By now a lot of businesses are somewhat familiar with Accounts Payable Automation, many have already adopted. It’s not hard to see real value in transforming your Accounts department with Accounts Payable Automation, and in a lot of cases, it can be crucial to the success of the Accounts Team. But real success in implementing this technology is not without its set of challenges.
If you’re not yet fully up to speed, Accounts Payable Automation is the process of automating the capture, classification, verification, approval, and ingestion of invoices into your financial system. By virtue, it removes a significant amount of the manual effort required to key data, match applicable purchase orders, and cross-check vendor & line item information. Done properly, the system will also prevent fraudulent invoices being paid, double-check calculations, and apply the company’s own unique business rules to the workflow. The holy grail of Accounts Payable Automation is what’s known as a ‘straight-through processing’, where purchase orders match invoices 100% and no person is involved in the process at all.
But so often this isn’t the case, as there are varying degrees of Accounts Payable Automation and the implementations often present considerable challenges. While there is a long list of potential roadblocks with any Accounts Payable implementation, fundamentally there are 3 that exist with all.
- Varying invoice layouts – invoices can arrive in a multitude of formats, such as PDF, TIFF, xls, or less commonly nowadays, fax. If an ingestion is only capable of recognizing invoices in a particular format, then trying to convince suppliers to change their invoice layout for you is like hoping you won’t get a tax bill next year.
- Errors and exceptions – in most cases at least 35% of invoices contain errors and correcting them usually requires phone calls to vendors. So, while Accounts Payable Automation is good, if the system isn’t smart enough to pick up on these and apply specific business rules to them, your staff end up wasting more time on it. Some examples here are when there’s no PO on the invoice, there are partial deliveries, or the invoice contains incorrect tax thresholds. Simply put; there is no ‘standard’ approach.
- Business validation rules – each business has its own set of data requirements for invoices so they’re able to be posted to the financial system. Vendor ERP systems generate invoices in a multitude of ways, with different variations of tax calculations and different formats (like GST not appearing on the header level). And many vendors themselves are unable, or unwilling, to supply the information your ERP system requires (such as PO or remittance advice). Chasing this data and adding it manually is tedious.
So that begs the question then, where does that leave a successful Accounts Payable Automation? In our experience, there are 3 key areas that need addressing correctly before any automation can be considered successful.
First, you need to understand the core business problem. For example, most commonly suppliers focus on the manual keying of invoice data, but this might not in fact be the quickest way to success. Perhaps consider the time taken to chase approvals or trying to find an invoice if a dispute arises, or even PO & statement matching.
Take the time to map out your existing process correctly. You can’t rush this, so trying to cut corners will end up costing in the long run. Done correctly, the Solution Architect will be able to uncover all the correct pain points by asking the right questions. If a process is broken and you’re trying to apply automation to it, you’re going to have constant issues. In addition, if the right stakeholders aren’t sponsoring the project the needs of the business are never going to get correctly met. And if the consultant can’t confidently explain the entire engagement process from the outset then ask yourself if you’ve chosen the right one, as there are likely to be gaps.
Accounts Payable Automation will not be perfect:
No automation is ever going to be 100% perfect, so setting the right expectations from the outset is vital for success. There are so many variables & variations that if you don’t have a set structure and consistency you’re not going to get straight-through processing. Of course, having “consistency” is completely unrealistic as you’re continually at the mercy of your vendors.
The name of the game is getting an efficiency & productivity gain. If your staff spend four days a week keying in data and you take that to two, or one (being validation), then you have a business case. This should be the focus. Perhaps consider the 80/20 rule. Also, keep in mind that you’re not removing staff from a particular role (unless of course, that’s your objective). What you are doing is utilizing your staff in a much better, more creative way where they can better realize their potential.
Make sure everyone buys in:
The Accounts Payable process is an extremely important process in any business, and it touches a large majority of the organisation. Make sure the whole finance team, the ERP provider, and the IT department are along for the ride. You’ll need resources allocated to the project for it to succeed, and if the message is wrong, you’re not solving all the challenges associated with AP, or you’re not aligning with the businesses strategic goals, you’re going to hit roadblocks.
It’s obviously important to choose the right partner, and keep in mind there is no one size fits all AP solution for Accounts Payable Automation. A significant portion of the cost will be in implementation, as it represents the supplier spending time to ensure all the challenges are met – and are integrated. Think of it in logical terms; how can a solution be tailor-made for a business, and one that solves your unique set of challenges, unless the appropriate amount of time is taken to consider all of the above?