Improve your Accounts Payable Process
In today’s competitive climate, the focus has fallen increasingly on streamlining back-office functions to unlock profit. This allows organisations to concentrate resources on driving the business forward.
Nowhere is this more evident than in Accounts Payable. Control and compliance, reducing costs and maintaining first-class supply chain relationships are vital features of a healthy finance function. So how can you improve your accounts payable process?
Accounts Payable Process Improvement Ideas
Manual AP processing costs are higher than those associated with Accounts Payable automation solutions. This is coupled with higher storage overhead costs. Inefficient processing gives rise to issues with the potential to impair profit. For example, duplicate payments, late payment fees or missed early payment discounts could occur.
Manual processing also leads to a lack of control and visibility to management. This leaves them unable to make informed decisions to effectively lead their team. This creates an environment vulnerable to fraud. Business growth, mergers and extension of centre locations can lead to even the best manual processing systems becoming clumsy, unwieldy and expensive to operate.
An AP automation solution aims to eliminate the burdens that can be associated with manual or paper-based systems. The goal is to improve your accounts payable process. AP automation software can eliminate paper from the process. It replaces costly, tedious and error-prone manual tasks with automated accuracy. This ensures that control and compliance increase visibility and management of information. Ultimately, it improves supplier relationships with faster payment and accurate updates.
1. Avoid Costly Duplicate and Late Payments (with Automated Invoice Matching)
Duplicate payments can be one of the biggest drivers for AP automation and subsequently improve your accounts payable process. One client of Documation detected duplicate invoices to a value of £16m within a year following automation. Duplicates that could easily have been paid under the old process.
In July 2014 Bacs reported a figure of £46.1 billion owed in late payments alone in the UK. Late payers risk damaging reputations and losing valued suppliers. Incurring late payment penalties may lead to falling foul of legislative initiatives to clamp down on late payment. This includes the UK government’s Prompt Payment Code and the EU Payments Directive to make ‘paying on time the norm’. By introducing an AP Automation solution, duplicate invoices will reduce through automated invoice matching.
2. Reduce Costs and Manual Effort (with Data Capture)
Accounts payable process improvement is possible with an automated solution. Invoices arriving via email, EDI or fax are captured without manual intervention – eliminating a common problem for organisations who still print email invoices before rescanning them or who are using the paper copy. AIIM points out that whereas 44 per cent of invoices now arrive in electronic format, 59 per cent of these will subsequently be printed to paper.
With an AP Automation solution to improve your accounts payable process, data from the majority of invoices are captured automatically with no manual effort, dramatically reducing data entry costs, improving validation and eliminating these costly duplicates.
1. AIIM: Paper vs. electronic: when “best evidence” isn’t good enough
3. Reduce Your Paper Trail
“The number one challenge for organisations today in AP is difficulty finding or managing paper-based documents.” (Aberdeen Group, 2014).
While an increasing number of invoices are received in electronic format, some are still paper-based and in many organisations, even the invoices received by email are still printed out for processing – adding printing costs to the problem!
Sifting through piles of paper searching for documents wastes time and even after an invoice has been paid, paper storage requirements are expensive and cumbersome, not to mention the potential risk from fire.
Documents frequently need to be delivered to other business areas for coding or query response, leading to additional costs for photocopying and distribution via internal post.
When invoices arrive at multiple locations they can be delayed or mislaid before even reaching the AP team. AP Automation solutions will enable accounts payable process improvement by eradicating this endless paper trail! By removing paper you can reduce printing costs and save valuable time and office space.
2 Aberdeen Group: Business Planning and Execution Report Roundup for June 2014
4. Improve Your Accounts Payable Process By Freeing Your AP Team For More Valued Added Tasks
Manual AP processing is expensive, slow and ineffective.
Entry of invoice data and GL (General Ledger) coding and matching invoices to purchase order accounts will take up a large percentage of an AP team’s time (and therefore the cost). Yet this is an activity that, although essential, adds no value to the business.
An AP Automation solution can improve processing times and free your AP team from data entry and time-consuming enquiries with supplier self-service capabilities.
5. Reduce Your Processing Costs & Improve Your Accounts Payable Process
Compare the costs of a traditional accounts payable process with those of an automated process, and the case for AP automation is compelling. The Aberdeen Group reports that those Best-in-Class process invoices at 0.17 of the cost experienced by Laggards.
A study carried out in the United States showed that an average company spends as much as $25 pushing just one invoice through a paper-based system. At the same time, half of all companies take between five and 15 days to process a single invoice when they do so manually.
How do you streamline accounts payable process?
Free your AP team from manual processing, hasten accounts payable process improvement and reduce the associated costs, significantly allowing resources to be focused elsewhere on more value-added tasks.
3 Iron Mountain 2013
6. Improve Your Accounts Payable Process and Reduce Your Processing Times
Even within those organisations that already have a purchase ordering system in place, some invoices will still need to be coded and approved before payment can be made.
AP Automation solutions will provide online facilities which allow GL coding to be entered by any approved user (even from outside the AP team) without the need to access the finance system. A benefit of this approach is that online coding is made simple for non-finance users by providing intelligent defaults and lists based on, for example, the vendor or department.
The impact is that the process is made considerably faster with the AP team saving the time which would have been spent checking (and potentially rejecting) paper forms.
Get faster accounts payable process improvement by implementing an AP Automation solution. It creates touchless, straight-through processing for most invoices, with any exceptions highlighted for rapid resolution by the AP team
7. Gain Better Visibility and KPI Analytics Across Your AP Processes
With invoices distributed out for coding and approval, or to resolve queries on receipting, pricing and other discrepancies, the AP team often has limited – if any – visibility or control over the process.
This can result in excess time spent chasing other business areas in order to meet deadlines or to answer supplier questions about payment.
Lack of visibility obstructs query resolution and without relevant information, management is unable to pinpoint processing bottlenecks, identify the priority and status of invoices within the system, determine company liability, or confidently make decisions affecting cash flow and the organisation’s bottom line.
Using AP automation dashboards and reporting tools for accounts payable process improvement, by providing complete visibility, helps you plan resources and identify and improve bottlenecks in your business. This also helps to analyse your spend.
8. Improve Your Accounts Payable Process With Control Over Authorisation, Security and Retention Policies Within One Cohesive System
Where procedures within AP have not grown and developed at the same rate as the organisation, the AP team can find itself dealing with unrefined and ill-defined processes, unable to enforce authorisation policies, security levels, deadlines and escalation strategies.
It is hard to make business controls and delegation of authority stick, in a manual process that involves a number of business areas, across multiple locations. This is further compounded when the participants typically see handling invoices as an unwelcome distraction from their ‘day-job’.
Delegation of invoice approval and the short-circuiting of authorisation controls in order to achieve payment on time can be the outcome.
The result of bad practice may come home to roost in the year-end audit – or manifest itself in fraud which, whether originating from within or outside an organisation, is more difficult to detect without checks, balances, control and visibility. AP Automation can improve your accounts payable process an enforce business rules to improve control over authorisation and security policies.
9. Take Advantage of Early Payment Discounts
There are substantial benefits for negotiating and securing an early payment discount from your suppliers with any early payment discounts that are secured going straight to your bottom line.
Early payments can also improve payment profiles and company credit reports, strengthening your position with other suppliers, and thus, improving the business’ whole supply chain process. An AP Automation solution can prioritise EPD invoices, warn users of deadlines and will speed up the AP process to allow discounts to be claimed.
10. Provide a Platform To Improve Your Accounts Payable Process By Creating ‘Best Practice’ For AP Processing
Following the most efficient procedures and compliant business rules for your organisation is imperative to success. One way of ensuring these rules are adhered to is to implement automated AP.
AP Automation can help to provide a platform to encourage the AP team to follow best practices within the business. By setting rules, a clear authorisation path, and identifying any blocks within the business, everyone adheres to the same business rules – increasing efficiency and implementing best practice with your AP team.
11. Improve Supplier Relationships and Purchasing Negotiation Position
Good supplier relationships are vital to your business and nothing keeps a supplier happier than on-time payments! With AP Automation allowing the user (or the Supplier themselves) to track the whereabouts of an invoice quickly and easily, the correct invoices are highly likely to be approved and paid within the set payment dates.
How Do You Manage Accounts Payable Effectively?
Using AP Automation, analysis of spend can also put your business in a good position for future negotiations around pricing and discounts.
Put simply, automation frees up the AP team to nurture and strengthen the supplier relationships that matter most.
The ultimate aim being to provide process improvement ideas for accounts payable.
Improving Accounts Payable Through Automation
Accounts Payable can be a timely and costly process. But when an AP Automation solution is implemented this can simplify your procedures to gain lower costs, faster payment cycles, reduced staff input, improved control and better supplier relationships.
If you are looking to reduce your paper trail, avoid costly duplicate or late payments and further reduce your processing costs an AP automation solution could be the answer.
As an expert AP Automation partner, Documation can provide information about the potential of best-practice and help assess the strength of a business case for automation.
To arrange an initial discussion – or for an informal chat – call us on +44 (0) 23 8064 7776 or email firstname.lastname@example.org – or you can contact us through our website.