After years of slow adoption, accounts payable (AP) departments are getting serious about automation. Seventy-one percent of accounts payable departments plan to automate further in 2020, according to the results of an online survey conducted by the Institute of Finance and Management (IOFM). Even highly automated accounts payable departments plan to deploy more technology this year.
Senior management is likely to be supportive of automation. Nearly two-thirds of accounts payable leaders surveyed by IOFM believe their senior management is more receptive to automation.
Accounts payable leaders and their bosses recognize that automation is critical to addressing the operational challenges of fraud and compliance risks caused by the sudden shift to remote working.
After all, adapting manual, outdated processes to a remote working environment is hard.
How to Get Started with Accounts Payable Automation
The first step towards automating accounts payable is to diagnose your pain points. Diagnosing these pain points will keep your project team focused on what is most important and will help ensure that your business case presents a compelling problem and solution-based premise.
IOFM finds that the biggest challenges accounts payable departments face in the new reality are:
-Increased vulnerability to fraud because of disrupted processes and procedures
-More phone calls and e-mails from suppliers about the status of invoices and payments
-Greater risk of missed invoice due dates because of operational disruption
-Inadequate visibility into the cash flow and spend data CFOs need to navigate the economy
Solicit feedback from frontline users as well as stakeholders to uncover your pain points.
One area to carefully examine as a potential source of pain is your organization’s current invoice approval workflows. The workflows that many accounts payable departments have relied on in the past were not designed to support remote workers. Inefficient accounts payable workflows result in:
-Higher processing costs
-A backlog of past-due invoices
-Strained vendor relationships
-Weak cash management
-Late payment penalties
-Missed early payment discounts
-Lots of supplier inquiries
Take a hard look at the way your organization is approving invoices these days. The first step in understanding your workflows is to create flow charts for all invoice approval processes:
1. Invoice receipt and data capture
2. Invoice matching
3. Invoice approvals
4. Exceptions resolution
5. ERP upload of invoice information
6. Payment and remittance management
Chances are that these processes have been disrupted by the move to remote working.
Be sure your automation project team learns your current invoice workflows including the number of business units or departments that make purchases, how each business unit or department currently manages its invoices, the number of unique types of invoices your organization receives, challenges with your current approval and exceptions workflows, and average approval invoice cycle times. By documenting your current workflows, you will be able to uncover inefficiencies and hidden costs.
With your current workflows in-hand, evaluate automated solutions with an eye towards:
-Invoice receipt: aggregating all invoices onto a single platform, especially PDF invoices
-Routing: routing invoices for distribution, exceptions resolution and payment authorization
-Matching: matching invoices with purchase orders and proof-of-delivery documents/data
-ERP integration: posting approved invoices directly to an ERP application
Another part of diagnosing your pain points is to understand your current costs. Sixty-two percent of businesses plan to reduce spending because of the economic downturn. Payables departments that manually process invoices have a tremendous opportunity to reduce their overhead with automation.
Determine your average cost per invoice by multiplying your total number of FTEs by the average compensation and benefits per FTE and dividing that figure by your total number of invoices.
IOFM finds that highly automated accounts payable departments spend less than one-fourth as much to process a single invoice compared to their accounts-payable peers with little or no automation.
Accounts payable automation is the elixir for the issues created by remote working – hence why more departments are prioritizing automation. Understanding the challenges in your current payables operation will help ensure that your automation project is a success, no matter where staff work.
Our team is here to help! Explore CIIS Virtual Office and speak with our Solutions Consultants about how Canon can assist your organization navigate through the current challenges, to maintain business continuity and manage document processes, while setting the stage for future process transformation across your business functions.