DEUTSCHE TELEKOM: BOOSTING INVOICE

PROCESSING WITH SMART AUTOMATION

6 December 2022

PURCHASE-TO-PAY ADVISORY WEBCAST

Today’s Hackett Hosts

Elisa Pagliari Beate Hausmann

Account Manager Director
Procurement & Purchase-to-Pay Global Purchase-to-Pay Advisory
Practice Lead

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Quick guide to using Zoom

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Share your insights within the Hackett Advisory Community
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CPE Eligibility and Learning Objectives

▪ For Continuing Professional Education (CPE) the evaluation is required, the evaluation will pop up in a second browser once
you exit Zoom
▪ To be eligible to receive credit you must be dialed into the Zoom call for a minimum of 50 minutes
▪ There will be polling questions throughout the webcast, you must participate in all polls to be eligible for CPE credit per
section 16.3 of The Statement on Standards for Continuing Professional Education (CPE) Programs.

Learning Objectives
Gain insights into Deutsche Telekom’s Accounts Payable digital transformation journey combining
1 tools in innovative ways to achieve efficiency, effectiveness and experience results.
Learn about Deutsche Telekom’s Smart FI Automation solution which predicts the e.g., G/L
2 account and tax code for 100.000+ Non-PO invoices received from German suppliers every year.
Gain key insights around the implementation project and team, achievements, lessons learned and
3 future plans to extend the use cases.

The Hackett Group is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the
National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding
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Defining a more digital payables: from core automation to enabling the 100% rules

1 Invoice pre- 2 Verification 3 Invoice 4 Discrepancy 5 Supplier 6 File, store 7 Inquiry and
processing and approval processing resolution payment and retrieve response

TRADITIONAL PAYABLES PRIORITIES

Automatically sort paper Automate approval steps Auto-matching of PO- Increase first-pass Greater visibility into Reduce physical Self-service allows
documents, eliminating and accounting code based invoices and match rates; reduce invoice status helps shipping and storage suppliers and internal
the need for batching of verification „touchless“ processing of need for discrepancy prioritize payments to costs with digital parties to look up status
invoices non-PO invoices resolution via invoice capitalize on early invoicing quickly.
validation against PO payment discounts
and MDM system

DIGITAL PAYABLES PRIORITIES

100% PO (where appropriate) 100% Exceptions Omni-channel

100% Onboarded 100% Touchless 100% On-time Payment 100% Digital
or invoice-less management interaction

▪ Digital at source ▪ Optimized thresholds, ▪ Invoice golden rules ▪ Human operators are ▪ Standard terms, pay ▪ Eliminate physical ▪ Customer satisfaction
▪ Electronic methods approval policies and and electronic exception focused to terms document costs matters
tailored by supplier limits enablement part of ▪ Analytics and process ▪ Financial supply chain ▪ Enhanced visibility ▪ 24/7 status visibility
tier e.g., EDI, cXML, ▪ Pre-coded shopping supplier selection and mining for value add e.g., and automated ▪ Shift-left strategy
E-Invoice, ERS, PO carts and catalogs set-up optimization discounts, cash accruals prioritizing e.g., self-
flip, B2B card ▪ Optimized S2P ▪ Master data cleansing ▪ Bot’s clean-up old service, chat/agent
channels and improved POs and balances
▪ Business rules timeliness
validation and
automated reminders

Source: The Hackett Group

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Quick Poll Question

Which status best describes your approach to

automation of Non-PO invoices?
Please select one

No Automation - Reviewing invoice, routing to

requestor, coding, approving and indexing 11%
into the system, all performed manually

Low – Very manual process (some automated

reviewing, all other steps performed 39%
manually)

Medium – Attempts to automate but many

manual exceptions (some automated
36%
reviewing and coding for recurring
transactions)

High – Minimal human involvement

(automated reviewing, routing, coding and 14%
indexing but approvals are still manual)

Fully automated – (fully integrated solutions

0%
providing, end-to-end process automation)

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Today’s presenters

JEANNINE BAUMANN
ONDREJ HORA
Head of Process Management
Digitalization Group Lead
Accounts Payable & Banking

JAKUB KONDEK
Senior Data Scientist

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Quick Poll Question

What is the current level of adoption of Artificial

Intelligence within Purchase-to-Pay?
Please select one

None 37%

Planning to adopt in the next 12-24

23%
months

Running pilots / proof of concepts 17%

Deployed in certain processes 17%

Large-scale deployment 6%

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Smart FI
DTSE | The Hackett Group
December 6
Agenda

▪ What is DTSE
▪ The challenge and vision for SmartFI
▪ What did we achieve & learn
▪ Next steps
▪ Building the AI team

11
DEUTSCHE TELEKOM SERVICES EUROPE
WE ARE THE INTERNAL SERVICES PROVIDER FOR DEUTSCHE TELEKOM
Q4D Qualification for Digitalization
Deutsche Telekom Services we walk the digital path with more than
Europe SE:
We are international shared service
center for the entire Deutsche
400 training courses in
future skills
Telekom Group.
3,600 participants in digital
wave events
Our business focus is on
Digitization, 65 % Female Employees
automation & 35 % Male Employees
mobilization.

333.9 mio. € 3,500

Revenues Employees in
Europe

13
WE ARE AT HOME IN EUROPE

More than 3.500 people.

We are active at 10 locations.

GERMANY SLOVAKIA ROMANIA

Cologne Bratislava Bucharest

1299 570 159

Darmstadt Kosice Timisoara

333 266 168

Hamburg
129 CZECH REPUBLIC

Leipzig Brno
313 132

Nuremberg
131

14
The challenge and vision for SmartFI
DTSE COVERS FINANCE & HR SERVICES

Finance Reporting Procure to Pay HR

▪ General Accounting
▪ Customer Finance
▪ Financial and customer
accounting for more
than 80 companies
▪ Over 365 million invoices
and direct debits
▪ Financial statements for
around 200 companies
▪ Consolidation
▪ Report creation
▪ Platform Management
▪ Centralization of
Management Reporting
within the Group
▪ Controlling Service
▪ Green Controlling Award
▪ Purchasing and sourcing of
a product or service
including invoice
verification and payment
▪ Hackett Benchmark Top-
Performer 2021
▪ 2 million order items
▪ 72 million tactical savings
▪ 13,5 billion net order
value
▪ 89% invoice no-touch-
rate
▪ Recruiting & Staffing Salary
▪ Time Management
▪ HR Administration
▪ 650,000 requests in
Customer Service
▪ 1,800,000 payroll
accountings
▪ Travel booking & expense
handling
▪ HR Services incl. Training

We enable our customers to optimize their processes by offering high-quality,

innovative and efficient services at competitive costs. 16
PTP TRANSFORMATION PROCESS: SYSTEMS, PROJECTS TO REACH HIGH AUTOMATION
FI
ReFx module
All ▪ implementation of invoicing
E-Invoicing
module for contract-based
▪ official
platform for specific invoices
Self-Billing PO national e-invoicing systems
▪ onlyfor PO invoices
All
Mail2Scan ▪ 100% automation
FI
▪ OCR Smart FI / AI
▪ data quality
▪ prediction & auto posting of
All FI invoices with machine
EDI interfaces learning
▪ automated E2E-process
Ariba interface PO ▪ individual data fields
IC
▪ automated E2E-process
• Intercompany
▪ standardized data fields
Platform
▪ IC4 highly automated
▪ intercompany process

17
CHALLENGE OF SMART FI: DRIVE AUTOMATION IN ALREADY HIGHLY AUTOMATED
PROCESS

Other FI automation Small expenses Scanned Invoices

30% of FI-Invoices via Upload
Automation rate already close to 100%
(EDI upload, Mass-Upload into SAP,…)
33% of FI-Invoices = small expenses
Automation rate already around 50%
(Auto posting in Invoice Workflow and via BOTS)
25% of FI-Invoices
Scanned Invoices are main scope to be
automated with Smart FI solution
Automation rate before Smart FI only around
13%

18
IN 2020, DTSE PTP MANUALLY PROCESSED AROUND 100K INVOICES WITH NO
REFERENCE TO A PURCHASE ORDER

For each NON-PO invoice accountant manually

checks:
▪ if the legal requirements of Article 14 of the German Value Added Tax (§14 UStG) are met
▪ if the invoice is a procurement bypass
▪ if the invoice includes a special ledger transaction such as a down payment or a deposit
▪ the type of delivered goods or services, and
… and derives the GL account and tax code per invoice line item
100k ~15FTE
non-PO accountants ▪ If all checks are ok, the accountant posts the invoice in SAP
invoices

5-8 minutes per invoice on average

60 invoices per day / person

19
19
EFFICIENCY IN INVOICE VERIFICATION VIA SMART FI
FURTHER USE CASES WITH IMPROVEMENTS IN COMPLIANCE

1 - automation of formal check

▪ First, we could implement the formal invoice check of German VAT law

2 - prediction of GL & auto posting

▪ Prediction of correct G/L account and Tax-Code with ML to be improved
▪ International rollout planned, challenge: individual country specifics

3 - further use cases

▪ We used the SmartFI application to identify procurement bypasses fully automatically
→ Maximum compliance assurance & fraud prevention
→ International rollout

20
What did we achieve and what did we learn?
WE BUILT A ML-ENGINE THAT AUTOMATICALLY PROCESSES INVOICES AND BOOKS
DIRECTLY INTO SAP

SAP

.pdf Archive Doc-ID Functional

Scan center One.archive module to
recognized Index data trigger VIM
workflow
data

Updated VIM Vendor Invoice

index data Management
New functional
module to
ML program
trigger
“SmartFI”
.pdf Webservice of
ML component
VIM index data

22 22
THE ML ENGINE HAS BEEN TRAINIED TO PREDICT HOW AN INVOICE SHOULD BE
BOOKED AND TAKES VARIOUS ACTIONS DEPENDING ON ACHIEVED CONFIDENCE LEVEL

SMART FI WORKFLOW

Extract invoice data

✓ trained on ca. 300,000 historical invoices

✓ used open-source machine learning models (tree-based

Make predictions
model architectures: Random Forest, Catboost)

✓ models for general ledger and tax code

Check compliance &
custom rules
Prediction ✓ application contains also legal and business checks which can
confidence? be easily extended

SAP Process results in SAP

23 23
2022: INSTEAD OF 60 INVOICES PER DAY, ACCOUNTANT ONLY SEES 45 THAT HAVE NOT
BEEN BOOKED AUTOMATICALLY

…and a reason why SmartFI

did not book the invoice

24 24
SMART FI APPLICATION SHOWS RESULTS REAL TIME IN SAP.
ACCOUNTANT SEES POSSIBLE PROBLEMS, E.G. WITH LEGAL REQUIREMENTS OR
BUSINESS RULES
Here, the VAT prediction
failed, and invoice needs to be
done manually

25
25
WHEN APPLICATION DOES NOT REACH CONFIDENCE LEVEL TO BOOK TRANSACTION
AUTOMATICALLY, SUGGESTIONS ARE SHOWN

Accountant confirms or edits

the proposal

26
26
WE ACHIEVED DECENT RESULTS AND SAVED 2FTE SO FAR, BUT ALSO FELL SHORT OF
EXPECTATIONS AT SOME POINTS
What didn’t go as planned:
▪ scope was reduced (excludes invoices where cost
center is not valid anymore, invoice has wage tax
original implications or type already automated earlier)
scope
▪ compliance checker prevents posting
▪ problems with 1st generation of models
feasible
scope

current auto
What we accomplished:
booking scope ▪ the first audited ML solution (ISAE-3000)
▪ modular architecture for any future checks

Booking 35% of invoices ▪

▪
compliance checking ensured
full integration with SAP

In feasible scope automatically

How to reach the full (yellow)
with accuracy of more than 99% scope:
▪ Supplier education
▪ New data models & process improvements

27 27
Next steps
IT TOOK US ABOUT 2 YRS. WITH 1 DATA SCIENTIST & BUSINESS SUPPORT COLLEAGUE
TO LEARN AND SET ON A SUCCESSFUL MACHINE LEARNING JOURNEY

Lessons learned Created a basis for

international rollout and…
1) Everything needs to be well-documented ▪ Close cooperation of business partners AI-enhanced internal/external automation
and IT people triggered
▪ improving auto booking quote, a
2) Keep It stupid simple ▪ Utilization of existing (SAP, Celonis) and ▪ Other procurement projects initiated (e.g.,
new (OpenShift Cloud) infrastructure Smart ReFX, Ticket Categorization, …)

3) Corporate infrastructure brings challenges ▪ Upskilling of internal employees (3 Data …external AI services
Scientists) consulting
▪ Several IT byproducts which will be further ▪ external clients (car parts manufacturer,
used famous fashion brand, oil company)

29
Building the AI team
DIGI TEAM: DTSE’S INNOVATION ENGINE IN BRNO

Agile and young Growing big Teaming with colleagues

2017

Data Analytics
started
>40% growth
over the past 5
years Cologne Bratislava
2019

AI Shared Services
started

From foundation Brno

Bucharest
today

Strong traction to 32FTE in

within DTAG
2022

31
WE STARTED THE AI INCUBATOR IN 2019

… kicked it off with a hackathon

17
partici-
pants
Coca-Cola
included
48hrs

HQ 3 use
Bonn trip cases

Hired!

32
AND GREW IT INTO WHAT IS THE AI SHARED SERVICES TODAY

Promoting AI in DT… …with growing product portfolio

Automated accruals
P&L Positions
~40% CAPEX /OPEX
& booking
KPIs
3
4 in Brno classification Foreign exchange

E-mail routing & FTE numbers

5 process
22 automation
License costs
3 Survey
Feedback
Contract Fulfillment
4 countries Evaluation
Document
(Procurement)
Ticket routing analysis Backbone network traffic
SHAREDSERVICES

Data Scientists Scrum Masters Financial & nonfinancial forecasts

Data Engineers Management team Text processing (NLP)
Classification
Project Leads

33
Q&A
CONTACTS

Jeannine Baumann Ondrej Hora Jakub Kondek

Head of Process Management Group lead – Digitalization Senior NLP Data Scientist
DTSE - Procure to Pay DTSE CZ DTSE – AI shared services
jeannine.baumann@telekom.de ondrej.hora@telekom.com j.kondek@telekom.com
CONTACT INFORMATION

ELISA PAGLIARI BEATE HAUSMANN

Account Manager Director
Procurement & Purchase-to-Pay Global Purchase-to-Pay Advisory Practice Lead

epagliari@thehackettgroup.com bhausmann@thehackettgroup.com

www.thehackettgroup.com www.thehackettgroup.com

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