The Next Step: Accounts Payable Automation
Value of AP
Many organizations view accounts payable (AP) as more of an expense to the business than an asset. People often fail to realize the true importance of AP mainly that every company needs an AP department to effectively manage costs and serve as a tool in long term planning. However, a fully automated accounts payable department holds even more value to the company as I will father explain.
AP Basic Functions
An accounts payable department does far more than simply pay bills. In more recent years, accounts payable has had major financial responsibilities such as cash management analysis and forecasting. But the basic function of AP is to pay invoices in a timely manner. Interestingly enough the basic function of paying of invoices can result in measurable savings to the company through prompt pay discounts (dynamic discounting). This is a major benefit of AP Automation.
Not all AP departments are created equal, the number of invoices generated by a retail or manufacturing business will be greater than a service oriented or public concern. Therefore, the importance of AP Automation is magnified by a company in an invoice-heavy industry. The decision to automate for them is far more compelling.
Major AP Limitations
There are three major areas that present challenges for an organization’s AP departments as they relate to profitability and management. Each of these areas can be addressed by AP Automation, but need to be seen as a function of the business instead of an obstacle within the department.
The first and most obvious issue facing AP, is having to deal with the hundreds or thousands of paper invoices. Hurting the environment and creating a stressful workload on the payables department can be eliminated with the implementation of AP Automation. Not mention dramatically reducing the number of paper cuts!
Another hindrance can be found in the form of lost discounts, duplicate payments, and internal fraud. This is literally money that routinely slips through the cracks.
Finally, compliance and regulatory issues can cause even more time being spent with regulators and auditors than performing the essential AP tasks. The preverbal “time is money” saying is manifested in this common scenario.
Automated AP Solutions
Accounts Payable Automation has a defined advantage to your existing system. What you will find is many of the problem areas are corrected by using the blueprint of your current system and creating an automated process for it. In other words, your basic process will continue with technology added make that process faster and more efficient.
The manual processing of invoices can be remedied by designing a system that electronically receives invoices, then collects the data for processing. Formally known as an EIPP (Electronic Invoice Presentment and Payment) system, it eliminates the human handling of invoices and is a faster and more efficient way of getting the information in and out of the AP process.
Invoices can be viewed on screen and AP personnel can be reassigned to more important responsibilities. Any anomalies in the receipt of invoices can be automatically checked in the system without interfering with the normal process. Capturing available invoice discounts (dynamic discounting) and eliminating duplicate payments are two important benefits to AP Automation.
Once the invoices are processed with electronic invoicing, the task of finding discounts and preventing duplicate payments will be quickly recognized by the system. Electronic invoicing or e-invoicing will result in more cash remaining in the company instead of being lost to inefficiencies and irregularities in the manual system. As for the problem of fraud, automation can limit access to the most sensitive steps in the AP process.
Finally, regulatory and compliance issues can be monitored through a dashboard that tracks and invoices and other information. Specific regulatory and compliance conditions can be built in to trigger an alert whenever a potential problem is detected.
Summarizing the process of automating your existing AP system:
l Fine tune the existing AP system blueprint process that currently is in use
l Implement the solution in planned stages
l Evaluate and analyze the results of the new system
The transition will not be as simple as the aforementioned steps appear to be, but you will realize the advantages in less time is commonly believed.