We’re very interested in hearing about the results of this AIIM research into Accounts Payable (AP), Atle, as AP is of course the most obvious application of Document Management technology and has been a sector focus for a long time.
Then you and thedmcollaborators readership are going to be a bit surprised.
Well, we found in a recent dialogue with over 200 accounting and finance professionals a lot less take-up of automated AP than your observation might lead you to expect. For example, and while there is obviously big differentiation between different sectors, the average number of organisations with automated AP is quite low – 34%.
That is surprising!
Yes, as is the fact that while a further 28% said they have digital processes for Accounts Payable, what that seems to mean in practice is that they use email to send invoices back and forth, but it’s a very ad hoc process, with a lot of chasing and reminders. 38% told us that even today, AP is still a paper-based system in their organisations. Some of those do receive invoices electronically, it’s true, but then they seemingly have to print them out to start working on them.
There’s obviously implications for here for time to deal with this sort of non-automated process, then, Atle?
Absolutely there is. We asked people how long it was taking them to process and pay an invoice they get, and we were told by 55% over 10 days. For 33%, it was over 20, and for 18%, over 30. That means the most common period is 11 to 20 days, and the average over 21.
That’s quite shocking.
Yes, it is. And there’s a cost, obviously. Whereas industry best practice for a digital invoicing and AP workflow can be as low as $3 to $5, for our respondents, given their non-automated processes, we were hearing about more like $31 to $40 as an average for manual or paper-based processes. That breaks down to some spending over $60 per invoice, once staff and distribution costs get totted up.
Why aren’t organisations addressing this?
We often talk about it in terms of reducing staff, as that’s being the payoff people should be shooting for, but the data suggests it just isn’t: many want to simply re-assign team member to more value-creating or customer-facing positions. Actually, we asked people what they wanted from a possible automated AP system, and we found that 59% desire reduced invoicing process cost, maybe not a big surprise given these numbers I just quoted, while 47% think it could reduce error and delay. 33% see big value in having improved visibility into their current invoicing status, and 60% want to integrate better with their in-house accounting and financial reporting systems. Another big proportion, 44%, want to have a process that covers everything apart from limited expectations, for instance. And there’s obviously business knock-ons by not having a friction-free, seamless process to pay system, as it could delay business co-operation and so, really, your profitability. This really would help, if you could do it, and users know that.
What’s the bottleneck then – why isn’t this happening, if accounting and finance professionals see all this potential?
It’s harder in big organisations, which often have a lot of legacy and on-premise systems, perhaps, to get a hearing. There’s also a complexity issue, or the perception that moving to automated AP would be very complicated. As a result, vendors really, really need to stress how easy it would be to do so with their solutions!
Fascinating, and useful to hear. I think you also asked about electronic signatures, Alte?
We did, which was identified along with a good audit trail as potentially very desirable, too. It’s really important to know that there’s no reason right now for a UK firm not to be using them; the Cabinet Office guidelines are very clear. Many firms keep hold of their paper, which could actually be a problem in a dispute, as you’d be expected to produce originals, whereas going electronic would mean as a policy you would not need to do this anymore, so it’d be safer.
I would recommend trying to go for the highest standard externally when working with partners and customer, but just having an audit trail if you can get a digital one would mean you wouldn’t really need one internally. But clearly, organisations need to be doing more on automating AP in the first place, as there’s huge pent-up demand here – and, I think, great market opportunity for DM suppliers who can convince them it’s genuinely really easy and simple to start.
Thanks so much for these great insights, Alte.
Atle Skjekkeland is a Senior Vice President at AIIM – the Association for Information and Image Management. He is a technologist, educator, and innovator. His interest in the future of information management with social, mobile, cloud, and big data has made him a frequent keynoter and workshop facilitator at events across the world. Atle is also the architect behind AIIM’s training programs with close to 30,000 students. He has a Master of Science degree from Norwegian School of Economics, and he has for the last 9 years lived just outside Washington DC with his wife Gardy and daughter Isabelle.