Accounts Payable (AP) processes are one of the most pivotal set of processes to the efficient running of modern business. Yet, very few organisations have made the process seamless and digital.
Why is this problem with invoice processing so endemic? Accounts Payable teams and FDs often appreciate the issues that manual paper-based processes lead to, but they struggle to see how automation can necessarily remedy the situation.
This is an education process with Accounts Payable teams and FDs around the potential of technology for helping them. And this is critical, because in our information age everybody has to go digital or be left behind. The big question is how we remedy this disconnect, and make progress towards the end automation goal.
Exceptions don’t prove any rules
To automate, first companies need to put the effort in, upfront, to understand actually what their processes are and start to think about meeting international standards of best practice. A poor, manual process can only lead to a poor, broken, automated process, after all.
Second, if you’re going to streamline, you have to think hard about what the straight line is through your business processes: what are your people doing at every step along the way? Be warned that there is often a disconnect between the management level and the operational level of the business in how these matters are viewed, and those views need to be reconciled before progress can be made.
Most people at the top and at the bottom of the business are in agreement, however, that they want to get rid of the drudgery of handling invoices. OCR (Optical Character Recognition) technology saves an awful lot of time and introduces a lot of accuracy in this process – and once in place, this data then be used to automate other functions such as the accounts payable process.
However, what can often stymie such a move is when firms think they need to plan for a very large amount of exception handling, because – and so the thinking goes – human back-up always needs to be present.
But the reality is there just aren’t that many exceptions that need to be managed. Businesses should factor in perhaps 20% or less as you move through the project. What’s more, businesses can assign systems to deal with some of these exceptions as well.
You can derive significant benefits out of automating your AP process, and in addition you still retain the best people you’ve got within that process. The people that are doing the more mundane jobs will have to be found some other value-add way of contributing to the business, and getting your expert people to deal with the occasional and anomalous exception is one important way.
If you want a smooth, streamlined AP process, the focus should be on sitting down with the operational users, quizzing them on what happens on a day-to-day basis, checking if that is consistent with the way the management want to move forward.
Once that process is complete is, you can map that process and think about improving and streamlining it.
No human touch
Ideally, FDs want to get to the point of it always being the case that an invoice comes in, it transitions through the system without any human touch. And and then, if it meets all the business rules automatically, which it should, particularly if there’s a purchase order system in place, then it’s paid according to the rules and it goes out. That scenario should be more and more the standard. But to get to that point, you have to change some of the bad practice of ‘I just need to see it or it just needs an extra level of approval.’
You want streamlined Accounts Payable because speed of transaction is the engine of your business, where it all happens from a cash generation and a cash management point of view. That’s what any FD should be looking at: Can I manage my cash better? Can I know where our money is at any point in their procurement cycle? Can I do this better?
A digital win-win
If you start down that route, the engine of the business is working well and a lot of the strain on working capital just goes away. It will also help cement the kind of friction-free supplier relationships you want, increasingly critical in today’s competitive environment while of course putting a great electronic process in place which can reduce the burden of your compliance work, too.
The message has to be to work around exceptions, not be a prisoner to them — and get your business up to truly 21st century level speed.
Howard Frear is Director of Sales & Marketing at EASY SOFTWARE UK