Invoice Process Automation in the ERP System

Invoice Process Automation in the ERP System

Business Consultancy Project; Spring 2024

Table of Contents

TOC o "1-3" h z u PART ONE PAGEREF _Toc164791936 h 31.1 Organizational Background PAGEREF _Toc164791937 h 31.2 Business Issue PAGEREF _Toc164791938 h 31.2.1 Preliminary Problem Analysis PAGEREF _Toc164791939 h 31.2.2 Consultancy Purpose Analysis PAGEREF _Toc164791940 h 41.3.1 Contacting Meeting PAGEREF _Toc164791941 h 51.3.2 Role as a consultant PAGEREF _Toc164791942 h 61.3.3 Time Schedule PAGEREF _Toc164791943 h 6PART TWO PAGEREF _Toc164791944 h 62.1 The agreement on the terms of the consultancy and the contracting steps followed. PAGEREF _Toc164791945 h 62.2 The methods used to collect and analyze required data/information. PAGEREF _Toc164791946 h 72.2.1 Financial Statement Analysis: PAGEREF _Toc164791947 h 72.2.2 Employee Interviews: PAGEREF _Toc164791948 h 72.2.3 AP Automation Benchmarking: PAGEREF _Toc164791949 h 82.3 The Resistance faced and the methods followed in dealing with it PAGEREF _Toc164791950 h 82.3.1 Loss of Control: PAGEREF _Toc164791951 h 82.3.2 Learning Curve Objectives: PAGEREF _Toc164791952 h 82.3.3 Control Concerns PAGEREF _Toc164791953 h 83.0 Findings and Discussion PAGEREF _Toc164791954 h 83.1 Financial Data Analysis PAGEREF _Toc164791955 h 93.2 Employee Interview Findings PAGEREF _Toc164791956 h 103.3 Benchmarking Findings PAGEREF _Toc164791957 h 113.4 Quantifying the Impact PAGEREF _Toc164791958 h 123.4.1 Supplier relationship strain PAGEREF _Toc164791959 h 123.4.2 Audit difficulties and compliance risks PAGEREF _Toc164791960 h 123.4.3 Working capital tied up PAGEREF _Toc164791961 h 133.4.4 Potential fraud PAGEREF _Toc164791962 h 133.4.5 Operational inefficiencies and headaches PAGEREF _Toc164791963 h 134.0 Conclusion, Recommendations, and Implications PAGEREF _Toc164791964 h 144.1 Conclusion PAGEREF _Toc164791965 h 144.2 Recommendations PAGEREF _Toc164791966 h 154.2.1Supplier self-service invoice submission portal PAGEREF _Toc164791967 h 154.2.2Automated purchase order and receipt matching PAGEREF _Toc164791968 h 154.2.3Configurable approval workflow rules PAGEREF _Toc164791969 h 154.2.4Central repository with full audit trails PAGEREF _Toc164791970 h 164.2.5Real-time dashboards and status visibility PAGEREF _Toc164791971 h 164.2.6 Action Plan for Implementation PAGEREF _Toc164791972 h 164.4 Implications of Recommendations PAGEREF _Toc164791973 h 174.4 Reflection PAGEREF _Toc164791974 h 174.5 Limitations PAGEREF _Toc164791975 h 18References PAGEREF _Toc164791976 h 19Appendix A PAGEREF _Toc164791977 h 20Appendix B PAGEREF _Toc164791978 h 21Appendix C PAGEREF _Toc164791979 h 23

PART ONE1.1 Organizational Background Noori Petroleum Services was established in 1993 as an energy subsidiary of Noori International Investment Limited (NIL). Currently, the company has nine departments and operates in the oil and gas sector of Qatar. In 2010, Noori implemented an ERP system which was majorly designed to improve efficiency of business operations particularly in the Finance department. In 2017, the company expanded the ERP system to be used in the Operations and Administration/HR departments. The nine departments function as a conveyor belt in carrying out the companys operations in line with its mission of being a leading and reliable service company and its vision of offering first class petroleum services. Salams services and products include but not limited to detection and protection, safety and environment, mechanical, chemical, electrical, and renewable and energy efficiency solutions. As such, a comprehensive and efficient system is critical for its operations as a key player in Qatars energy sector.

1.2 Business Issue1.2.1 Preliminary Problem AnalysisSince the installation of this new ERP system, there have been problems with booking of supplier invoices and payments in a timely manner. Business growth has seen it receive approximately 6,000 supplier invoices annually. There is a delay between invoice submission and payment, which makes it hard for suppliers to get paid on time. This is a key requirement when dealing with suppliers working within the oil and gas industry: to maintain good relationships across entire value chains or ecosystems, which include all business partners along the supply chain. Timely payment is very important towards maintaining trustful relationships among suppliers, especially where business enterprises work in the oil and gas industry. Delayed payments have far-reaching implications with regard to accounts payable accruals, audit timelines that are impacted due to supplier trust issues, as well as working capital management.In the current process, the procurement team should generate a purchase order, the supplier should deliver goods or services, and the warehouse team should create a store receipt voucher while the accountant enters an invoice by matching against the store receipt voucher (Purchasing Methodology Template). Problem occurs when the warehouses staffs prepare the store receipt voucher and do not deliver invoices on time to accounts, leading to the accumulation of higher accounts payable accruals in the general ledger during the year-end process. This leads to an increase in the AP accrual in the trial balance which makes the accounts department in a bad reputation for working in an effective and efficient manner. Hence, the auditor raises concerns during the financial statement audit putting the company in a bad shape and embarrassment of not booking the liability on time. Moreover, this also causes delays in payment to the supplier as the accountants are busy with tracking of invoices with the warehouse team and then booking them.

1.2.2 Consultancy Purpose AnalysisThere is a need for a solution that will streamline the invoice submission process to ensure timely booking and payment of supplier invoices. This will resolve the accounts payable accrual issues, improve supplier relationships through on-time payment, and prevent external audit delays. Errors may be reduced, all invoices submitted are accounted for, proper accrual accuracy is maintained, and corporate governance is supported as well as timely audits through a computer-based procurement system (Ainsworth, 2019). The automated invoice submission process has the potential to significantly reduce such errors in purchase order matching activities while increasing the accuracy of the overall accruals made, thus also supporting the accountability necessitated by audit requirements. Suppliers can make direct submissions via a self-service portal that accurately routes invoices for processing (Purchasing Methodology Template). Furthermore, reduced manual efforts to match invoices will minimize potential fraud or revenue leakages as well (Purchasing Methodology Template) (Rangsipunyaporn, 2021). Transparency and compliance across the source-to-pay process are ensured due to the audit trail of documents (Purchasing Methodology Template). By automating workflows, working capital tied up in lengthy payment cycles can be unlocked. Together, these benefits create a strong business case for operational efficiency with streamlined supplier invoice automation.

1.3 Planning and Consulting

1.3.1 Contacting MeetingI have initiated the contact with the department heads i.e. the chief accountant and finance manager to address the issues which the accounts team were facing and decided to provide some recommendations which will increase the effectiveness and efficiency of the accounts department. The proposal consulted with the managers was to agree on the scope of streamlining the supplier invoice process using the Oracle systems external party portal. After matching store receipt vouchers and purchase orders, suppliers will now be able to submit invoices directly into the portal. Suppliers will no longer depend on warehouse teams collecting and submitting invoices if they can be directly accessed for submission. Once fully automated, errors emanating from manual processes will be eliminated, and it will provide reliable tracking for all invoices once submitted into the system. Such initiatives are necessary as the finance manager has an oversight role over all finance operations within an organization. This harmonization of executive support ensures that its use is widespread.

1.3.2 Role as a ConsultantBeing an internal consultant accountant in the company, I will play a collaborative role with the department heads and IT ERP developer to understand the gaps in the invoice booking process and how the IT will map the invoice booking process from the external parties in the oracle system. Moreover, the accounts team and I will evaluate the current AR automation system which is being used to submit the invoices in the clients portal. The support is required from the chief accountant to share the financial data of the AP accrual and provide the report of the unaccounted records from the purchase orders.

1.3.3 Time ScheduleThis assignment should take 6 weeks only; the study will be to discover the gaps of unrecorded invoices and come up with a solution that would mitigate the problem of unaccounted invoices. The time needed in this assignment is required for the discussion with the management to come up with alternative solutions. An employee interview will be conducted to find detailed information for the reason for the late submission of invoices. Collaboration with the ERP developer team to develop an invoice submission portal for the external parties and training will be done within the staff who will be involved in this assignment.

PART TWO2.1 The agreement on the terms of the consultancy and the contracting steps followed.The scope and objectives of streamlining the supplier invoice and payment process were defined in a kickoff meeting with the chief accountant and finance manager to ensure timely supplier payments, strengthen relationships, minimize errors, improve accrual accuracy, and support external audits (Balios et al., 2019). My role as consultant entails end-to-end process analysis, diagnosing root causes of delays, proposing an automation solution that leverages Oracles supplier portal capabilities, planning solution implementation with relevant teams, creating user guidelines for suppliers, and training staff on updated protocols. With an agile approach based on continuous iterative cycles of understanding through assessments, solving by recommending the management to develop an invoice submission portal for the vendors.This involved formal contracting steps such as defining the statement of work, specifying expected deliverables, outlining the 6-week timeline, the cost for installation of invoice submission portal, signing a non-disclosure agreement to protect sensitive company information, scheduling regular status review meetings every 2 weeks, detailing change management procedures for scope adjustments if required, and setting targeted success metrics focused mainly on reducing invoice processing cycle time. These terms were accepted by the finance manager, who aims to reduce invoicing delays and mistakes significantly by automating submissions via the Oracle supplier portal (Rijanto, 2021). No longer relying on warehouse personnel for accepting invoices and giving real-time visibility once invoices are submitted.

2.2 The methods used to collect and analyze required data/information.The analysis of the prevailing condition took advantage of a combination of both quantitative and qualitative approaches in gathering information on the causes as follows:

2.2.1 Financial Statement Analysis: Analyze the trial balance of the company for the past seven years in order to gather the data of the general ledger AP accrual which has been increasing every year without control.

2.2.2 Employee Interviews: Had face-to-face discussions with more than 15 contributors across several departments such as procurement, warehousing, accounting, and accounts payable so that light could be shed around unaccounted transactions and the gap for the invoice submission on time.

2.2.3 AP Automation Benchmarking: Studied outcomes of other companies automation projects aimed at streamlining accounts payable functions together with source-to-pay processes, amongst others.

2.3 The Resistance faced and the methods followed in dealing with itIn order to drive the adoption of change, it was necessary that pockets of expected resistance be anticipated, mainly from operations and warehouse teams who are most affected by the changes (Lewis, 2019). The major areas where such resistance which was experienced include:

2.3.1 Loss of Control: moving the intakes and sending of external supplier invoices from warehouse men directly to suppliers through a new Oracle portal.

2.3.2 Learning Curve Objectives: It will take more time and effort for team members to change outdated processes. The proactive strategy utilized communication, education, and benefit awareness as some strategies to avoid minimizing the proactive strategy.

2.3.3 Control Concerns: This has also entailed having one-on-one working sessions with warehouse managers to address job impacts, provide reassurances over job security, and explain that the administrative burden relieved allows for an up leveling of responsibilities.

PART THREE

3.0 Findings and DiscussionHaving critically reviewed the information that was gathered, a number of important discoveries were made regarding the problems that the Finance and Procurement departments of Noori Petroleum Services faces in relation to the timely booking and payment of supplier invoices.

3.1 Financial Data AnalysisThe initial evidence came from the investigation of the companys financial statements for the last seven years starting from 2017 to 2023. The results are shown in the table and column chart below.

Looking at the above table and column chart, it is clear that the unpaid supplier debt has been increasing from 2021 to 2023. Although, there is a reduction from 2017 to 2020, it is because of covid-19. As payments are received, good invoice processing would lower the account payable balance; however, yearly earned increments reveal weaknesses in the management system regarding invoices, which resulted in a collection of obligations against suppliers. Attention should be paid to the accounts payable accrual that keeps rising year after year (Hasan, 2021). If these problems are consistently ignored, there may be compounding negative impacts, which will increase the amount of unpaid debts and make them more difficult to manage or handle later. when a result, efficient invoicing should lower the account payable balance when payments are received; yet yearly increases suggest that there is an issue with the way in which invoices have been handled, which has resulted in the buildup of amounts that suppliers still owe.

3.2 Employee Interview Findings To better understand the root causes, interviews were conducted with 15 employees across procurement, warehousing, accounting, and accounts payable departments. Several key issues emerged:

Delays in warehouse staff preparing store receipt vouchers When suppliers deliver goods or services, the warehouse team is supposed to create a store receipt voucher promptly. However, interviews revealed the warehouse staff often delay this step by several weeks due to high workloads and inefficient processes.

Lost or misplaced invoicesIn many cases, supplier invoices get misplaced or lost after the warehouse team received them from suppliers but before delivering them to accounts payable. There is no automated system to track invoice status.

Manual invoice matching is tedious Accounts payable staff must manually match each invoice to its corresponding purchase order and store receipt voucher. This is a time-consuming and error-prone process that further delays invoice processing.

Heavy workload on few accountants There are only 3 accountants responsible for manually entering around 6,000 supplier invoices per year. This extremely high workload contributes to the delays.

In summary, the interviews exposed delays, lost invoices, tedious manual processes, and understaffing as key factors preventing Noori Petroleum from paying suppliers promptly after receiving goods/services. The interviews provided deeper insights into why the accounts payable accrual has grown so large over the years. The warehouse delays in creating receipt vouchers mean invoices cannot be processed right away, pushing payment dates further out (Bragg, 2020). When invoices then get misplaced or lost between warehouse and accounting, they may not get entered at all until the issue is discovered much later. This leads to accruals ballooning higher and higher. The tedious manual invoice matching and understaffed accounts payable team mean even the invoices that are successfully received take weeks or months to process, again delaying payments owed to suppliers. It is a vicious cycle of delays compounding upon each other.

3.3 Benchmarking FindingsTo provide further context, the invoice automation initiatives of other companies in similar industries were reviewed. Most have implemented cloud-based accounts payable automation solutions that digitize and streamline the entire process.

Common benefits achieved include:

Suppliers can upload invoices directly to a vendor portal 24/7Invoices are automatically routed and matched to POs/receiptsAutomated approval workflows based on pre-set rulesInvoice exceptions are flagged and tracked automaticallyReal-time visibility into invoice status for all stakeholders

Invoices are paid faster, optimizing working capital managementThese benchmarking findings highlight how Noori Petroleum's completely manual process is outdated compared to modern best practices. Implementing similar automation would resolve the root causes behind their invoice processing issues.

The automated solutions used by other companies clearly demonstrate how technology can streamline and optimize the accounts payable process. By allowing suppliers to submit invoices directly to a portal, issues of lost invoices and warehouse delays are eliminated. The automatic routing and matching to purchase orders and receipts resolves the tedious and error-prone manual efforts. Pre-defined approval workflows govern the process seamlessly based on rules. Any exceptions are automatically flagged for review. Full visibility is provided to both the company and suppliers on invoice status throughout. And ultimately, invoices can be paid much faster by avoiding the cumbersome steps prone to delays in the manual system.

3.4 Quantifying the ImpactTo emphasize the importance of addressing these problems, we can quantify the negative impacts on the business:

3.4.1 Supplier relationship strainWith thousands of invoices unpaid for extended periods each year, Noori Petroleum likely has tarnished relationships with many suppliers. Delayed payments demonstrate lack of reliability as a customer which can jeopardize the company's reputation and bargaining power. This runs completely counter to the company's mission of being a leading and reliable service provider. If major suppliers lose trust and confidence in Salam's ability to pay them on-time, they may be unwilling to extend favorable credit terms or pricing in the future. This could increase costs for the company. Over time, an accumulation of negative experiences may lead key suppliers to take their business elsewhere to more reliable customers. Losing access to essential suppliers in this specialized industry could be catastrophic to operations.

3.4.2 Audit difficulties and compliance risksThe auditors have already raised concerns about the large accounts payable accrual balance growing annually (Mohammed 2022, p.121-133). This makes their audit process more difficult in verifying amounts are proper. Auditors must spend more time investigating reasons for large accruals and ensuring all liabilities are recorded accurately. If invoices are not recorded accurately, it increases compliance risks for violations of accounting standards. Audit delays and questioning can raise red flags about the company's internal controls and financial reporting practices. At worst, there could be reputational damage or regulatory penalties if reporting failures are deemed severe enough.

3.4.3 Working capital tied up

The growing accounts payable balance represents cash outflows that have been delayed, tying up monetary resources that could be better deployed elsewhere to improve profitability and operations. With millions in unpaid invoices accrued each year, the company is missing out on potential returns that could be earned if the capital was invested productively elsewhere or used to pay down debt. Analysts view working capital metrics as an indicator of how efficiently a business is managing its operating cycle. By allowing excess cash to be tied up in accounts payable, the company appears inefficient.

3.4.4 Potential fraud

With thousands of invoices being handled manually with little visibility, there are opportunities for fraud, whether accidental or intentional, in the form of duplicate payments, payments for goods not received, etc. Weak controls enable dishonest employees or suppliers to potentially exploit the opaque system for personal gain at the company's expense (Laguecir & Leca, 2021). Automated systems with full audit trails and approvals help prevent and detect such issues.

3.4.5 Operational inefficiencies and headachesSignificant operational difficulties and headaches are caused by juggling missing bills, matching problems, and shortened closure deadlines. Constant firefighting can lead to demotivated and exhausted staff. Low morale among staff members increases attrition, training expenses, and institutional knowledge loss. Overwhelming workloads raise the risk of burnout and expensive human mistake. When workers are overworked and forced to perform repetitive manual jobs that could be automated, productivity declines. The business is suffering from the overall expenditures of running such an ineffective procedure.

Thebusinessissufferingfromtheoverallexpendituresofrunningsuchanineffectiveprocedure. In conclusion, the results show that Noori Petroleum's supplier invoice management procedure has serious, structural problems. Measuring the detrimental effects on vendors, audits, working capital, fraud risks, and operational inefficiencies emphasizes how urgent it is to put in place a better automated solution in order to permanently fix the issues. Maintaining the status quo is just not viable in the long run. This sets the stage for the subsequent stage of the consultant process, which involves assessing possible alternatives and creating a workable recommendation.

PART FOUR

4.0 Conclusion, Recommendations, and Implications4.1 Conclusion

After thoroughly investigating the issues around delayed supplier invoice payments at Noori Petroleum Services, it is clear there are significant systematic problems in their current manual processes. Financial data analysis revealed a significant year-over-year growth in the accounts payable accrual balance, suggesting late payment of invoices. Employee interviews revealed root causes such as delayed receipt voucher creation, lost invoices, tedious manual document matching, and understaffed accounts payable teams.

Benchmarking findings highlighted how Salam's manual approach is outdated compared to modern best practices. Most other companies have implemented automated accounts payable solutions that streamline the entire invoice management lifecycle. This eliminates many of the pitfalls and delays inherent in Salam's current processes. The negative impacts of delayed payments are far-reaching: strained supplier relationships, auditing difficulties, tying up working capital, fraud risks, operational inefficiencies, and more. In the long run, maintaining the status quo is unsustainable for Noori Petroleum. We urgently need an automated solution to permanently resolve this long-standing issue.

4.2 RecommendationsTo address the root causes identified, I strongly recommend that Noori Petroleum implement a cloud-based accounts payable automation solution with the following key capabilities:

Supplier self-service invoice submission portal: Allow suppliers to log in and directly upload invoice documents and details through a secure online portal 24/7 (Snijders, 2019). This eliminates missing invoices and delays from the warehouse team.

Automated purchase order and receipt matching: The system should automatically match submitted invoices to existing purchase orders and receipt data with smart rules-based matching logic. This prevents manual effort.

Configurable approval workflow rules: Approval hierarchies and policies should be pre-configured in the system to automatically route invoices through the proper approval channels based on criteria like amount, supplier, etc.

Central repository with full audit trails: All invoice documents and data should be stored centrally with comprehensive audit trails to ensure transparency and ease auditing/reporting processes.

Real-time dashboards and status visibility: Both Noori Petroleum and suppliers should have real-time visibility into invoice status, processing steps, errors, etc. through intuitive dashboards.

Implementing a modern solution with these capabilities will directly resolve the root causes behind delays and errors. It establishes a streamlined, centralized process with full visibility to ensure invoices get processed accurately and efficiently from submission to payment. The specific product I recommend evaluating is the Oracle Accounts Payable Automation solution, which is pre-integrated with their ERP. This provides a smooth transition by leveraging their existing Oracle investments and IT infrastructure.

4.2.6 Action Plan for ImplementationTo properly implement the recommended solution, I propose this high-level action plan:

Work closely with all impacted departments to document detailed requirements, integration needs, approval workflows, reporting/dashboard needs, etc.

Thoroughly evaluate Oracle solution capabilities against requirements. Negotiate contract terms, pricing, timeline, etc.

Configure and customize Oracle solution based on requirements. Conduct UAT across departments to validate.

Migrate necessary master data and transaction data. Test integration points with ERP.

Deliver comprehensive training to all impacted users and suppliers. Manage change and communications.

Final go-live checklist, cut-over planning, issue resolution. Then deploy solution to production environment.

Proactively monitor solution and datasets for any issues. Provide heightened support after go-live.

4.4 Implications of RecommendationsImplementing automated accounts payable will have significant positive implications for Noori Petroleum:

Strengthened supplier relationships through reliable on-time paymentsIncreased supplier satisfaction and retention

Optimized working capital levels by reducing delayed cash outflowsStreamlined audits and compliance with automated controlsReduced costs and efforts from manual inefficiencies

Mitigated fraud

Improved employee productivity and job satisfaction

While there will be upfront software and implementation costs, the invest will quickly pay back through hard dollar savings and productivity gains from eliminating the current manual burdens. Putting in place modern best practices also enhances Noori Petroleum's reputation as an innovative, reliable industry leader. Some challenges may arise such as change resistance from users accustomed to manual ways. This underscores the critical importance of proper training and change management to drive solution adoption.

4.4 ReflectionLooking ahead, Noori Petroleum would be wise to examine automation opportunities across other back-office finance processes beyond just accounts payable. Guided by their experience with this accounts payable initiative, they can build a roadmap to modernize areas like accounts receivable, cash application, travel and expense management, and more. They should adopt an agile, iterative approach to continuously improve processes over time as technology and best practices evolve. This first project lays a solid digital foundation to gradually transform their entire finance operating model to be leaner and more value-adding. Overall, this accounts payable automation powerfully demonstrates how leveraging technology can drastically enhance operational efficiency, compliance, and strategic finance capabilities to accelerate Noori Petroleum's business performance.

4.5 LimitationsThis study's key limitation is that it focused solely on Noori Petroleum's internal processes related to accounts payable. It did not investigate the practices of suppliers themselves in invoice submission, which could potentially cause delays as well. Future studies should examine the supplier side. Additionally, the benchmark data on peer companies automation initiatives provided high-level benefits but lacked quantitative statistics to compare metrics like actual cost and time savings achieved. More granular benchmarking would strengthen the business case further. Finally, qualitative data from employee interviews is subject to the personal biases of those interviewed. More comprehensive surveying across a larger sample could uncover additional root causes that were not identified here. Despite these limitations, the evidence collected through financial analysis, process observations, and internal and external input clearly highlights major fundamental flaws in Noori Petroleum's current processes that urgently need to be addressed through automation capabilities.

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