IT Focus - The paper free zone

Document management and workflow are two labour-saving office’ paperwork, says John Stokdyk. automation processes hovering on accountancy’s technological horizon.

Electronic document management involves scanning paper documents, such as purchase orders, invoices and delivery notes, and archiving them in an indexed image database. The promise is that firms can save not just on the physical storage costs, but also on the time it takes to retrieve the documents.

Workflow builds review, approval and release mechanisms into business application software. Rather than burying a passive file in the corporate database, a workflow application would forward the information to the next person who needed to see it. Workflow systems can be configured to prompt required actions and set deadlines and provide auditable records for appraisal and measurement.

Each approach has its proponents among suppliers and consultants. But a number of companies are putting the two together to pioneer paperless finance techniques.

Ian Watts, product manager at GTOS, an independent document management specialist firm that started life as Grant Thornton’s IT department, says: ‘Document management and workflow go hand in hand.’

Cutting the paper diet

Foodstuffs manufacturer Cargill turned to GTOS to help it implement a document management and workflow-based system for processing invoices at its UK financial services centre in Swinderby, Lincolnshire.

The centre processes over 1,000 invoices every day into a JD Edwards-based accounts system that runs on an IBM AS/400 minicomputer.

GTOS set up a document image management and workflow system using its GTOS Viewpoint system. GTOS ViewPoint operates as a gateway to IBM’s ImagePlus software, and manages both the workflow and storage/retrieval processes to and from ImagePlus.

Under the new system, Cargill sorting clerks open the post, sort it manually into batches and remove staples, paperclips and pointless paperwork before scanning the invoices on two Bell and Howell machines.

Each batch of digitised invoices is passed to the accounts team leader, who can choose to process them him- or herself, or to route the batch to the next available posting clerk. The posting clerks then pick up invoices from their in-baskets and move them to an ‘awaiting match’ basket on-screen.

If they cannot read any document, they make a note of the batch number so that they can manually retrieve the rogue invoice for rescanning.

If any other problems, such as incorrect purchase order numbers or illegible signatures, are identified during the logging process the posting clerks route the invoice to the query team’s in-basket.

As part of the checking-in process, the posting clerks match the invoices against the purchase order or ledger code on the JD Edwards ledgers for each Cargill division. If everything is correct the invoice is matched to the order and placed in a completion queue for payment authorisation.

Any further anomalies or problems are returned to the query team which attempts to fix them or, if it cannot, returns it to the originating division.

Following the system’s initial success, the company plans to install Kilostream links between six remote sites and the financial services centre, allowing staff to return invoice queries electronically.

If you re-use it – manage it

Phillip Carnelley, document management project manager at research consultancy Ovum, which publishes a quarterly analysis of document management systems, explains: ‘Every business runs on the back of documents – document management is a way of linking people, processes and documents.’

Carnelley describes document management as ‘the practical face of knowledge management,’ and says it should be at the heart of a company’s information system. As a result, document management systems need to inter-operate with a company’s entire information architecture, which can extend from scanners to intranets based on the World Wide Web, relational databases, e-mail, groupware and operational business and production computer systems.

Document management has gained the strongest hold in engineering industries such as nuclear power, oil and gas and aerospace that have to meet documentation demands from regulators. Pharmaceutical manufacturers have also found the technique useful for protecting their patents.

The accountancy profession has not been conspicuous in its uptake of document management, but other service industries have found it useful for collating different documents relating to their customers. John Richardson, of document management specialist consultancy Strategy Partners and a contributor to the Ovum reports, has supported several projects to introduce systems, both into finance departments and accountancy firms.

‘In terms of supporting the accounting and auditing function, there is not a lot of justification,’ says Richardson. ‘Documents tend to be visited once by one person and reported on.’

The benefits of document management come when the stored items are re-used, he continues. ‘In accounts receivable, they are re-used, and the returns on investment are phenomenal. You run more efficiently and also reduce overheads and overdrafts.’

Strategy Partners can draw on examples among its clients who have achieved 60% to 70% savings or more. One international dispatch company based its cost justification for a #100,000 document management system on the #30,000 to #40,000 savings it would achieve on the physical space needed to store invoices and delivery notes, explains Richardson.

‘Using the new system, staff could answer customer queries over the phone and also highlight problem clients. In the end, the company was able to cut three days from the time needed to collect their outstanding debts, which amounted to #170,000 over the year, making the filing cabinet analysis somewhat ridiculous.’

According to Strategy Partners managing director Rory Staunton, document management is not far away from making the leap to mainstream administrative use.

‘Everybody ends up putting their e-mail into an electronic skip – their hard disk. At the infrastructure level, it can be impossible to find what you have done with Microsoft Office. People can no longer put labels on floppies and hope to find their documents. Neither Windows NT nor Windows 95 will do it, so specialists will have to provide the tools to make this possible.’

Carnelley echoes this theme: ‘Everybody expects infrastructure like that to come from Microsoft for $99 (#60), but it won’t do it.’

Territorial boundaries

The key to accelerating take-up, Carnelley says, lies in standard interfaces between document management and other application programs.

Enterprise resource planning software vendors – SAP, Oracle, PeopleSoft, Baan and JD Edwards and their like – are all aware of the potential of both workflow and document management technologies. While most are overhauling their packages to support more office automation techniques, they lag behind the specialist, ‘component’ manufacturers such as Documentum, FileNet and OpenText, say the Ovum consultants.

Trevor Salomon, marketing director for JD Edwards, disputes this theory.

‘You’ve got to forget the territorial aspect and look at corporate data. One of the historic problems for companies is that people want multiple access to the same document and to be able to roll it up and use it elsewhere. An ERP corporate backbone is the best system for that.

‘Document management systems are not going to satisfy the information needs of people who need to make corporate decisions and manipulate data,’ he says.

Rather than trying to oust each other from the nest, Salomon says document management and workflow can co-exist fruitfully with business application software. His colleague, technical consultant John Brooks, adds that ERP vendors are reluctant to buy up document and workflow rivals, because that might cut them off from other players in a rapidly growing market. ‘There’s no Microsoft in the market, which for the time being will put off a lot of people,’ says Brooks.

JBA is another accountancy and business software supplier building workflow tools into its product. Automotive components manufacturer Midlands Industrial Plastics is in the process of installing JBA’s System 21 software.

For MIP’s group IT manager Matt Stevens, the workflow elements in JBA’s new ‘active enterprise management’ product strategy was one of the attractions of System 21.

‘Accounts departments can generate huge amounts of paper,’ says Stevens.

‘Rather than having to trawl through 50 reports to see if everything’s OK, the active enterprise software can produce reports that tell you where things are going wrong.’ The software can be programmed so that predefined incidents or exceptions from standard rules automatically produce e-mail warnings for the relevant managers.

A survey conducted by Arthur Andersen earlier this year for workflow supplier Staffware identified that typical benefits from using the technology included improved cycle times, an increase in the number of cases handled by each employee, improved customer satisfaction, cost reduction, and increased throughput reflected in improved cashflows.

Implementation issues

On the negative side, new working patterns demand flexibility from staff, some of whom might need to be re-allocated to other tasks. In some cases, processes running too quickly pushed bottlenecks on to managers who struggled to cope with their workload while administrative staff waited for them to finish and pass the work to them for the next stage of processing.

When it came to introducing office automation technologies, Andersen found that two-thirds of companies adopted a multiphase approach to implementation.

Respondents said the step-by-step approach gave them the ability to learn and correct as they went along, and allowed them to tackle different processes one at a time.

John Thompson, manager of Cargill’s financial services centre, says the company involved all staff in the implementation process and listened to their comments as the document handling system went in.

‘In particular we tried not to create a mirror image of the old system, but to deliver a higher level of functionality,’ says Thompson.

Initially Cargill underestimated the additional work in preparing the paperwork for scanning, which created a dip in productivity at the beginning of the process. Now, he says, ‘The old system of physically sending queried invoices out for authorisation is winding down naturally, as is the current requirement for filing.’

Most companies introducing workflow systems aim to finish the installation within six months. Coincidentally, Arthur Andersen itself introduced a sophisticated document management system when it moved its northern region head office into a new site in Leeds (see box below).

As with any current technological trend, the future of workflow and document management lies on the Internet. Arthur Andersen is basing its future strategy around Lotus Notes, while JD Edwards’ Brooks says that by supporting Notes, Internet protocols and Microsoft Application Programming Interfaces, ERP vendors are ensuring they can extend their applications beyond the enterprise.

For the moment, he says, e-mail is here and it will take several years for anything to match it as a universal standard. But it is already having a dramatic impact on how finance departments conduct their daily business.

‘If a large sales order comes in, applications will be able to generate e-mail to a supplier or it might inform someone electronically if they are approaching their credit limit,’ he says.

Electronic documents can encompass many formats, from scanned invoice images to accounts ledgers and either Excel or Word files.

Once they are digital, however, documents can do more than they can on paper – they can be authorised, annotated, edited or discarded and allow the user to be far more pro-active. As the technologies gain wider acceptance among businesses and users they will create the potential for new finance paradigms – provided that accountants can be convinced they are secure enough.

The paperless office is still about as plausible (and useful) as a paperless toilet, but growing networks of interlinked business applications could have an even more profound effect for company accountants – it will extend their reach beyond the organisation.

FOUR STEPS TO LOSE THE PAPERWEIGHT

1 Register document, either by scanning paper or importing computer files

2 Check-in/check-out

3 Query document content or ‘meta data,’ such as date or author

4 Access control

OUTSOURCED DIGITISED CREDIT CONTROL

As Cargill demonstrates, the most obvious financial benefit of digitising accounts documentation lies in the credit control department.

But not all companies may want to invest in the equipment and extra labour needed to input and manage document archives. Specialist workflow supplier Microgen offers an alternative – outsourcing.

Microgen runs a workflow and document management system called Axess.

Customers can buy a complete system, or arrange for Microgen to take over the scanning, indexing and storage. Using a dial-up Internet connection, customers access Microgen’s password-protected intranet to look at their files.

The advantage of the managed service, says Microgen sales and marketing director Linda Scott, is that: ‘Businesses receive the benefits of the latest data retention and retrieval technology, without any huge capital expenditure or risk of obsolescence.’

Building materials supplier Pioneer took up the Microgen Axess service to replace the manual query and debtor chasing processes used by its credit control team.

Assistant customer accounts manager Sean Keeley explains, ‘To respond to a customer query could take anything up to two days. We were not always able to deliver immediate service and could not use our departmental resources as efficiently as we would have liked.’

Each member of Pioneer’s credit control department in Harrow can access the customer archive via Microgen’s intranet. Once they locate the documents they want, they can find the answers to their queries and print, fax or e-mail the results to the customer.

Keeley says, ‘The department now has the ability to respond to and solve enquiries immediately and efficiently. This has not only had a positive effect on our organisational resources but, more importantly, it has also improved our customer service levels.’

Microgen customer Stena Line, the shipping company, has gone a step further and uses Microgen’s Chronos debtor management service to send out over 800,000 passenger invoices a year, along with monthly statements to 6,000 customers. Stena Line finance manager Philip Bamford explains that previously the office ground to a halt every month as staff filled the envelopes manually. Now, though, they prepare the invoices and send them electronically from their Ashford office to Microgen’s Welwyn Garden City facility twice a week. Microgen then prints the invoices and sends them out the same day.

ARTHUR ANDERSEN’S PAPERLESS SUCCESS

When Arthur Andersen’s northern region moved into its new headquarters, managing partner Mike Beverley used it as an opportunity to pilot a ‘paperless office’ in the tax division.

Beverley encourages his staff to exploit technology to the full and asked tax partner David Cobb, who also has responsibility for the office’s computer systems, to look into document management possibilities.

The firm uses Lotus Notes groupware, which allows staff to access and use common documents.

‘It was merely a question of adding a new document image module, which appears as an icon on the Notes desktop,’ he says.

Initially, the system encountered teething problems, but they were administrative rather than technical, explains Cobb. ‘Once we appointed someone full-time to look after the system, it started running more smoothly,’ says Cobb.

Each morning, the person looking after the system opens the post and sorts it for each department.

After scanning, she passes the paper copies to the recipient department, which attaches stickers detailing the clients’ names and group, the service lines they use and the date and title of the document. Later in the day, the documents are passed to the operator who adds the detail to the electronic archive.

The electronic version of the documents are filed into client groups, each of which is represented by its own Notes icon. All documents are treated this way, except for some personal tax and financial planning cases, which are kept out for reasons of confidentiality.

Cobb anticipated the scanning would delay incoming post, but it is reaching partners by 10.30am, which compares favourably to the previous, manual system. ‘I was surprised at the amount of outgoing stuff the system has generated,’ says Cobb. ‘Outgoing documents may need to be scanned and bundled together with attachments such as Excel files.’

The dispatch work is carried out by secretaries in each department and the outgoing documents are stored alongside incoming post in the client folders.

‘The immediate benefits that gives us is that for each client group we have one client file for both outgoing and incoming post,’ says Cobb. ‘Each individual can sort by date, service line, or subsidiary company as they like. Everyone in the tax division has instant access from their own desk and there are no conflicts,’ he says.

Lotus Notes is classed as groupware and the current installation takes Andersens to the brink of using it as a workflow control. ‘When a document is in Notes you can just click ‘forward’ and ask other people to deal with it,’ says Cobb.

Each manager has an on-screen ‘work box’ in which they can edit documents or assign responsibility to other staff members. The document does not disappear from the manager’s work box until it has been signed off as actioned.

The current system has done so well, Cobb says, that he is now seriously considering adding a specific Notes workflow module in the future.

‘Our original driver was cutting down storage space on-site,’ he says.

‘But the benefits of everyone having instant access and being able to sort their own documents far outweigh that.’