Singing from the same song sheet
Siemens’ path to AP standardization

No matter how high the sopranos’ range and how perfectly on key the te
nors and baritones might be, a chorus cannot achieve its potential unless all its members are singing in unison. It is the blending or orchestration of many parts into a single composition that makes for a happy choirmaster, a successful performance, and an appreciative audience.

Whether an endeavor is in music, sports, medicine, business, or any other initiative that involves bringing together diverse individuals, groups, and processes, there must be a common element — a standardization of sorts — for success.

Siemens experienced this when confronted with the need for an AP solution across multiple and diverse legal entities with business units operating on different platforms. Accounting managers Simona Darjan, Camille Hiltz, and Angela Sanford confronted the challenge. “With the migration of new Siemens entities into the shared services organization,” says Darjan, “our scale expanded tremendously. As a result, the magnitude of our daily transactions required a more automated and systematic approach.”

Based on the education, experience, and research of Siemens’ AP activity, coupled with insights garnered from extensive benchmarking, it was determined that the best long-term solution was to standardize and automate the invoice processing cycle. “With more than half a million increase over what we processed before, it became evident that we all needed to get on the same page,” says Hiltz.

Although standardization would have many benefits, including simplifying efforts to meet compliance requirements, there was an inherent economic challenge at the heart of the issue. “We were tasked with providing significant cost savings to the Siemens operating companies that we support,” explains Sanford, ”while ensuring that the overall supplier relations would be impacted as little as possible.”

Staying competitive, adding value
The vision of Siemens AP is to take the function beyond transaction processing into more strategic “value-add” activities. And to stay competitive in the current market, Siemens continually looks for opportunities to save money through process improvements. The managers recognized that standardizing and automating most of the transactional processes would be strategically competitive, while allowing AP to add value in a very visible and measurable manner.

“Overall, the key drivers for cost reduction in a large organization like ours revolve around automation, standardization, and scale,” explains Darjan. “We have pretty much maximized all of our scale potential so, as a consequence, the next appropriate steps to reduce costs were to automate and standardize.”

Siemens’ solution was to automate invoice submission and posting for a large percentage of transactions. Invoice submission automation would be accomplished by implementing an aggressive electronic invoicing campaign. Enhancing the workflow business rule capabilities (the automated programming of the system) would enable invoices to electronically voucher with little or no manual intervention.

As part of the process, AP developed a solid business case that identified significant savings for each business unit based on the transaction volume. Although a project of this scope requires numerous phases and takes several years to complete, Siemens’ high-level steps to electronic invoicing included:
• Clearly identifying the scope of the project.
• Gathering business requirements.
• Clearly defining functionality and capability criteria for the required tools.
• Determining whether functionality could be developed in-house or a third-party would be required.
• Establishing selection criteria should a third-party be needed.
• Designing a statement of work with milestone targets.
• Initiating the RFP process.
• Awarding the contract.
• Monitoring progress of each goal and milestone.
• Changing and adjusting the strategy as necessary to maintain focus.
“Following the milestones and the progress made for each step is critical to determining what needs to be tweaked in the strategy along the way,” says Hiltz. “Because such a project’s time span is fairly long, keeping good track of progress becomes essential to the overall success,” she explains.

Siemens’ monitoring process comprises:
- Tracking and analyzing failed items in the automated posting process, by reason and vendor.
- Seeking resolution of failure issues as to reason and vendor within two months.
- Detailing dated improvement actions for responsible owner.
- Ensuring visibility and transparency by including overall statistics in monthly service performance reports and monthly meetings with business unit management.
- Driving resolutions through weekly internal meetings.

Currently, Hiltz says, Siemens global shared services North America AP is processing 1.8 million invoices per year. Before making the changes, fewer than 50 percent of Siemens invoice submissions were electronic. Now, the group has achieved 65 percent overall, with a target of reaching 80 percent before the end of the fiscal year. ”We have been able to achieve significant improvements in invoice posting automation, especially considering the complexity and variety of our business,” says Sanford. “However, we still have a considerable challenge in the electronic invoice submission process.”

Key strategies implemented by the Siemens AP group include:
- Establishing a vendor adoption committee with representatives from all divisions.
- Aggressively targeting high-volume suppliers.
- Increasing purchase order usage, with changes on the PO that reflect the electronic submission method.
- Establishing and promoting e-invoicing as ”the way of doing business with Siemens.”
- Requiring by contract that all new vendors submit invoices electronically.

One of the most significant differences in the new system is the processing time. “It used to take up to seven days including mail time to process all the paper invoices to workflow,” says Hiltz. “Now the electronic invoices are in the workflow system within 24 hours or less.”

Fortunately, shared services was able to reassign the employees no longer needed in AP as a result of the automation to new projects. This strategy resulted in additional savings for the company.

“It’s important to point out,” Darjan warns, “that such an undertaking likely will be met with some opposition, as every organization has its nay-sayers.” In fact, the AP team encountered a lot of change-management issues throughout the planning and implementation of the electronic invoicing initiative. “Some people just don’t like change,” she says. She elaborates that skeptics were concerned about having to follow new processes, doubtful about whether the new system would work, and protective of supplier relationships. Even after bringing the new project to fruition, the corporate perceptions of the initiative still vary.

“We are working hard to ensure every business unit understands that global shared services is a critical partner,” she says. “I believe that perceptions of AP eventually will change through our consistent delivery on the value proposition, and the enhanced visibility we are pursuing and garnering for the positive, value-added results of the standardization initiative.” Others are already on board 100 percent, and have a clear appreciation of the overall benefits brought about by the changes. Those with this perspective consider AP as an extension of and a partner to other business units, contributing to smooth, successful operations.

“Although we’ve come a long way, we are committed to doing whatever it takes to get everybody on the same sheet,” says Darjan. “And when that happens, it will be music to our ears!”

Tips for getting on the same page
Darjan makes several recommendations for AP functions looking to orchestrate major changes, build partnerships, and get everyone on the same page. These ideas are especially effective in large organizations with diverse stakeholders.
• Be firm, transparent, and comprehensive in researching, planning, and proposing initiatives and processes you hope to implement.
• Get upfront buy-in and support at all levels before any major implementation.
• Clearly articulate the need for the change, the expected results, and the long-term benefits to the organization.
• Establish simple, succinct messages that clarify how the change will support each business unit from top to bottom, and how it will simplify processes, while ensuring and enhancing quality.

In a word, communication is the key. “We have found that taking the time to clearly communicate about planned changes,” says Hiltz, “goes a long way toward calming fears and opening doors to acceptance. This can bring about a harmonious partnership that will contribute to the initiative’s ultimate success.”