been processed.“