Increasing automation drives down costs, reduces errors and improves efficiency. For Thames Water, an investment in invoice management automation from Bottomline Technologies has transformed the accounts payable process. Today 65% of the 80,000 invoices received annually are processed automatically, with no manual intervention.

With this level of automation, the company’s accounts payable staff are now released to spend more time resolving payment issues and working to continually improve compliance. Leveraging detailed reports from Bottomline, Thames Water is highlighting issues with supplier compliance and building stronger supplier relationships.

Essential Service

As the UK’s largest water company, Thames Water services 14 million customers – supplying 2,600 litres of tap water to 8.8 million customers across London and the Thames Valley and treating 4 billion litres of sewage. In addition to meeting increasingly tough demands from regulator Of WAT for both renewing infrastructure and minimising customer price increases, Thames Water is committed to operating as a ‘best in class’ service provider. The company has a strong focus on improving efficiency and driving down costs – and a key component of this strategy is ensuring smooth transactions throughout the supply chain, from orders through to payment.

The scale and volume of administration across the utilities industries are challenging. Bottomline process 80,000 invoices each year and the company is pushing hard to minimise the amount of manual intervention required to process these invoices. Underpinning this vision was the selection of the invoice management service from Bottomline Technologies. The end to end solution, encompassing both invoice capture and invoice processing, manages all Thames Water invoices – which are received via both post and email. Invoices are scanned, automatically validated and matched using Thames Water’s processing rules, purchase order (PO) data and vendor lists. Any documents failing to meet these checks are automatically routed to the accounts payable team via the invoice management workflow solution.

Business Improvement Analyst Debby Roberts said that prior to introducing the new scanning system, Thames Water had 22 dedicated payment agents. At any one time up to 6,000 invoices were under review and required assessment to be processed. “The entire accounts payable process was incredibly labour intensive,” she said.

The invoice processing service from Bottomline delivered immediate benefits. Roberts said, “From day one, 20% of the invoices could be processed without any input from payment agents, enabling Thames Water to reduce manual handling costs by 50%.”

Collaborative approach

Thames Water and Bottomline have worked together to continually refine the accounts payable process. Today 65% of invoices are processed without any manual intervention; and the company pays 92% of invoices within payment terms.

“A straight through processing (STP) rate of 65% is an impressive achievement,” said Roberts. “Furthermore, with far lower volumes of invoices requiring any manual intervention, Thames Water has been able to focus heavily on making further improvements in the accounts payable process, including close collaboration with suppliers to improve compliance.”

Now the eight payments agents have just 75 invoices outstanding at any time. Issues such as incorrect or missing purchase order numbers will result in invoices being pushed back to suppliers for correction; while problems such as orders being set up differently to the way the invoice has been presented can be checked internally, adjusted and pushed through to the ERP system for payment.

The significant improvement in straight through processing (STP) rates has been achieved in a number of ways. The introduction of SAP three years ago has enabled Thames Water to impose greater control over requisitioning processes, improving compliance rates. In addition, Bottomline has made changes to processes, most notably to address Thames Water’s duplicate invoice problem.

According to Roberts, if an invoice has not been paid when expected, suppliers will sometimes send a duplicate invoice rather than pick up the phone and ask if there is a problem. As a result Thames Water receives upwards of 500 duplicate invoices a month – each of which were automatically flagged as a problem requiring a payment agent, reducing the STP rates and wasting the company’s time.

The tight integration between Bottomline and SAP enabled Bottomline to change the logic to address the duplicate issue. Now when an invoice is scanned, if it is flagged up as a duplicate it is automatically closed down without requiring any manual intervention.

Roberts said: “Obviously all 80,000 invoices have to be scanned – even duplicates – in case the original was not received. This approach ensures no invoices are missed but completely removes the time wasted on duplicates.” The solution also enables Thames Water to minimise the risk of suppliers – or rogue suppliers – attempting to issue fraudulent invoices.

Supplier performance

In addition, Bottomline provides real time access to accounts payable information for staff across Thames Water – from the finance team undertaking month, quarter and year end reconciliation to requisitioners wanting to check the invoice for work requested. Roberts said: “Requisitioners want to see an invoice – and that caused a lot of non-compliance issues at the beginning of this process: invoices were sent to local offices rather than the Bottomline invoice processing centre.”

By providing a web link to invoices, that problem has been overcome, further driving up the compliance levels across Thames Water.

In addition, staff now have complete visibility over the invoice payment processes and immediate access to supplier statements – including whether or not the payment has been processed and paid via SAP or rejected. This visibility enables supplier queries to be addressed rapidly and improves the supplier relationship.

Thames Water also uses a raft of reports from Bottomline to drive on going supplier performance and review. The set of detailed reports provides both a top line view of the STP rate and the underlying data, enabling Thames Water to gain insight into why invoices have failed and highlight specific problem suppliers.

Thames Water has created a supplier league table to report non-compliance which includes the rejected invoices each month. “This is a key component in our drive to improve compliance,” Roberts explains.

“Thames Water has framework agreements with some of the key, high spend suppliers and the data from Bottomline is used to demonstrate areas of non compliance, for example sending invoices without the right information. Now that Bottomline is processing such a high percentage of invoices without manual intervention, Thames Water’s payment agents have been released to use this information in a more meaningful fashion and drive further improvements in the accounts payable process.”

Conclusion

Since the original decision to use the Bottomline invoice management service in 2003, Bottomline has processed in excess of 650,000 invoices. Throughout this time Thames Water and Bottomline have continued to drive incremental improvements in the STP rate, and the company’s goal is to achieve 75%. From regular updates on new legislative changes – such as the proposed abolition of cheques as a payment mechanism – to meeting with other companies using Bottomline systems to discuss best practice, collaboration has played a big part in the continued evolution of the accounts payable process.

Roberts said: “Bottomline’s commitment to continually improving the accounts payable process is fundamental to achieving our efficiency objectives. Furthermore, being a good company to do business with is important for Thames Water and the efficiency of our payments process is one of the reasons suppliers consider us a desirable customer.”