AP Automation and the Healthcare Industry

Organizations with large supply chains often find themselves awash in a sea of paper, often drowning potential discounts and making late payments because their accounts payable system hasn’t grown with the business. Healthcare organizations suffer from this issue as in particular, as they have to deal with strict government regulations added to the mix. They are constantly ordering necessary products from their supply lines.

This constant ordering produces mountains of purchase orders and invoices for accounts payable to sort out. Complicating the payment process is the chain of authorization; in a healthcare organization, approval may require a process stretching all the way up to the CEO. In a large healthcare organization, processing purchase orders and invoices by hand is a lengthy task; the organization can process their invoices much faster if they employ Accounts Payable Automation.

What is AP Automation?

The AP process involves purchase orders for orders and invoices for payment. Accounts payable automation means processing both POs and invoices electronically, instead of with paper. Electronic Data Interchange (EDI) allows the healthcare organization to send purchase orders electronically to suppliers and to receive invoices from suppliers electronically as well. This speeds up the process literally by days (and weeks) as it eliminates mailing paper back and forth. Automating of the AP process does not eliminate paper, as some purchase orders and invoices will require manual handling, but it does cut the paper down dramatically. Carbon-copy invoices can be replaced by printing a single copy of the invoice, and the same is true for the purchase orders.

Barriers to AP Automation

No organization is ready to automate their AP processes at the drop of a hat. Until the problem of paper-handling becomes a negative influence on an organization, will they then begin to recognize the benefits of Electronic Invoicing? Suppliers often offer discounts for fast payment of an invoice, but a paper-based AP Department is usually not able to take advantage of them because paper-handling is laborious and slow.

The first barrier to AP automation is getting your own AP staff on board. It is extremely important that leadership communicates to members of the group exactly how the project will benefit them and what the department will accomplish with the changes that will be taking place.

The second barrier to AP automation is your suppliers. Many of them have no EDI capability, and no plans to implement any. For accounts payable automation to be successful, your suppliers must be capable of receiving your POs electronically and electronically sending their invoices to you. Almost no business supplying large customers is without the Internet; this capability can be used to automate their purchase orders and invoices. Get your suppliers on board with the idea of AP automation and your department will be recognized.

The third barrier to AP automation is the individual departments within an organization. It takes time to retrain individual departments to use the electronic invoicing process, and the conversion process must be carefully planned in order to not have a long lapse between the training and the actual go-live date. It’s more than likely for the departments to be resistant to the change, so getting their buy-in is important, and moving from training to go-live quickly is critical.

Automating Your AP Process

Below is a list of the steps the organization can follow for a successful AP automation implementation:

  1. Get a Project Manager to run the process. The project manager will control all aspects of the automation project, and is the final arbiter of all decisions.
  2. The PM should have the IT department evaluate vendors for the software component. The software must be able to input the electronically received invoices into the AP software, into a staging area, and produce reports for the AP staff to review before the staff approves the invoice and moves the input invoice into the payment process. The AP department needs to review the candidates for their ability to interface to the existing AP procedures.
  3. The PM should have the networking department evaluate the suppliers for their capability to handle electronic purchase orders and to send electronic invoices. The network department must also evaluate the organization’s in-house networking capabilities, to ensure departments have the connectivity to use the automation process.
  4. The PM should have the IT department evaluate the individual departments for the necessary computing power to access the automation process and produce electronic purchase orders.
  5. Once a vendor is chosen, the IT department must purchase the software and implement the package. This may involve converting the existing data into a new database, coding of custom data input screens, writing new reports, and producing new documentation for the users.
  6. Iterate through a cycle of testing-revision-testing until the software is deemed integrated and the new processes are ready to go live.
  7. Schedule training for departments in as concentrated a period as resources allow, avoiding a long period between training and go-live.
  8. Run parallel between the automated process and the current production model. When the automated process produces the same result as the production system, schedule a cut-over date, and go live.
  9. Once the new system is in production, monitor results for a month, to ensure the new system meets all requirements.

This is an essential formula for going through the AP automation process. It may seem like a sizable task, but if you follow it as outlined you will be able to automate your purchase orders and invoices smoothly. Being able to capture pricing discounts from your suppliers and making timely payments for goods received is essential for a prosperous Accounts Payable Department. Now large organizations like healthcare companies are able to participate in an AP process that’s automated and is able to grow their business.

Meta description: How do large organizations like healthcare companies apply AP Automation to their AP process? Discover what it takes for a successful e-invoicing implementation