5 myths about accounts payable automation debunked

Achieve Best-in-Class Performance by Challenging Old Assumptions

The Accounts Payable Challenge

The economic downturn, tight credit, and declining margins have come togetherlike a perfect storm, forcing companies to scrutinize their internal businessprocesses as they seek ways to cut costs and bolster their bottom lines.

Accounts Payable is no exception.

For companies that carefully rethought the situation, cutting the costs typicallyassociated with Accounts Payable emerged as a no-brainer - automate theprocess, and significant cost savings would follow. Surprisingly though, adoptionhas lagged, and frequently among enterprises most likely to benefit fromautomating the time-consuming and labor-intensive invoice matching andapproval process.

It's a common misstep that begs the question -why would an established,experienced, and otherwise innovative organization forego an obvious andeasily implementable business advantage?

The answer has to do with a series of myths and misconceptions relating toautomation that often govern behavior. The reality is that CFOs, Controllers,Procurement Directors, and Managers can improve their internal processes withrelative ease while contributing to the organization's overall mission tostreamline costs.

If your company has been reluctant to embrace a service that could in factdeliver significant - even spectacular - cost savings, perhaps it is time to revisitthe five myths that hold businesses back when they should be marching forward.

In the next few pages you'll not only learn why those myths are untrue, butyou'll also become apprised of facts that will help you improve your AccountsPayable process.

5 Myths That Need Debunking

Myth 1: Automation is not really more efficient

Consider the inefficiencies that stem from you remainingtethered to a non-automated, paper-based process:

• At the low end of the Accounts Payable spectrum, a 2010 Aberdeen Group study found that it can take anywhere from 3.5 to 2.3 days to process a single invoice. (The industry average for 50% of companies is 14.2 days to process a single invoice.)1
• The cost of processing can range from $5 to $25 for a single invoice
• This includes the costs associated with manual processing, shuffling invoices between individuals and departments, exceptions processing, accrual delays, failed audits, duplicate invoices, and late payments

By contrast, the efficiencies you gain by automating theAccounts Payable process produce results that aredramatic by any measure. These include a:

• 90-95% reduction in paperwork
• 25% improvement in labor productivity

Even with the benefit of an exceptionally dedicated dataentry and email-processing staff, you can only, on average,manually process 1,000 invoices a month per full-timeemployee or equivalent (FTE). By contrast, automatedand rules-based matching increases that number to6,000-8,000 invoices a month per FTE.

Conclusion: Automation not only brings significantefficiencies to your Accounts Payable process, it allows youthe headroom to support business growth while maintainingexisting staffing levels. In other words, you can do morewith less.

Myth 2: We'd lose control over our process

Automation actually gives you greater control over andincreased visibility into the process. Business rules automatethe routing, matching, and circulation of invoices and areconfigured to your organization's specific needs. Not havingto look at each transaction individually means that you willhave the time to focus instead on the much smaller butcrucial set of exceptions that require attention. For example,certain solutions offer rule-based, auto-approved features toaccelerate the processing of straightforward invoices. Thistype of automation saves full-time employees time byrequiring them to review and handle only those invoices thatdo not pass the pre-established system rules.

Automating the process also captures the document andmetadata at the point of receipt of the invoice - so youhave full visibility into the process. No more invoiceshiding on individual users' desks without Accounts Payableknowing they exist. Accounts Payable and Finance nowhave a real-time view of their outstanding liabilities at anypoint in time.

Conclusion: Automation results in greater, not less, controlover your internal Accounts Payable process.

Myth 3: Automation is too expensive

Solutions that offer end-to-end Accounts Payableautomation using Software-as-a-Service (SaaS) and the"cloud" require no upfront software or infrastructurepurchases or recurring license maintenance. Choosing anAccounts Payable solution that is offered as a serviceallows all the users that are part of the business process toparticipate without having to pay expensive user-basedlicense fees. And with a true multi-tenant SaaS solution,you should expect functionality upgrades periodicallybased on best practices and input from your peers sharingthe same core application platforms. All of this implies thatyou will reach your ROI significantly faster than otherwise.

Conclusion: Automating the Accounts Payable process ismore available to a wider range of budgets.

Myth 4: We're too small for automation

Cloud-based solutions coupled with a multi-tenantapproach equates to a very low marginal cost to serve.With economies of scale and best practices, everyonebenefits from automation. And, as explained earlier,automation enables your Accounts Payable staff to focuson more strategic activities, such as, sourcing initiatives,spend management, and supplier management.

Conclusion: You are never too small to save money.

Myth 5: We're too big for automation

Cloud-based Accounts Payable solutions that are deliveredas a service scale easily and can handle large volumes oftransactions. E-invoicing supplier networks enable directdata integration to "skip paper" altogether. Supplierportals allow vendors with smaller invoice volumes aconvenient avenue to create and submit electronicinvoices. These channels aggregate inbound invoices,enable 2- and 3-way matching with business rules againstpurchase orders (POs) and receipts, and facilitate "straightthrough processing" with no human intervention.

Conclusion: The larger your enterprise, the more sense itmakes to seek out automation and gain a better handle onyour large transaction volumes.

Problem 1: Lack of visibility and controlover the process

Paper invoices sit on individual employees' desks untilthey are routed to Accounts Payable "“ there is no visibilityinto the liabilities until it is data entered into an EnterpriseResource Planning (ERP) system. Field managementrequests result in rushed payments because AccountsPayable can't provide adequate controls. Lost, missing, orduplicate invoices are all major risks within a paper-basedprocess. Automation with front-end scan and capture, onthe other hand, provides immediate, real-time visibility intothe entire process.

Automation provides audit proofing and better controls.All actions on documents are automatically logged andtracked, and provide ready reporting on transactions tosatisfy compliance obligations.

Problem 2: Delays in processing - longcycle times and period close delays

Manual process implies data entry and resultant delays.Longer cycle times imply potential late fees. Paper-basedprocesses with poor visibility lead to longer and inaccurateaccruals, which in turn can lead to delays in period endclosing of the books. Reconciliations prior to close canbecome a nightmare. Automation provides real-time,accurate visibility into all transactions with up-front invoiceingestion and digitization.

Problem 3: Low productivity; no resourcesto address other key priorities

Filing, retrieving, and keying data into ERP systems is notthe best way to leverage your accounting and financetalent. Manual processes are inefficient and time consuming.Inter-departmental file requests, additionalcopies, and obscure reporting can further complicatematters. Vendor management and support to respond to,"Where's my payment?" inquiries can be a time sink. Howthen do you handle key priorities such as vendor riskmanagement, fraud prevention and proactive monitoring,spend management, and sourcing initiatives support?

The answer: By automating your Accounts Payableprocess. With automation you can eliminate the "non-valueadded" tasks that your staff may have been mired in.Through exception-based management of the AccountsPayable process, you can free up your staff to focus onyour higher value strategic priorities. Capturing invoiceinformation in electronic format at the front of the processenables reporting and data visibility to answer keystrategic questions around spend management.

Problem 4: Quality and errors

Manual processes have a tendency to produce "exceptionsare the norm" scenarios. When users are forced to touchand process every transaction, it is difficult to filter outand prioritize which need the most attention. Without clearprioritization and focus, user errors creep in -keyingerrors, matching errors, misfiled documents, and the like.Automation flips this on its head, with a focus on theexception and not the normal scenario. Robust businessrules allow the system to streamline the process. Bestpractices-based workflows enable tighter process controlsand minimize errors. With the bulk of the straightforwardtransactions handled automatically, a user can focus timeand effort on managing the true exceptions - which improves process performance and quality metrics.

Problem 5: No support for sourcing/procurement initiatives

Spending not captured by a standard PO processis a challenge to manage due to the large number ofsuppliers and items involved. Manual, paper-basedprocesses provide no support for sourcing initiatives.While procurement can structure central contracts withprojected savings, these are not realized until AccountsPayable can enforce the spend control. Accounts Payableis the final gatekeeper to ensuring that what iscontracted is what is bought. Paper-based processesprovide poor visibility into overall spend on non-PO/indirect items. Automation provides clear visibility intothese areas. "What gets measured, gets managed,"and sourcing-led indirect spend control and savings canbe attributed directly to Accounts Payable automation.

Summary

Once you've dismissed the myths and misconceptionsthat have been holding you back from automatingyour Accounts Payable process, you can implementa comprehensive solution that will address yourmain pain points.

When its architecture is cloud-based and delivered asan SaaS model, the solution will move you closer toyour goal of becoming paperless. And with a paperlessconduit between Procurement, Accounts Payable,Accounts Receivable, and Suppliers, you'll be able tomanage nearly 100% of your invoices electronically.

Automating and streamlining your invoice processingwill also provide you with a secure and serviceablearchive for invoice data. The fact that you will bepaying for it on a per-transaction basis makes it acost-effective solution. It also makes it one that canbe implemented quickly.

Finally, you will realize process improvements in days,rather than months, resulting in a rapid return oninvestment. You'll have an end-to-end Accounts Payablesolution that increases compliance, cuts costs, andreduces cycle times.