Editor’s Note: Today’s article is a sneak peek into the findings from Ardent Partners’ latest AP research report, “ePayables 2016: Eyes on Prize,” available for download here. CPO Rising will feature several articles highlighting key discussion points from the new report.
The modern accounts payable (“AP”) team is well-positioned to achieve the “next level” of performance. This “next level” often involves moving away from data entry and manual activities, and toward providing valuable financial and operational intelligence to the greater organization. Innovation plays a major role in this business process transformation, and, without the right solutions in place to automate (and streamline) traditionally-manual processes, AP will find it difficult at best to move beyond it transactional perception.
Manual Processes are Holding Accounts Payable Back
For many years (and even currently for some organizations), the AP team processed all supplier invoices manually. This was a lengthy, time-consuming process with consequences that included AP gaining a reputation for focusing solely on data entry, high exception rates, long invoice approval times, and high invoice-processing costs. Manual processes are also notoriously opaque, causing more of AP’s time to be taken up by invoice and payment status inquiries from both internal and external stakeholders.
In a manual, paper-based environment, AP often delivers value only through increasing process efficiency. Visibility into AP’s data – specifically invoices and payments – is hidden because of the nature opacity of manual processes. AP teams often do not quickly know the status of invoices in a manual environment, and have to physically track down which approver has the invoice in order to find out that information. Because of this, stakeholders asking for updates often do not get them in a timely fashion and find that the information they do receive is often incomplete.
On the payment side, there is little visibility into whether the supplier received payment in a timely manner or at all, for that matter. A manual payment process depends on the postal service delivering payment in a timely fashion, which means the buyer has no insight into payment arrival until the supplier cashes the check. This is problematic for financial planning and, combined with paper-based invoicing processes, results in a tactically focused AP team.
Why Technology Matters
AP automation solutions are the very definition of game-changing for teams laboring under manual, paper-based workflows. New technologies result in immediate and far-reaching changes in AP’s day-to-day activities—data entry is no longer required, accidental mistakes are practically eliminated, and invoices are often entered into the accounting system and ready for approval in seconds. This is transformative for AP teams, and often forces a deep examination of whether the function has the skills necessary to operate effectively. There are also benefits, such as increased visibility into the AP process, that cascade throughout the organization and increase AP’s standing in the eyes of stakeholders like treasury, procurement, and the line of business.
Removing paper from the AP workflow, whether through a scan-and-capture solution or eInvoicing software, can also dramatically shrink the amount of time it takes to process an invoice. Consider that the Best-in-Class in Ardent’s ePayables 2016: Eyes on the Prize research study (click here to download) can process an invoice 77% faster than their peers. This is a huge difference in processing times, likely because of the Best-in-Class’s greater use of technology, and allows high-performing AP teams the opportunity to capture more early payment discounts as well as have greater flexibility in scheduling payments overall.
In fact, nearly 60% of respondents in Ardent’s ePayables 2016 study noted “new and improved technology” as the top requirement for moving AP to a higher level of performance. AP teams that suffer under manual processes must focus most of their time on data entry and invoice approval; automated solutions eliminate this need to emphasize data entry, increase visibility into invoice and payment data, and free up AP staff to focus on activities of more strategic value.
Implementing new and improved AP technology can also have a positive impact on other departments in the enterprise. The increased data visibility that arises from greater automation can help AP provide financial and operational intelligence to its functional partners in treasury and procurement for varied uses like informing cash forecasts or supporting supplier rationalization. This improved data visibility can also help reduce exceptions; as paper is eliminated from the process, AP can access the documents it needs more easily and can more swiftly handle any exceptions that arise. Moreover, this data can be used to determine root-causes and attempt to head off further invoice exceptions.
Innovation is the key determinant in the accounts payable function moving beyond its back-office roots and into the “next level” of strategic performance. Solutions such as scan and capture, automated routing and approval workflows, electronic payment solutions, and business networks can increase process efficiency, improve data visibility, and allow the AP team to emphasize strategic activities over data entry. Implementing the right platforms must be a key focus for every AP leader that wants to push the function into higher ground.
Download the ePayables 2016: Eyes on the Prize report today (click here) for more about the state of the AP marketplace and how the function can improve in the years to come.