Sealed with a loving … invoice

If your partner made you coffee and toast at breakfast-time – and presented you with a bill for £2.50, how would you feel?

Financial independence among couples isn’t so odd nowadays. Around 28% of couples prefer to keep totally separate financial arrangements, according to research.

But news came this week of one married couple in Australia who pushed things a little further.

Apparently, they got into the habit of billing each other for trifling amounts – as little as 50 cents. One invoice was for a $1.60 light-bulb during their 20-year marriage. (NB: We can only hope they used electronic invoicing to avoid a paper storm.)

But the couple’s curious relationship entered choppy water over a boat, according to reports. In fact, magistrates are now being asked to decide whether the wife should contribute to the custom-made $600,000 yacht the husband had built to sail around Europe. It’s claimed that the wife had no interest in sailing whatsoever.

Interestingly, over the years, the wife's assets increased to nearly $4 million while the husband's assets shrank to $315,000, say reports. Perhaps one of them was better at invoicing? We can only speculate.

But however amusing the story, you’ve got to admire their attention to detail. Perhaps they could tell you how many light-bulbs were purchased over their 20 years? And, armed with that information, perhaps they could have bought in bulk from a single supplier and got a better deal for themselves?

The point is this: Potential savings are often locked away in the detail.

In the wider world, finance systems that simply use budget codes for purchasing are often unable to drill down into the detail – and separate items into clearly-defined categories. They cannot see how much is actually spent on product type A or B because the boundaries are blurred.

This contrasts with organisations with purchase-to-pay (P2P) systems that use the United Nations Standard Products and Services Code (UNSPSC). Armed with specific spend information linked to codes, these organisations can target particular categories and negotiate contracts with suppliers, often saving a fortune in the process.

The benefits of UNSPSC magnify when others are involved. This may be through collaboration and shared services in the public sector – or through affiliated companies and business divisions in the private sector. Each financial unit may have its own unique budget code system, but UNSPSC brings uniformity so everyone can see the big picture on spending – and make even greater savings.

High-fives for Kazakhstan

Borat, the creation of comedian Sacha Baron Cohen, did little to endear himself to the Republic of Kazakhstan or do much to project the image of a forward-looking country.

But the Kazakhstan government is making a name for itself – for all the right reasons.

The country’s tax bosses have announced that Kazakhstan is to switch to electronic invoicing from July 2012, say reports. National companies will begin the switch-over - with others following from next January.

And the change will be radical. It’s estimated that Kazakh companies issue 56 million invoices annually. But, apparently, these are all on paper. Not only will the move electronic invoicing save money but it’ll make documents easier to trace.

How green do you want your supply chain to be?

Today’s tougher economic conditions, cost reduction and ways to enhance productivity may be dominating the boardroom agenda. But environmental issues are still in sharp focus.

Take car maker Honda for instance.

According to news reports, the company has faced numerous procurement challenges, from last year's earthquake and tsunami in Japan to flooding in Thailand. Now Honda is powering ahead to make its procurement operations greener and improving the sustainability of its supply chain.

There’s momentum behind environmental issues here in the UK too. Around 90 business organisations are backing next month’s Climate Week, Councils, charities and cultural groups are involved too.

Meanwhile, small businesses are being warned that they could lose out on profitable contracts if they cannot fit into a green supply chain.

But would your organisation be more attracted to suppliers because their green credentials … rather than price alone? And do you have any way of making it happen easily – for instance, by comparing two identically-priced products but knowing which is greener?

If you’re interested in exploring the possibilities, then contact EGS.

How important is it … that your suppliers are local?

When procuring goods and services, price comparison is essential. But it may not be everything – to every buying organisation.

Take the Indian government for instance. According to web site Purcon, the furniture giant IKEA is holding off on plans to enter India’s burgeoning retail market because of the country’s procurement policy.

The site says that when India recently allowed foreign companies to have full ownership of stores selling a single brand – there was a condition. Single-brand stores must source 30% of their materials from local firms.

There’s an obvious logic at work. The Indian government wants local businesses to share in the success of overseas-based firms. A potential win/win.

Back in the UK, local/regional public sector organisations may feel a desire to support their local economies at one level or another.

Businesses may also be more inclined to ‘think local’. On one hand, they need to cut costs in the current economic climate but, on the other, there’s the company brand and reputation to think about. Should ‘social responsibility’ extend beyond global environmental concerns to supporting local businesses? After all, many companies already support local schools, hospitals and other good causes.

But favouritism with contracts can equal unfair competition – and fall foul of legislation.

So perhaps the onus is on local suppliers?

They need to prove why being local is of value. When responding to tenders, perhaps their close proximity or local knowledge may result in a better service? They may also team up with national organisations, adding value by being local. Points like these could make a more compelling submission.

That way, buying organisations could be justified in choosing a local submission over any other – but only if strong business reasons make this possible.

NB: If buying organisations have the right e-procurement system, then local, regional and national suppliers of all shapes and sizes can offer their goods and services on a level playing field.

EGS ‘athletes’ get a great run for the money

If you didn’t get a ticket for the Olympics, never mind. It’s the taking part that matters most … especially if there’s money raised a good cause.

EGS’s super-fit … or rather, super-enthusiastic … team of runners put their best feet forward in the Hyde Park Jog to raise funds for the British Heart Foundation (BHF).

As well as clocking up the kilometres, we’ve also been collecting donations and sponsorship for this excellent cause. EGS is also kindly offering to double what we raise as a team.

Once the aches and pains wear off, we may even be at it again! No promises yet. But the BHF are lining up a season of runs and jogs across the country for anyone wanting to take part. What a great idea.

Is this the end for ‘bonkers’ procurement?

“It is bonkers for different parts of Government to be paying vastly different prices for exactly the same goods. We are putting a stop to this madness which has been presided over for too long.”

That’s the Cabinet Office minister Francis Maude, quoted in The Daily Telegraph, as the government targets billions of pounds worth of savings in procurement.

Public bodies have been paying as little as £350 and as much as £2,000 for the same laptop, according to Mr Maud, says the Telegraph.

The problem of paying too much for the same thing made headline news last autumn. Sir Philip Green’s Efficiency Review sounded the alarm – and this blog provided its own insights.

The right tools and mindset is required to achieve big savings. And it’s been happening for years in local government. A lesson surely for central government?

Do you have a hunch you’re paying too much? Would you like to benchmark the numbers?

EGS has helped organisations reduce their key commodity costs by an average 20%, thanks to our Cost Reduction Analysis service. This compares like-for-like goods and services with those available in nationally-agreed contracts. But unlike most services of this nature, which simply hand you a report together with a bill, EGS will take it a step further.

The nationally-agreed contracts are all on EGS’s e-marketplace. So not only will we tell you which contracts will save you money, we will connect you to them online instantly. Savings start straight away. And there’s no need to go out to tender.

Contact EGS for a case study on our Cost Reduction Analysis service if you’re interested.

Why invoice scanning and OCR is no more than an interim solution

The following article first appeared in Peter Whent’s blog “Small Business Syndrome”. Peter Whent is Chief Executive of EGS Group Limited. You can follow his blog here: http://small-business-syndrome.blogspot.com/

Invoice scanning together with Optical Character Recognition (OCR) – digitising paper documents to you and me - is presented by many as the answer to everyone’s electronic invoicing prayers. In fact one company which I won’t name, which claims to be a leader in e-invoicing, is actively promoting it as their strategy. There are several reasons why invoice scanning is not the answer and represents only an interim solution.

The holy grail in the world of e-invoicing is that an invoice should go from creation, to delivery, to approval, to payment without a piece of paper being created. In other words machine to machine with software doing the work along the way. Not a pipe dream at all. Today we deliver hundreds of thousands of true electronic invoices a year that follow exactly this path. And with some ground-breaking new interfaces and tools currently in testing, we expect that number to increase sharply in the months ahead.

Invoice scanning and OCR (in the context of invoice processing) became popular because companies couldn’t persuade enough of their suppliers to adopt a truly electronic method of submitting invoices. This meant they found themselves in no man’s land – paying for an e-invoice solution but still having to retain a small army of employees to handle paper invoices. Scanning and OCR takes the paper, scans it and uses OCR technology to lift the data off the page so that it is useful and uses it to create an electronic invoice. But here is why it is no more than an interim solution:

1. It is at best an inaccurate process. OCR software vendors will tell you they can read characters from paper with 99% accuracy. That may be so with a simple text document in a medium sized typeface. But when it comes to small print on invoices, the reality is that it is a lot less accurate. It only needs to read one character incorrectly in the wrong place for the invoice to fail in an electronic approval process. Someone has to manage these failures and exceptions. People involved in the process? Not what was promised from “electronic invoicing”.
   
   
2. OCR on its own is not enough. The next thing a well run AP department will want to do is validate an invoice before it goes into an approval process so that it doesn’t get lost within the approval process. Validation, which is an automated process, includes all those pre-flight checks before starting an electronic approval process – is there a Purchasde Order (PO) number? Does it relate to an existing PO? Is there a supplier reference? Is there a VAT number? Does the invoice add up correctly? And so on. Even the most sophisticated solutions with people checking every invoice struggle with this. Suddenly the failure rate has risen. More inaccuracies and exceptions to manage. More people involved.
   

Of course the net result of this is that you or your outsourced provider has to incur some real costs to bring this error rate down. Guess who ends up getting stuck with those costs? So suddenly your business plan doesn’t look so good. Where you were expecting to drive the cost of processing each invoice down below £1, human intervention has resulted in costs being much higher.

Scanning and OCR has its place. Even allowing for the absurdity of taking an electronic file, printing it out on paper as an invoice, sending the paper to your customer for them to use an expensive process to turn it back into an electronic file – it has its place. But only if you build your business case based on there being a concerted effort to migrate from scanning and OCR to real electronic invoicing. You should aim over a three year period to turn a ratio of 80% scanned and 20% electronic on its head and have 80% submitted electronically. This is all about being good at persuading your suppliers to send you electronic invoices or online invoices. That is a whole subject on its own!

To see how a good e-invoicing deployment works download a case study here which shows how Essex County Council released 20 AP staff and will save £2.5 million next year by understanding the important distinction between scanning as a means to an end versus scanning as the answer. They now process tens of thousands of real electronic invoices – those that go from creation to delivery, to approval to payment without a piece of paper being created. Invoice scanning was merely a stepping stone which helped them to get there.