Is Your AP Process Fully Automated? Consider These 4 Telling Scenarios

What seems like automation often isn’t.

Accounts payable leaders may feel like their vendor invoice solution is automated, but in reality, it’s frequently full of faxes, scanned images, and other gunk that clogs the process.

To help you get a sense of what full invoice automation looks like, we’ve described four common invoicing scenarios below. If any sound familiar, we have a suggestion at the end of this post for what to do about it.

 

Scenario 1: Stash of Band-Aids (aka “capture-and-print chaos”)

Invoices arrive at an organization in one of two ways: centrally or de-centrally.

With centralized capture, a company receives all invoices at a single location. Decentralized capture is characteristic of companies with multiple locations, like property management and professional services firms or banks. Once invoices are received at branch locations, they’re typically scanned and e-mailed to company headquarters for processing.

The problem: Of the two methods, centralized capture is ideal as it allows you to see all outstanding liabilities in one location, thus providing cash-flow visibility.  However, the moment you introduce paper (or hit FWD on that e-mail) is the moment your process becomes manual or semi-automated.

It’s also the moment that paper cuts become a real problem.

 

Scenario 2: AP shoes are made for walking (aka “semi-automated workflow woes”)

Even more important than capture is the next step: what happens once an invoice arrives.

In most organizations, it takes a lot of effort to get an invoice approved. Someone from the AP team might have to print it out and deliver it to an approver. Invoices get lost, bottlenecks arise, and it’s hard to track documents through the process.

The problem: Introducing manual steps into the approval workflow makes it impossible to get an accurate view of liabilities. It also adds inefficiencies, like requiring someone to code information into a general ledger and another person to field calls from vendors.

In this scenario, even if your business is using digital files or processes during some of the steps, the AP staff still has to manually connect the dots between the steps – and that means a lot of miles walking the office (so to speak).

 

Scenario 3: The “it’s all good” fallacy (aka “ERP derp”)

Often, a business will use the AP module of its ERP to process and pay invoices. You may be thinking your system is working great, but you may not know that it doesn’t allow for growth. ERP add-on solutions usually aren’t designed to scale.

ERP workflows can also fall short of invoice automation. For example, limitations in the ERP can mean your AP staff still needs to field calls from vendors (as opposed to information being available through a vendor portal, for example). And some ERP solutions tend to lack mobile apps, meaning invoices can’t be approved from a smartphone. These shortcomings create delays, lower visibility into liabilities, and hinder staff productivity.

The problem: Though AP leaders may think they’re in the clear, ERPs only offer semi-automation processes. Though the specifics will vary across ERP solutions, financial software typically provides only pieces of AP automation – not all the components. And the parts that are available are typically not as powerful as those from specialized solutions.

 

Scenario 4: Don’t bank on discounts (aka “ACHes and pains”)

When it’s time to pay an invoice, a company typically cuts a paper check or has a bank facilitate an Automated Clearing House (ACH) payment.

Cutting paper checks, of course, introduces paper and cost into the process. But even if your business has a bank facilitating ACH payments, it may be missing out on the payment optimization possibilities of full invoice automation.

The problem: Payment optimization is about paying bills in a timely manner, which allows a business to streamline cash flow and free up additional working capital (e.g., through early payment rebates).

 

Full Automation: It’s a glorious feeling

In short, true accounts payable automation is purely paperless. All invoices are received electronically – and all communication around invoice approvals or matching issues happens – in a single system or set of integrated systems (we don’t just mean e-mail).

You may be using digital tools. But if you’re manually having to connect the pieces, you’re not quite there – yet.

There’s a lot more to automation. If you’d like to find out more, take a look our brief whitepaper, Is Your AP Department Truly Automated?

The paper dives deep into ERPs, managed-invoice models, fraud reduction, payment processing, and the importance of a metrics-based culture.

More than anything, though, the paper looks at how the AP department is changing – for the better.

There role of the AP professional is – thankfully – transitioning from data-entry clerk to strategic partner. AP staff increasingly find themselves helping shape their company’s cash-management strategy.

In other words, they finally get to do the work they’re great at.

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