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EFFECTIVE ACCOUNTS PAYABLE AUTOMATION: 3 PILLARS TO SUCCESS

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AUTOMATION

By Kyle McNabb, SVP of product marketing

 

Ineffective accounts payable (A/P) processes are costing UK—and global—businesses considerably. According to the US’ Institute of Finance & Management (IOFM) each payment costs an organisation twice as much to process in an organisation with less effective A/P functions than it does in best-in-class companies.

With a dogged focus on cutting wasteful spend in many organisations, A/P should not be overlooked. Automation is one way leading organisations are finding points of savings in A/P, as doing so can significantly improve effectiveness and efficiency, reduce human errors and missed payments and ultimately boosts satisfaction ratings thanks to faster payment processing.

When done right, automation is also embraced by A/P staff, as it allows them to cut down the time spent on manual processing and instead gives them more bandwidth to focus on managing exceptions, developing relationships with suppliers and taking on new tasks.

Deploying the right software solution is a first step in a successful A/P automation project, but that effort must also take into account best practices in order to realise the greatest results.

 

AUTOMATION

Kyle McNabb

Centralisation

Centralisation and organisation are key to any effective accounting process. But in many organisations, the data leveraged by A/P comes from disparate sources. The company’s enterprise resource planning (ERP) system usually serves as the main source, but there are countless others. Consider, for example, the systems that reside with sales staff, external vendors, customers or other points along the supply chain, such as transportation carriers and manufacturing and warehouse facilities.

If the information needed to streamline the management of exceptions is not centralised—with data from different source systems connected via unique identifiers such as vendor ID, account code and customer name—then it cannot be leveraged seamlessly to automate payment processing.

Furthermore, a lot of content is available only as paper, PDF, image, etc. That content must be scanned to have critical data elements—such as the date, account number or amount—electronically captured and metadata created. Then, and only then, the content can be indexed and stored in a repository and database. From there, the invoice and associated supporting content can be linked and processed via workflow.

Some automated A/P solutions can integrate myriad information and content formats with their data repository. It’s important to confirm the solution you select can, in fact, cover formats such as Microsoft Word and Excel, PDF, email, video, scanned capture documents—and uses a variety of standardised methods to exchange information in electronic formats (e.g., XML, JSON and EDI). They should also intelligently index, archive and organise this content so that users can easily find and access necessary information. An effective automated A/P platform also includes auditing and reconciliation capabilities, which alert users to errors such as duplicate, short or delayed payments.

 

Integration

Centralisation entails storing all critical accounting documents related to A/P in a single place. However, in even the most streamlined enterprises, these documents still touch several different systems. Some documents are stored in an ERP system or a content-collaboration platform, but other crucial information often resides on paper, in sales contracts, on inspection certificates or elsewhere. Disparate systems that function independently and without effective integration only prolong accounting processes.

To be most effective, the payables software solution must be able to communicate with all core systems that house relevant documents. If it can’t, records can become “lost in the loop” and put the organisation at risk. To prevent this, any A/P automation solution should integrate with the company’s content services platform (CSP) and ERP systems. Integrating systems and federating content across them leads to substantially reduced processing times.

 

Unification

A/P-related systems aren’t the only software in the company that contains information relevant to A/P processes. Marketing, customer service, operations, manufacturing and legal, among other major departments, have some bottom-line impact on business operations.

Because A/P staff spend most of their time dealing with transactions that are not PO-based or with PO exceptions like mistakes in amount, quantity, price, payment terms, etc., having this information is critical to their effectiveness. And although this information exists in other departments, it is rarely made readily available to A/P to use when resolving exceptions.

Automated A/P solutions can centralise enterprise content beyond the documentation that is typically considered central to payables processes. When evaluating solutions, assess if the system uses standards-based REST APIs, low-code web-hook enabled content-centric workflows and content federation to access content stored in repositories used in other parts of the organisation. This approach will improve transparency and yield improved cost savings within A/P and the broader supply chain.

 

Reaping the Rewards

When a company is able to tighten its A/P processes, the entire business reaps the rewards. It eliminates the processing delays that result in inaccurate reporting, poor financial visibility, delayed business decisions, costly reruns and wasted money. It also allows money to flow into and out of an organisation faster. According to IOFM, organisations that apply A/P automation best practices can pay their non-PO invoices on time 96% of the time, compared to only 13% of those that are less automated.

The key to enabling that is to capture, manage, federate and audit content across the entire organisation and ensure systems work in concert across different departments and applications. Only with that centralisation, integration and unification can a company make more-informed business decisions and improve cash flow for the near and long term.

 

Business

JUMP-STARTING PROCUREMENT TRANSFORMATION WITH A CLEAR AND REALISTIC PLAN

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by Alex Klein, COO at Efficio Consulting

 

Following a period of ongoing economic uncertainty, business spend has risen high up on the C-Suite agenda, with the procurement function shifted into the hot seat as the enablers of not only rapid cost-cutting but future profitability. In fact, according to Efficio’s experts and authors of recently released PROFIT FROM PROCUREMENT, companies that break down the silos between departments and effectively optimise the procurement function can expect to add 30% to their bottom line.

But where to begin? In order to successfully embark on a roadmap to profitability, a concrete and realistic plan must be put in place – one that has clear objectives and actions agreed amongst all involved. Unfortunately, this is not something that can be achieved overnight. As with anything worth having, this involves a program of gradual transformation and is likely to take no less than 18 months to really drive an impact. With a long lead time to success, the CPO must ensure that the program makes the desired splash – proving its value and keeping internal stakeholders engaged throughout. This requires a plan that will have a high impact, high visibility, cross-functionality, and be fully resourced. Only then can procurement’s profit potential be truly unleashed.

 

Take a step back and listen

When embarking on a Procurement Transformation mission, getting to know the key stakeholders involved will be a crucial first step to getting the project off the ground. Whether that be the CEO, CFO, functional heads, or business unit heads – the CPO must take the time to listen and understand their expectations, needs, and requirements before a vision for the road ahead can be formed.

Suppliers are often forgotten in this mix, yet they are equally as crucial. Questions need to be asked, such as – what improvement options do they see? How could they help us to reduce cost? And how can we help them in return? What each stakeholder wants from procurement, and where they see value will likely differ, so it is important to have all cards on the table upfront. Not only should these considerations sit at the heart of your plan, but they can actually assist in making it a reality.

 

Determining the desired outcomes

Next up, and at the top of the pyramid that comprises your plan, needs to be a clear vision. Whilst the outcome of your efforts may seem pre-defined – such as, to cut costs and release profitability – the scope of this can span as wide or as narrow as you’d like. Now is the time to consider how far you want to stretch this outcome, and the only way to determine this is to ask yourself, “what does the next level of procurement look like in my organisation”?

This procurement vision, of course needs to link back to the businesses overall corporate strategy. For example, if the business is looking towards aggressive growth, procurement should help facilitate this by aiming for scalability. If the strategy is to rapidly digitise, procurement can play a part in digitising the supply chain.

As part of this vision, the CPO must also consider their desired role and remit. For example, how do you see procurement’s way of working changing? How do you see your procurement people interacting with the rest of the business? What do you want your suppliers to say about you?  Once defined, a clear ambition can keep Procurement Transformation on track and aligned. Without it, and with every stakeholder having varying needs, the desired outcome can quickly become lost.

 

Establishing a step by step improvement plan

So, you now have a solid vision – you’ve spent time listening to your internal customers – surely, you’re now ready to focus on getting there? Not so fast – you now need to think about the various facets of the function, including the organisation, people, and processes to establish where you currently stand. This will act as a baseline, in which a roadmap can then be developed and will require set objectives along the way to keep the journey on track. “House of Procurement tools” can be particularly effective here – these frameworks break down the procurement function in terms of strategy, organisation, people, processes, and systems – marking them against a benchmark of bad, average, and good. By plotting against this framework, you can tackle transformation in chunks, setting concreate objectives as a sub-factor level.

Once the current state of play has been established, the goal can then be plotted at the other end of the roadmap, with the activities needed to get to this end goal plotted in between. Key to plotting such a roadmap will be a review of which activities matter, what people are doing currently, and whether these tasks having a meaningful impact. This may require a restructure of the current team, which may require investing in additional strategic procurement resources as well as upgrading internal capability.

Nevertheless, this plan must be granular, and it must be actionable. It is all well and good having great ambition, but it is nothing unless you know exactly how and what it takes to get there. Transformation takes time, and it will certainly not happen overnight, so make sure to break down your roadmap into smaller, more achievable, chunks. Rather than focusing on a single  end goal 18 months down the track, ensure you have milestones to aim for after month three and month six, that contribute to the overall picture. Assembling such a plan is no easy task, but it is the very foundation needed for procurement teams to jump-start transformation.

So, what comes next? Buy in from the rest of the business of course. After all, a plan can only be successful once it has board level approval and sufficient investment. In part two of this series, Alex Klein will explore the stages that follow, including: developing a savings execution plan, building a business case for procurement investment, and ensuring program structure and governance.

 

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Finance

THE IMPORTANCE OF MANAGING DATA RISK IN THE FINANCE FUNCTION 

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Written by Steph Charbonneau, Senior Director of Product Strategy, Vera by HelpSystems  

 

CFOs and financial controllers play a pivotal role in how organisations evaluate and manage data risk. Analyst firm Gartner reports that more than 30% of organisations will use financial risk assessments of their data assets to prioritise investment choices for IT, analytics, security, and privacy by 2022.

Data is particularly at risk within the finance function. Sensitive data such as customer and supplier information, financial statements, and personnel records are processed and shared daily both inside and with vendors outside the organisation. The finance team communicates with banks, auditors, and lawyers on a regular basis and while laws and policies exist to provide protection, there’s no certainty as to where your data could end up, and you can’t control it once it is sent. The information that resides outside the organisation’s security perimeter is accessible with equal permissions, meaning access is not restricted once someone gains it.

 

Assess Your Vulnerability 

All of this presents an immense risk. Understanding what the risks and potential costs are is an important component of organisational planning. How would the organisation react if sensitive information were disseminated to the wrong audience? What could it cost? Simply thinking ‘it won’t happen to me’ or assuming a party erroneously receiving sensitive data will act with integrity and delete the information can no longer be justified. Data breaches are common and can have a significant impact on your business.

The financial risk of a data breach is typically the cost of lost revenue, compliance challenges, cost of litigation, privacy regulation penalties, and reputational damage. Revenue loss risk and litigation costs risk are tangible impacts that can be measured. However, it is more difficult to quantify the probability. On that front, understanding your data’s level of vulnerability is important. If you are SOC2 compliant, your risk will be mitigated by the controls within the internal bounds of your system. On the flip side, it is difficult to assess the probability for data that leaves your repositories. Internal compliance, including SOC2, cannot address it.

Thankfully, there’s a multitude of methods to protect assets and minimise your cyber risk. Consider securing and managing your data with technology like digital rights management (DRM), data loss prevention (DLP), data classification and security incident and event management (SIEM) software. There are network controls you can put in place, and you should have a process for evaluating the security of any apps you use to minimise your vulnerability. Evaluate your cyber risk holistically to ensure nothing slips through the net, otherwise your vulnerability remains.

 

Implementing Data Security Best Practices

Cybersecurity can be very complex depending on the size and industry of the organisation. New attack methods and new technologies to deal with those attack vectors show up all the time. To maximise efforts at assessing security risk, allocate resources so the most effective tools and strategies (such as encryption or digital rights management) are used to protect the most important information assets.

Finance leaders should follow these best practices to manage their team’s cyber risk.

  • Identify exposures in either tools or processes and work with the IT team to close the gaps in security.
  • Classify your files and with it, understand where your sensitive data is located and how access is provided to parties that need it, especially those outside your organisation. Company policies and processes often overlook, or have no direct control of, data outside the organisation so this awareness is important.
  • Adopt a zero-trust approach to protecting your sensitive data and implement technology that allows you to manage your risk. Software such as digital rights management,for example, protects your most valuable data assets no matter where they travel, allowing you to secure, track, audit, and revoke access if data accidentally or maliciously falls into the wrong hands.
  • Educate and train finance team members to recognise and manage risk. Employees need to understand the importance of the data they are using and have access to the right tools and processes so that it is handled correctly.

 

Protect Your Most Valuable Assets

Evaluating an organisation’s cyber risk starts with clearly understanding the company’s risk tolerance. Is the organisation risk tolerant, or extremely risk averse? The answer may differ depending on what needs to be protected and what industry you operate in. In the finance function, what level of risk are you willing to accept and still justify and defend to stakeholders? Start by identifying those assets where the risk is unacceptable and where access needs to be carefully controlled and managed and focus your execution from there.

 

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