What is VIM, vendor invoice management?
Vendor invoice management or VIM as it is popularly known is an add on to SAP. VIM is a product of OpenText, and it is a highly popular module of SAP. What exactly does VIM do and why is it popular? Let’s look at what exactly do we need from vendors right now? What do we expect from our AP department? We want them to pay the right amounts, right? We want to pay the right amount to the right vendor, e.g., if the vendor invoices us for 100$ We want to make sure we pay that when we pay him money, it is the same amount as the invoice. It is not going upset him if you pay more obviously:), But when your manager finds out, he/she will be upset, right? And if you pay the vendor less than the invoice amount of $100, the vendor is going to call us and ask for his payment. The next thing you want to do is that you want to pay on time. If there are any delays in payments, it is going to be expensive for us because that’s going to either make the vendor mad and we might lose out on some business or there might be some penalties that s that we have to pay. So I’m the long run. We are paying a lot more than we should have just because we did not pay on time. And a lot of times why don’t we pay on time? It’s because there’s a problem with the system may be the invoice hasn’t been entered properly. Maybe the invoice hasn’t been approved by the right person at the right time people do not know that someone was waiting for them to approve this invoice. And those are the sort of issues that could happen. What we want to do is, to reduce our cost. There are advantages of paying in bulk getting, better payment terms and obviously paying on time as we just discussed would be one of the things that what we want from our AP department.
What do we want from AP?
- Pay the right amounts to the vendors
- Pay on time
- Reduce costs, i.e., get discounts
How does this currently work?
Let’s look at how this Currently works in sap.
If you get an invoice, it’s either going to come through a PO or if you have a direct invoice, you’re going to create an FB60 invoice. So, let’s see how that happens.
Let’s assume you get this PDF invoice from the vendor.
This is mailed to us, and the AP clerk has to enter this in SAP. They will need to look at the at the vendor name on the pdf, then do a drop down in SAP to find that vendor. They could accidentally choose the wrong vendor here.
Then they need to enter the date in the sap screen. There could be a few dates on the PDF.
The person entering this could take the date and map it in the wrong field which could calculate the wrong discount, or it gets paid late etc.
Similarly, the amounts from the pdf have to be entered into SAP. One fat finger could cause the wrong amount to be entered.
And you can see this whole process is manual.
1-PDF invoice received from Vendor
2-Take details from the invoice and enter them into SAP
Even when everything is entered correctly, the invoice could just be sitting at someone’s desk and not entered in SAP or the AP clerk can only enter the top part of the screen and the bottom part has to be entered by her manager.
Due to this she parks the invoice, and then the manager approves, but the manager only gets notified by an instant message which she ignores and then forgets about. We only find out that the invoice wasn’t entered when the vendors call for the payment. So this whole process you can see it’s very manual and there are so many more issues that happen with the AP invoices.
Issues with the current process
- The wrong Vendor is entered in SAP
- The wrong amount is entered
- Delays in getting approvals
- Delays in entering an invoice
The VIM solution
Let’s look at what exactly VIM does and how it helps the business. It is important to first understand the pains of the business before understanding the solution. The vendor needs to send us an invoice. They have two options1- They can simply email the invoice to an email address, and that extracts information from the pdf and creates what is called as a DP. The OCR solution of VIM reads for e..g the vendor name from the invoice and then finds the vendor number in SAP and enters that in the vendor number field. It will then look at the invoice data and map it to the SAP invoice date. The amount is mapped to the amount column and so on. The system does all the heavy lifting for us. It maps most of the fields, and then a DP is created. Within the DP you can setup various rules, e.g., the invoice gets approved by the initial person and then it goes to the inbox of the coder who will need to enter the G/L account info. This gets emailed to the coder, and their manager can see how many Dps are with them, how long have they been sitting with them, etc. This makes it much easier to track the flow of the invoices and who needs to take action on this. In VIM, you can have various rules, e.g. if the DP has cost center A on it, it goes to the HR manager to approve, cost center B goes to the Logistics manager. The rules can be setup with a lot of detail. E.g., Once the HR manager approves the invoice, it goes to the HR director if the invoice is more than $50,000. Each approval is captured within the system, so there is no question of how approved this and when did they approve it later on and you start digging through your old emails and then realize that those emails were already archived. These pdf invoices are archived and attached to the DP, so you can easily view them later on. Once all the approvals are done in DP, a FI invoice is created. There are various ways to setup this approval process. I am going through the most common scenario.
Physical mailing of invoices
Apart from email, the vendors can also mail the invoices, but rather than manually entering them into SAP, these are scanned using a special scanner, and once the invoices are scanned, the DP creation and the workflow process starts.
What is OCR
OCR technology takes the text from a pdf, picture, etc. and extracts that into text that you can edit.
E.g., if you see a picture like below
you can see that it says SAP Concur and THE BEST RUN SAP
but it’s not in a text format, it is an image.
OCR will scan that picture and extract the info from that image so that it would extract “SAP Concur (and) The Best run.” It can’t extract the “C” and “SAP” as that is a logo.
This technology extracts the vendor name from a pdf and reads it as, e.g. “Walmart” and then finds out Walmart’s vendor number and maps that to the DP.
Another example showing how it looks side by side
On the left is a page of book that is scanned. OCR technology extracts that text on the right
Other components that work along with VIM
There are other components of VIM like ICC( image capture center) this uses OCR technology to capture the invoices and extract info from them.
Archive Server– When a DP is getting created the invoice document is archived. This is where the archive servers come into the picture
Enterprise Scan– This is a special scanner that scans the invoices and then sends them to ICC and the archive server. It has some special capabilities like scanning multiple physical documents into one sap document or the ability to skip certain pages.
Basis components – There are Basis components that your basis team will work on as well.