SMBs: Getting Started with AP Automation

Posted by Andrew Bartolini on April 7th, 2016
Stored in Articles, Procure-to-Pay, Strategy, Technology

Our annual “State of ePayables” research survey is now open. Your responses will help us establish the Best-in-Class metrics that readers can use to benchmark the performance of their AP operations. If you have a few minutes, I encourage you to click here and take it. Thanks in advance!

One interesting thing in recent years as it relates to “ePayables” is the growth we have seen in the SMB market. Once upon a time, small and mid-sized businesses (SMBs) struggled to automate business processes such as accounts payable (AP) and procurement. With the advent of cloud solutions, this is no longer the case. SMBs now have reasonable options (from a resource and investment perspective) to consider if and when they want to transform their inefficient, paper-based invoice and payment processes.

How Do SMBs Run AP Today?

For a variety of reasons, SMBs are more likely than their large enterprise counterparts to run their AP operations in a mostly manual and more inefficient way resulting in:

  • High operational costs –SMBs may deal with a lower volume of invoices/payments, but the cost of manually processing paper can be significant because the completion of each step in a manual environment can be both time consuming and highly tactical. According to Ardent Partners research, businesses can reduce their invoice processing costs by between 40-70% through automation.
  • Costly errors and delays – A paper-based AP process is more likely to cause numerous errors such as overpayments, duplicate payments, and late payments. Manual processes result in lengthy invoice processing times which, in addition to late payment penalties, can make it difficult to get an accurate picture of accruals or any early payment discount opportunities.
  • General lack of visibility – Limited access to accurate and timely data around invoices and payments makes it difficult to get a clear picture of current and future liabilities. This affects the ability to accurately forecast expenses and appropriately plan and fund investments.

One of the most crucial aspects of running a successful SMB is how effectively the business manages its cash flow and maintains direct access to it; this has been particularly true given the economic conditions of the past few years where credit for SMBs has been tight. Financially knowledgeable SMBs understand the value of optimizing their cash and having a level of predictability around their cash inflow and outflow, as well as having a clear view of current and future liabilities – this is where automating AP proves to be valuable for the SMB.

Making a Business Case for AP Automation

As with any change in the business world, the first step is to craft a business case. In order to do that effectively in an SMB environment, it’s critical to first gain support from all the relevant stakeholders and also ensure that those stakeholders understand the goals, objectives, and benefits of the initiative. Finance and treasury, for example, should always be involved in cash management discussions.

Once everyone is on-board with the project, the next stage is to understand the current situation. We suggest looking at any accounts payable process in terms of the Ardent Partners ePayables Framework of “receive,” “process,” and “pay.” Once these specifics are outlined, next the SMB can identify where the current process falls short. Does the company have high processing costs? Is there a lack of transparency? These and other questions should be answered before moving on.

Only after the process and challenges are understood can the requirements—both technical and operational—be gathered for the new solution, the return on investment calculated, and the organizational impact determined. Keep in mind that getting the company to accept change may be a difficult task; it can even make or break the entire implementation in some cases.

Finding the Right AP Automation Solution

When it comes to selecting the right solution there are certain factors that are going to be more important to an SMB than to a larger enterprise. The following are aspects that are likely to impact an SMB’s decision-making process and will also help to differentiate between various solutions.

  • Solution delivery and pricing – For an SMB, a cloud-based solution makes great sense; there is typically no large up-front investment and no requirement for a large IT infrastructure or heavy involvement from IT staff. Pricing for cloud-based solutions generally follow some form of usage or time-based model so an SMB pays for what it uses while also seeing the benefits of solution upgrades or new functionality which, in most cases, is rolled out to all clients.
  • Implementation cost/time – In most cases, SMBs do not have the resources or time required to manage a long and complex technology deployment. As such, SMBs should look for solutions that offer shorter deployment times.
  • Automation of the entire AP process – SMBs should consider solutions that allow them to automate the entire end-to-end AP process, from invoice receipt and processing to payment management and settlement. Many SMBs will find the option to outsource the scanning and capture of paper or PDF invoices appealing as certain suppliers will continue to submit paper. If an SMB’s objective is to gain better visibility into cash flow and optimize it, automating the entire AP process and moving off paper is a great place to start.
  • Ease of Use – The delivery method of the solution combined with the ease of use and “DIY” functionality allows clients to get up and running quickly, accelerating the time to value.
  • Mobile capabilities – From an AP perspective, the ability to access the solution via a mobile device can improve invoice processing times and overall efficiency of the solution by providing immediate access to remote or field staff and frequent travelers.
  • Reporting capabilities – Reporting capabilities can give SMBs a real-time, accurate view of payables, allowing them to establish and track key metrics, continuously improve AP performance and make more informed decisions around vendor payments.

Final Thoughts

AP automation solutions allow businesses to not only keep operational costs down but also improve efficiency and visibility into invoice and payment data and gain greater clarity, predictability and control over cash flow.  The availability of these solutions in the cloud has made them accessible for SMBs enabling them to leverage highly sophisticated, scalable, and affordable technology to drastically improve AP operations and be as effective as their larger competitors.


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