AvidXchange

Data-entry isn't a single event anymore

David Miller — Tue, 02 Mar 2010 13:00:00 GMT

When I visit customers and look around most AP departments (that is, before AvidXchange gets implemented), I see stacks of paper everywhere and lots of people typing data into their accounting system as a repetitive task. They're usually called AP Clerks, or something similar.

Data-entry today is an event that takes place all at once. In order to get a transaction into any accounting system there is usually a lengthy list of required fields and they all need to be entered all at once. You can't enter some fields now and some later. It's a one-shot deal.

Can you enter a payable into your accounting system without identifying who the vendor is? No, you can't.

The design of all accounting systems (and most other AP applications for that matter) forces an inefficient batch process on its customers. You have to wait until all the data is complete - and presumably accurate - before a transaction can go into the system.

Think about that for a moment. What would life look like if a transaction could go into the system immediately, with partial data, where the system could manage and enforce all the required fields as a part of the process?

It would mean that you could apply data to the transaction over time and as it moves through your process. When that happens, it becomes possible for data-entry automation to happen over time too as the transaction becomes more defined as more people touch it and add their knowledge to it.

An Example

Let's take the example of an invoice that comes into AP when the vendor can't be properly identified and it requires a person in the field to help resolve the issue. Most companies resolve this with a phone call or an email to the field with a "vendor verification" request. Until then, the invoice either sits on someone's desk (remember, it can't go into the system without a Vendor) or it goes into the system with the wrong Vendor. It's hard to say which one is worse.

Now, let's look at the better way: the invoice comes in, it gets captured in the AP automation system immediately, and gets routed to the field without a Vendor. Once the Vendor is properly identified and selected by the field manager, the AP automation tool can then apply automation to complete other required fields based on the selected Vendor, and it can be re-routed to the next step in the approval process.

It goes into the system early, it stays there, and over time, the right data is applied. No queuing and no batch data-entry. There is no such thing as data-entry in this process. It goes away. It's not a defined job anymore. It happens over time as automation is free to work its magic.

Accounting Systems don't work that way

Accounting systems don't work this way. They have a design flaw where data-entry is a one-time event. It's not something that's likely to change with the next version. It's an ingrained part of their DNA.

When you evaluate how you're going to move your process forward, compare the limitations of batched data-entry as a job function versus the power and freedom of data-entry as an automated event that happens over time.

Follow up from SEVC

David Miller — Sat, 27 Feb 2010 16:55:00 GMT

From everyone at AvidXchange, thank you to Eric Gregg and the Southeast Venture Conference for the opportunity to tell our story. Further, thanks to everyone who listened to our presentation.

For those interested, I will present an extended version of my presentation sometime in mid-March via Go-to-Meeting. Please send me an email at dmiller@avidxchange.com if you'd to be invited.

We're in the exception management business

David Miller — Fri, 12 Feb 2010 13:05:00 GMT

In any process, it's the exceptions that kill you. They suck all your time and energy.

It's when the paper jams in your printer.
It's when you lose access to your network and can't access a document.
It's when you have to send a fax instead of an email.
It's when you add too much salt to your chicken cacciatore.

We know from more than 200 customers that the 25% of all invoices that have some sort of an exception take up 85% of the time and energy to resolve. It could be anything:

who is the vendor?
is the vendor approved and active?
which location or department does the invoice belong to?
is it a duplicate?
is the pricing wrong?

And these are just the easy ones.

Anyone can design a process for when everything goes right. It's how you manage the exceptions that matter.

When you think about what the value of an AP automation product will do for you, think about how you're going to manage exceptions. It's where the money is.

Receiving electronic data-files from your vendors

David Miller — Fri, 05 Feb 2010 13:20:00 GMT

It seems fairly clear that you'd save a lot of time and energy managing invoice approvals if a Vendor could send you an "invoice file" and the contents of the file would just "show up" as invoices in your AP automation tool (like AvidInvoice). It's getting easier to do and this is the way the world is moving.

It sounds easy: talk to your high-transaction-volume vendors, agree on a consistent data-mapping and file-format, use your AP automation tool's API to map the file to the API, do your testing, and then, viola, start receiving electronic invoices.

Actually, it's not that easy. It's time consuming, and in order to create a compelling ROI to invest the time and energy into a project like that, you'll either (i) need to receive an awful lot of invoices every month from a vendor, probably more than a few hundred; or (ii) have the ability to leverage an existing integration created by someone else.

I'm not going to talk about how compelling the ROI is for getting electronic data, however given how compelling it is, and given the way the world is moving, you'd be wise to figure out how to keep this option open.

The NON SaaS-model Option

How would this work if your AP automation tool were NOT a SaaS-model product? Three things would be working against you:

For starters, you'd have to manage your own environment. OK, no big deal if you have an experienced IT team with the right expertise or if you can hire your AP automation vendor to do this for you.

Second, convincing vendors to invest the time just to integrate to your "one-off" integration will be tougher. Remember, they have to invest connecting to you, too, and they'll have to justify the ROI for your integration just like you do. You'll need to be a really good customer to get their attention. Again, if you are a good customer, no real problem.

Finally, and here's the kicker, it's unlikely to ever be easy to share someone else's integration. You'll wind up bearing the entire cost burden yourself.

So let's say that someone has already used the same AP automation tool you use to integrate to a vendor like, let's say, Fedex:

How are you going to know that another integration to Fedex even exists? Is Fedex going to tell you? Is the other Customer?
Is the other company that invested in the integration going to share their work with you? for free? under what terms?
Will the other company's integration to Fedex even work for you? Will you have to modify hard-coded customizations? What if your network environments are different? What if your accounting systems or databases are different?

The SaaS-model Option

When we compare that scenario to a SaaS-model company's integration options, there's really no comparison.

First, no environmental issues, period: it's fully managed and supported by the AP automation vendor.

Second, vendors will realize that they can invest in one integration that will cross multiple customers with significantly more volume in the aggregate so the ROI is much more compelling.

And third, integrations are designed to be shared from the get-go so anyone can use any integration with minimal issues. It's built to be shared, and as the number of customers and integrations grows, it get more compelling for vendors to invest in more integrations. The economics of the business model encourage lower costs and higher value.

At the end of the day, unless your AP automation tool is a SaaS-model product, you're probably not going to leverage integration options like this, even if they're supported within your product. Anytime soon, if ever. The ROI will never be there.

NOT choosing a SaaS-model product is a choice. It's important to understand what you'll likely never have if you don't make the right one.

SaaS University in Dallas Presentation Follow up

David Miller — Wed, 27 Jan 2010 17:00:00 GMT

Thanks for everyone's time and attention during my presentation on Product Strategy at SaaS University in Dallas today. Here are links to some of the references I mentioned during my talk.

My Presentation (on GoogleDocs ... some formatting issues during upload)
Bessemer's Top 10 Laws of Cloud Computing and SaaS
The "Never List" and why it's important

eInvoicing Adoption Survey

David Miller — Sat, 23 Jan 2010 16:39:00 GMT

Paystream Advisors published an interesting posting on the secrets to automating your AP process. No real secrets here though it's nice to see independent research validating our customer experience.

The Virtual ERP system

David Miller — Thu, 21 Jan 2010 13:32:00 GMT

I'm wondering what's going to happen to ERP systems as SaaS applications develop and mature.

Customers are demanding that their ERP vendors add API's to their products so that they can connect to services that the ERP vendors don't offer. These API's are getting more and more robust.

At the same time, SaaS providers, with there own API's, are introducing innovative services that leverage the SaaS model that cannot be offered by ERP vendors who have single-instance applications.

How long is it going to be before the functionality and value of a SaaS offering that provides what has been a core ERP system module prompts the customer to abandon use of that core ERP system module and just use both sets of API's to create a "virtual" ERP system comprised of solutions from multiple vendors?

And how is an ERP vendor going to offset the model disadvantages they have when compared to SaaS-model services? How are they going to be able to out-invest their SaaS-model competitors in any particular process when the SaaS-model vendors are investing in one process and the ERP vendors have to allocate resources against dozens of processes? I have doubts that they can.

It seems like the SaaS-model is causing the multi-decade trend that drove customers toward an integrated ERP product to reverse course. Time and technology are working against ERP systems.

Associating email conversations to invoices

David Miller — Fri, 15 Jan 2010 13:18:00 GMT

You probably have a question about an invoice that's pending your approval about 10% of the time - at least that's the experience across all AvidXchange Users. If you're like most of us, your preference is to send someone an email with your question and wait for the answer.

Here's the problem: how do you track these conversations? When the issue is resolved, what do you do with all the email? How do associate all this activity to the invoice so that you know what happened when you go back and look at it months later?

Luckily, SaaS applications like AvidXchange have a solution for issue tracking that non-SaaS applications can never offer. It works like this:

You browse to an invoice in our application and add a comment to it. The application sends to your recipients an email that contains a special Reply-to email address unique to that conversation thread. When your co-workers or vendors reply to your email using Outlook, GMail, or whatever email client they use, the return-message goes to AvidXchange where we log it against the conversation thread, record it in the transaction history for the invoice, and forward it along to all replied-to recipients.

In other words, our service lets everyone use their existing email tools to manage conversations in a natural way that requires almost no behavioral changes, and then it tracks everything in the one place where you will want to see it: in the application attached to the invoice. It couldn't possibly be an easier.

Can a non-SaaS product do that? Not likely.

Add "automating the way issues are resolved and tracked and associated to invoices" to the AP Never List - something else that a non-SaaS product will never be able to do.

Leveraging Optical Character Recognition (OCR)

David Miller — Thu, 14 Jan 2010 13:50:00 GMT

Most people understand that there are tools available to extract data off of printed documents and that this process is called Optical Character Recognition, or OCR. When it works well it's like magic: fields can be populated automatically with much lower data entry costs.

How does it work and why should it be on your AP automation Never List?

OCR is complicated stuff. Like most things, it takes deep expertise in order for it to work well and that translates into lots of time, energy, and money. It's one thing if every invoice looked alike - like some medical insurance forms do - but invoices come in all shapes and sizes and no two vendor's invoices may look alike. If OCR is going to be magical for AP documents, then someone is going to have to become an expert.

Ask yourself these questions:

If you install a stand-alone version of an AP automation product that includes OCR features or you license a hosted version of a single-instance product, how will you benefit from someone else's work? How will you benefit from the investments others make in the same technology? How will they benefit from your investments? If I'm doing work in my instance and your doing work in your instance, how can we possibly share our work to move things forward faster for both of us?

The answer is that we can't.

Now, consider a single-instance service like AvidInvoice and the AvidBill Network. All invoices are funneled through one central process so AvidXchange can apply resources against a feature like OCR that benefits all Customers. If we figure out how to OCR invoices from Office Depot for one Customer, we've figured it out for all other Customers, too (at least in theory, but it's a little more complicated than that). Costs are widely dispersed and value grows for everyone, and far more quickly.

So if you want OCR you have a choice: become an expert and dedicate the time, energy, and expense that will be required to make it work; or leverage a service that includes OCR as a core competency.

For most people, this isn't really a choice at all.

Making it easy to receive the email I get from Vendors

David Miller — Thu, 07 Jan 2010 13:24:00 GMT

If you're planning to invest in software to automate your AP process, you're going to want an easy way to manage inbound email because more and more vendors prefer to send you their bills this way: it's cheaper and faster to manage than sending stuff through the mail.

Wouldn't it be great if you could have an email address, like vendor-bills@your-company.com, that you could print on all your communications and publicize to all your vendors so that when a bill came in to this address it magically appeared inside your AP system ready for processing? And that it went through a series of validations to make sure that it was a document you could actually manage?

What I mean is that your AP system just connected to your email address so that no one in your company ever had to touch these inbound emails. They would just show up in your system waiting for action.

I can tell you that it's very cool because that's how the AvidInbox works with the AvidBill Network. AvidXchange gives you an email address and everything sent to that email address just shows up waiting to be managed.

The only reason we're able to do that is because we have a SaaS-model and we're able to support connecting the one instance of our application to one email system. Managing and scaling a one-to-one connection is possible.

What if we had multiple instances of our application running, some that we managed and some that our customers managed, and we had to connect to the countless number of possible email systems that companies use, like Exchange, Notes, GMail, etc.? We probably wouldn't be able to offer that service because managing an unknown numbers of possible connections is costly, time-consuming, and ridiculously complex.

So if you don't choose a system delivered through a SaaS-model that has a single-instance don't expect it to be easy to connect it to your email system. More than likely, don't expect it to be possible anytime soon.

Since email is so important and since the volume of bills you get this way is going to grow dramatically, ask yourself whether you should ever invest in a system that doesn't make this brain-dead easy.

That's why "making it easy to manage the emails I get from my vendors" is on the Never List.

The "Never List" and AP automation

David Miller — Thu, 24 Dec 2009 16:45:00 GMT

In previous posts, I've discussed what a Never List is and why it's important . Now I want to list some of the specific items that would be on my Never List if I were looking to automate my Accounts Payable processes. Leveraging Optical Character...(read more)

Why you should care about your "Never List"

David Miller — Thu, 24 Dec 2009 15:56:00 GMT

You don't have to do much reading to discover that Software-as-a-Service (SaaS) is the future of software. In fact, it's the present of software, too. Companies like AvidXchange have sprouted in every corner of technology to make it easy for business...(read more)

The "Never List"

David Miller — Tue, 22 Dec 2009 14:48:00 GMT

Here's the idea: what if there were things you wanted that you could never have? For example, if you bought a Betamax way back when, you knew that you could never use it to watch a VHS movie. So if your favorite movie was not released in the Beta...(read more)

AvidXchange Events

AvidXchange — Tue, 01 Dec 2009 16:44:00 GMT

Upcoming events for 2010 Date Article 03-21-10 IRES International User Conference 04-27-10 AvidXchange User Forum 2010 05-09-10 IAPP Annual Forum / Expo 06-09-10 IOMA AP Automation Conference 09-20-10 AvidXchange User Conference 2010 10-11-10 IOMA AP...(read more)