From the July-August 2009 issue of Treasury & Risk magazine

Paperless Pitch

When $5 billion CB Richard Ellis Group decided to build an automated invoice processing, approval and payment system, it wanted to do it right. So the Los Angeles-based commercial real estate company spent nine months investigating vendors. Many offered ready-to-go, end-to-end packages, according to Margaret Guelzow, the company's financial systems manager. But CBRE decided the best solution was to take performers from four different providers and organize them as a quartet that could harmonize all the different processes the company needed. The players are Cambridge Solutions, Bank of America's PayMode, and rCash Pay and SiteStuff, both owned by Yardi Solutions.

That music is starting to sound sweet. The new process cuts the cost of payment processing in half, Guelzow says, and trims 23% off the cost of invoice processing. She estimates that once the system is fully implemented, the cost of processing a vendor payment at CBRE will fall below $6, compared with an industry average of $11.31 cited by the 2007 IOMA Benchmarking Report.

Payments can zip through the new system in three days or less, compared with the 30 to 45 days it took under the old paper-based system, Guelzow adds, and invoice status is visible to all parties throughout the process. "An invoice is passed to each partner in turn like a baton in a relay race," she says. "The interdependent workflow accelerates processing time, reduces errors and ends materials waste." By digitizing almost 2 million invoices a year, she estimates that CBRE has eliminated 10 million pieces of paper .

Here's how it works. About half of the 140,000 invoices that arrive each month are still delivered by the U.S. mail, but instead of going to CBRE offices, they go to more than 20 lockboxes operated by Cambridge. The lockbox staff scans the paper invoices and sends digital images to a service center in Bangalore, India, where staffers key the important data into rCash Pay software that is externally hosted. The 40% that arrive by e-mail are also funneled into rCash and processed in India. The invoices are routed to various property managers for approval within the rCash Pay software, which then interfaces with CBRE's accounting systems (MRI, Yardi, JDE E1). The accounting systems' A/P applications send files of approved payments to B of A's PayMode to be paid.

"We did a pilot to see if outsourcing would work for us, and it did," Guelzow says. "We chose each of our vendors because of their expertise but also for their willingness to learn what we needed and work with each other to put the pieces together so that it works seamlessly."

The big savings come from eliminating all paper after the first touch and from outsourcing the data capture to India, says Brad Setser, vice president of marketing at Yardi. Data capture is still largely a manual process because invoice formats are so varied, but efficiency tools that aid manual capture are used, he adds. The goal is a fully paperless process, including invoice receipt and payments, Guelzow says. CBRE now receives 10% of invoices electronically via rCash PAY, and makes 30% of its payments electronically through PayMode.

RCash provides full invoice outsourcing, but CBRE went with Cambridge because rCash is an A/P specialist, while Cambridge supports a broader outsourcing menu. "Cambridge is able to perform multiple tie-out processes as well as audit processes we require," Guelzow says.

Because rCash already had the functionality and the interface, "we enabled Cambridge and CBRE to use something ready-made and integrate with all the CB Richard Ellis property management systems," Setser says. The combination allowed CBRE to "deploy immediately."

In the commercial real estate world, each property or project is essentially a separate business that requires its own set of books, he explains. This complexity and fragmentation mean commercial real estate companies require customized accounting systems, called property management systems, Setser says.

CBRE has 80 different property management systems, some of them hosted by the company, others by software vendors and CBRE clients, Guelzow says. "There are different scenarios around all of them. But rCash is built for situations like that. It's very industry-specific and set up by property. It can route the invoices for approval under a variety of business rules." Property managers view and approve invoices for payment, and invoices are paid out of 3,000 disbursement accounts linked to individual properties.

All the invoices that have been routed and approved for payment on rCash Pay flow into the A/P systems of the various property management systems, where they are released by the accounting team and sent to PayMode, flagged for either ACH or check payments, Guelzow explains. Bank of America prints and mails the checks and sends ACH files. Not every payment is made through PayMode yet, Guelzow adds. "Due to client requirements, we're limited in how fast we can roll out this solution."

PayMode processes 208,000 payments annually for CBRE--about 70% checks and 30% ACH credits. "We increased the electronic payments by 10% just from January through April this year," says Douglas Cummings, B of A's senior vice president and team leader for large corporate real estate services. The goal, of course is to get them all moved to ACH. PayMode is bank-neutral, he explains. "We pay from multiple accounts at more than 100 different banks." B of A is using its influence and technology to convert payees from checks to ACH as quickly as possible, Cummings says. The highly controlled payment process (a Sarbanes-Oxley benefit) makes cash flow more predictable, he adds.

The fourth component of CBRE's solution, SiteStuff, is an outsourced e-procurement operation built specifically for the real estate industry. Real estate clients typically buy basic supplies and maintenance and repair items through SiteStuff at discounted rates negotiated by SiteStuff, which pays the suppliers and bills its clients. In the case of CBRE, it generates invoices as electronic documents in formats that load automatically into rCash Pay, explains CEO Charlie Pace. This is a portion of the 10% of CBRE invoices that arrive electronically, he says.

"We source for 3% to 5% of our clients' budgets but for a much higher percentage of their incoming invoices," Pace says. "We take out the noise for them." While many real estate companies have discussed linking SiteStuff e-procurement to p-card payments or consolidated invoicing, few have done so, he reports. "They're just not willing to lose the detailed information."

With this project, CBRE is out in front of a trend that is driving many treasuries, Setser says. "Everyone is looking for ways to cut costs, maximize efficiencies and build sustainable business practices. It's a hot issue."

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