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.
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.