Accounts Payable Dashboards to Track Key Performance Indicators
There are many ways you can approach process improvement but every effective and proven methodology starts with measuring the current process. I am constantly reminded of the famous quote by Lord Kelvin when I think of this. “If you can’t measure it, you can’t improve it”. This is particularly true with finance and the accounts payable process.
This reason alone justifies the investment into accounts payable dashboards for the accounts payable process but there are many other benefits that are realized by organizations that have implemented accounts payable automation solution that includes accounts payable dashboard reporting. Here are some of the other key benefits organizations have realized:
<< MORE >>Best Practices – Reporting and Invoice Archiving
Recently I spoke with yet another accounts payable department that was severely limited in their ability to perform robust reporting and online invoice retrieval across the organization. What many organizations have learned or will learn is this is not easy or in some cases possible with their ERP system(s) or reporting tools they have purchased. These reports and resulting data are a critical component of running a best-in-class accounts payable process. To get these account payable reports without the proper tools usually requires extensive and time consuming data mining and manipulation in spreadsheets and databases. At best these reports are working with data that has been stagnating for a few days but most of the time the data is much older and nowhere ...
<< MORE >>Top AP Best Practices - Scanning
Ten years ago there were only a few best practices when it came to automating the accounts payable process. The one that was widely adapted was scan to archive (also known as backend or late scanning) which occurred at the end of the accounts payable process to get rid of the filing cabinet. Another key goal was to image enable the ERP systems such as SAP, Oracle, PeopleSoft, JD Edwards, MS Dynamics (SL, AX and GP), Lawson and even homegrown systems to allow users to directly retrieve invoices from the ERP system. As with all technology over the last decade, there have been large advancements in the purchase to pay automation and accounts payable automation marketplace. These advancements include Software as a Service or ...
<< MORE >>Automatic Three Way Matching
Today more and more organizations are trying to increase the number of purchase orders that are being issued where possible. The business drivers behind this include better controls, visibility, supplier prices and compliance. With the increase of purchase orders you will naturally see the increase of purchase order (PO) based invoices. The next question naturally is, what do I do in Accounts Payable with my PO based invoices to increase efficiencies in AP when they constitute a large portion of my volume? The answer should be to reduce the cost to process each invoice as much as possible by applying automatic three way matching. With automatic invoice matching, straight through processing becomes possible which dramatically reduces those costs and the associated headaches. Straight through processing allows AP departments to automate the invoice matching process without needing manual AP processor intervention to handle the match.
While automatic invoice matching can provide significant improvements to the accounts payable process, there are some important factors you need to consider before you implement.
The first and one of the most important factors is where to perform the automatic invoice matching process. Organizations have three primary options today.
- ERP System – All of the market leading ERP systems have modules that can perform the matching process. These solutions typically require customization to deploy and IT or consultants to manage and perform modifications.
- Electronic Content Management (ECM) Systems – These systems include generic workflows that can be configured to perform matching. ECM’s typically require customization to deploy an IT or consultants to manage and perform modifications.
- Accounts Payable Automation Solutions - These solutions include automatic two, three and “N” way matching as part of their core offering. Marketing leading AP automation solutions can be deployed without customization and AP can typically manage and perform modifications as needed.
There are a number of variables that you will need to consider to determine what is right for your organization. These would include software costs (do you need more licenses?), professional services, how would it be configured short term and long term and who would perform this, how users would manage exceptions and if it requires customization to meet your requirements. All of these determine your initial investment as well as your long term total cost of ownership (TCO). For example, if your IT team wanted to perform the invoice matching in your ERP system and additional software was required, a large consulting project would typically ensue and your internal IT staff may be burdened with the changes to the configuration. This scenario may cause you to consider an alternative as your return on investment may be hindered with the overhead and your long term TCO will be a continuous burden.
The second factor is how to receive the invoice data electronically typically through an e-invoice supplier network or to extract it from the paper based invoices using tools like optical character recognition (OCR). Today the best practice is to receive as many invoices electronically as possible through file feeds (EDI, XML, CSV, etc), e-invoicing supplier networks and to leverage OCR for paper or email based invoices. OCR is at a distinct disadvantage when it comes to helping automate the three way matching process as it usually means you have to extract line item invoice detail. This typically increases the complexity of the deployment as invoices formats vary wildly and increase the labor required to validate the information as the number of invoice fields have been increase exponentially.
The third factor is ensuring that the inbound invoices from your supplier have enough data to perform the invoice matching process efficiently. Of course you will need to have the common fields such as quantity, unit price unit of measure and extended amount. The additional complexity comes into play when organizations issue one PO or blanket PO’s and receive many invoices against the PO. Unfortunately on paper invoices and most e-invoices in North America, suppliers rarely include the PO line on the invoice lines but rather put the PO number in the invoice header. This means you may also need valid part numbers and other information to correlate an invoice line to a PO line prior to sending it to the invoice matching engine. With that said you may also need a mechanism to correlate the invoice data to get the data ready for the matching process.
In this case for successful automatic three way matching to occur one of these conditions needs to be met.
- The suppliers invoice lines are in the same order and quantity as the PO.
- The supplier provides positional data on their invoice indicating which PO line each invoice line ties to.
- Consistent data, such as part numbers and descriptions, between the PO file and the invoice are present for the system to identify the positional data.
For most organizations this is an iterative process and requires collaboration with suppliers to satisfy one of these conditions.
Is there a better way to perform automatic three way matching?
Yes, fortunately with innovations and advances in accounts payable technology there is a better way. Today leading providers of Software as a Service (SaaS) based Accounts Payable automation solutions have added algorithms to perform what is known as “Aggregate Matching” or sometimes called Header Level matching. With aggregate matching the solution will probabilistically attempt to determine the line level matches without having to extract all of the invoice line item detail. The algorithms analyze the goods receipt, the invoice amount and the line items on the purchase order to perform this process automatically. If the solution can’t find matching lines above a defined confidence threshold, the invoice is presented to an operator for exception handling. This allows organizations to very efficiently perform automatic three matching without having to extract the line item detail. It also allows for a wider variance on the invoice data that the suppliers provide on their invoices while still achieving high levels of accounts payable automation. As everyone in Accounts Payable knows, it is much easier to accomplish something if you don’t have to rely on the supplier to change their process.
The optimum solution is to combine aggregate matching with line level matching in one AP automation solution. By this we mean that if you have invoices coming in electronically through e-invoice supplier networks that are at the line item level and do not have additional cost to capture invoice line items, then have the AP automation solution perform automated invoice matching at the line item level and deploy straight through processing to assist with the automatic invoice matching. For all other invoices that are coming in as paper, emails or fax that require tools like OCR to extract the invoice line item details which result is added costs to capture, those type invoices are great candidates for Aggregate Matching. So an AP automation solution that has the ability to combine line item level invoice matching as well as aggregate matching truly gives AP departments the flexibility to perform all types of invoice matching while minimizing the cost required to manually capture invoice line items to perform the three way match.
Benefits of SaaS in Accounts Payable
Historically, companies looking for accounts payable automation were required to buy software, build the AP solution and maintain their IT infrastructures despite exponential costs. Software as a Service (SaaS) gives companies an alternative. Now, they can plug in and subscribe to services built on shared infrastructure via the Cloud. The SaaS model has flourished in recent years because of the many benefits it offers to businesses of all sizes and types. Here is what is driving organizations to take advantage of SaaS based accounts payable automation solutions which include things like AP workflow, automated three way matching, straight through processing, e-invoicing, vendor portals, PO requisitioning, etc.
- Rapid deployments – This means little or no professional services expenses for configuration of the AP automation solution. Rapid deployment and early stage prototypes can assist in getting end user buy-in by allowing the hype of a new project to be much closer to when users can actually start taking advantage of the accounts payable solution. Being able to start using the AP automation solution in a shorter period of time also decreases the time for an organization to start realizing the return on their investment. This all happens within weeks instead of months with SaaS accounts payable.
- Lower initial costs - SaaS accounts payable applications are subscription based so no capital funding is required. No license fees mean lower initial costs. Having the SaaS accounts payable provider manage the IT infrastructure means your organization has no IT costs for hardware, software, and the people needed to manage it all. These lower initial costs also make it much easier for organizations to get their accounts payable automation project approved since the ROI is realized in year one.
- Highly scalable – SaaS accounts payable solutions provide organizations the ability to quickly add users without having to worry about additional infrastructure and the related support. This allows for organizations to grow without being required to plan ahead. Additionally the top SaaS accounts payable solutions do not even charge a per user fee which comes in handy when using an AP workflow solution and you can add unlimited invoice approvers at no additional cost. The AP workflow solutions on the market that do have a per user fee (and there are unfortunately plenty of them out there) are more typical of AP solutions that have more of general document management focus including basic AP workflow capability but tend to lack a core focus on accounts payable and what our needs are. That is apparent since anyone who understands the AP space and our needs would know that a per user fee model does not necessarily work in accounts payable workflow solutions when we have so many approvers. So be wary of SaaS models with per user fees if you intend to automate your invoice approval process with AP workflow. SaaS accounts payable providers with true multi-tenant architectures can scale indefinitely to meet customer demand so your IT staff won’t be pulling their hair out if you double your users overnight. Do you know how long it takes your IT staff to order a new server and get it into production if your IT group was supporting an internal solution? The current industry average is four to six weeks.
- Minimal IT resources required – Without the need to manage the infrastructure, applications and upgrades, true SaaS based accounts payable solutions tend to require none to minimal IT support. With most SaaS based the accounts payable solutions, business users can perform most of the application configuration and management without having to incur professional service fees for every little change needed. AP almost always finds itself competing for IT resources and projects that are more strategic to the organization. The SaaS accounts payable business model allows for Accounts Payable departments to get projects approved when IT resources are scarce.
- Minimize risk – SaaS Accounts Payable providers offer varying contract terms that reduce your investment risk and exposure should the AP solution not work for your organization. It also creates a paradigm shift with how SaaS AP providers interact with their accounts payable customers to maximize retention and renewal. SaaS providers are counting on your renewal which tends focus them on being much more responsive than the on-premise software provider who has already won the largest part of the business from a client with the large upfront implementation fee.
- Never run on outdated software - SaaS accounts payable applications are innovating at a rapid rate because SaaS AP providers are focused on what’s next rather than on maintaining numerous versions of old code. SaaS AP providers use the same technology architecture as the best consumer Web: companies like eBay, Google, and Yahoo!, which enables the same levels of continuous innovation. With the top SaaS accounts payable solutions typically providing new releases every quarter with new features and functionality, you are ensured of always being on the latest technology. Additionally clients are typically also much more likely to have input into the new features and functionality of a SaaS AP solution than they would on a traditional in house type solution.
- Powerful infrastructure and world class security – SaaS accounts payable providers specifically the ones hosting in a Cloud environment, operate on the latest server and networking technologies to ensure their customer’s experience meets or beats expectations. This all takes place over a robust and redundant network of distributed data centers around the country and the world. The protection of their client’s data and intellectual property is their top priority and provide extensive dedicated resources to maintain data security. These Cloud data centers are protected around the clock and are typically monitored by a dedicated onsite security team. Most organizations can’t afford this level of infrastructure and security for an on-premise accounts payable automation solution. With a SaaS based AP solution, almost every organization can easily afford.
In summary, the accounts payable market data compiled by AP analysts suggests that SaaS accounts payable solutions are growing at 40% per year while in house solutions are in decline. That data is further backed up when you see how many pure in house accounts payable solution providers are scrambling to get into the SaaS arena to not lose market share. I caution anyone out there looking at a SaaS accounts payable solution to not be fooled by SaaS imposters who are predominately just taking their in house model and hosting it on the Internet and calling that solution SaaS. When you peel back the skin on these SaaS imposter models you see that although the label on the outside says SaaS, under the covers is still in house technology with the same inherent challenges and costs. So buyer beware that unfortunately just because the cover says SaaS that you still need to do your homework to uncover the true SaaS AP solutions from the imposters.
AP Automation Alternatives: The Difference Between SaaS, Cloud, and On-Premise Solutions
Lately, the terms Software as a Service (SaaS) and cloud automation have created a lot of confusion in the Accounts Payable automation marketplace. Are these two terms synonymous or different?
Many Accounts Payable solution providers who recently promoted themselves as SaaS providers are all of a sudden championing services that are “In the cloud”, and who could blame them? Thanks to a relatively little known company called Microsoft, the general public is now privy to the buzz surrounding cloud computing. Microsoft has turned “Go to the Cloud” into a well-known catch phrase without really explaining what it means to go to the cloud, but it seems to imply that the cloud fixes everything. In response, many AP automation providers have changed their messaging and now describe their solutions as cloud-architected, in hopes that Microsoft’s advertising will pay off for them as well. However, with so many Accounts Payable automation providers advertising themselves as cloud-based, how can the average AP consumer make an educated decision and understand the difference between solution offerings?
Messaging has led many consumers to think of “the cloud” as another term for the Internet and to think that SaaS and cloud are the same. By definition these terms are commonly described as follows:
Software as a Service (aka SaaS), which is sometimes referred to as ‘software on demand’ is software that is deployed over the Internet and typically on a pay-as-you-go model. This approach to application delivery is part of the utility computing model where all of the technology is in the "cloud” and accessed over the Internet as a service.
Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management, effort, or service provider interaction.
These definitions are fairly generic and still do not help Accounts Payable decision makers fully understand the difference. To make matters worse, those most responsible for “clouding” the meanings of SaaS and cloud automation are those who provide Accounts Payable automation solutions.
The easiest way to think about this, particularly from an Accounts Payable automation perspective, in trying to get to the bottom of this SaaS vs cloud confusion is that SaaS-based AP solutions run in a cloud environment. In other words, SaaS is a business model and cloud is the hosting option.
One of the biggest areas of confusion when evaluating AP automation alternatives is in deciphering between real SaaS providers who use cloud hosting and imposters who claim to be SaaS just because their solution is hosted. This has become increasingly difficult because on-premise AP solution providers can imitate true SaaS providers by hosting their on-premise Accounts Payable applications and calling them SaaS or cloud-based. Hosting an on-premise AP solution that is also accessible over the Internet and calling that AP solution SaaS is not the same as a true SaaS product that is hosted in a cloud environment. An on-premise solution code base is entirely different than what is needed in a true multi-tenant SaaS product, which is why on-premise providers typically do not have SaaS models because it would require an entire re-write of their product to make it SaaS-based.
Many on-premise providers are causing a disservice to the Accounts Payable marketplace by confusing the meaning of Software-as-a-Service and the benefits a true SaaS product delivers. Some on-premise solution providers realizing SaaS is the way of the future have come out with their own fixed-functionality SaaS models while still offering their on-premise models. Although these providers claim to have both SaaS and on-premise AP solutions, they devalue the SaaS model as only being a prepackaged solution with not as much flexibility for customization as an on-premise model, when in fact, a good Accounts Payable SaaS product is not prepackaged nor limited in functionality. Good SaaS AP solutions can have the same functionality and customization as on-premise models with the primary difference being that SaaS models are significantly less expensive, which allows their AP clients to achieve ROI much faster. Not a bad thing for an AP client.
Who wouldn’t want to promote a faster ROI? The answer is on-premise AP solution providers who know how difficult it is to accomplish a fast ROI by using an on-premise model that requires upfront cash.
The bottom line is that buyers of AP automation are being confused and purposely misled by the very companies that are trying to sell them a solution.
Even in pure SaaS products, there are many differences. Some Accounts Payable SaaS products are really SaaS hybrids because they are not really multi-tenant, not truly configurable, and really do come as a prepackaged AP solution that does not have much flexibility for customization.
Truth be told, SaaS products have come a long way in the AP automation market to the point that SaaS is growing by 40% whereas on-premise models are in decline.
The reality is that SaaS is here to stay and being that true SaaS models today provide the same customizable capability as on-premise solutions and at a much lower cost with significantly less risk. Microsoft is right. Why would you not “go to the cloud?”
Creating an AP Strategy
When AP departments start down the path of deciding which AP strategy to implement, they may not know where the best place to start is. We understand the importance that scanning invoices has on finding the correct AP solution, but how far up in our AP automation process should we initially look to scan invoices? Countless companies scan invoices on the backend of their AP approval process mostly to satisfy invoice archival purposes while others scan in the middle, using e-mail to streamline the invoice approval process.
However, if you are planning to pay for invoice scanning and want to get the most benefit for your money, it is best to scan as early in the invoice approval process as possible. In other words, for the biggest ROI on your invoice scanning investment, the scanning should occur immediately after receiving the invoice from a supplier, before anyone even touches a paper invoice. When considering a scanning option, many AP professionals find that it is best to use an outsourced AP service provider who can manage a central receiving lock box to receive paper-based invoices and deliver a scanning alternative. By using an outsourced AP service provider, companies eliminate the need to invest in costly scanning equipment. Also, by not scanning invoices internally, there is no need to train staff on completing the invoice scanning correctly. The next question after scanning invoices revolves around data capture. Do you continue to perform data entry as you do today with internal AP staff? Or do we look into OCR technology or offshore data capture where labor rates are significantly cheaper. Buying OCR software to manage automated data capture internally has its benefits, but drawbacks can include: upfront OCR software costs, maintenance and upkeep charges, managing OCR exceptions and validations when OCR cannot accurately read line item details, maintaining templates and/or data libraries for keywords that require capture, and most importantly, the cost of internal personnel to operate OCR software and clean up exceptions.
Many companies that outsource the scanning aspect also use the same AP service provider to outsource data capture. These outsourced AP service providers typically handle not only the OCR capture, but also the OCR validations process, which means companies do not need additional AP personnel for any of the capture or validation. Other companies have totally offshored their data capture which results in lower labor costs to companies, but still requires internal accounts payable staff to manage the offshore relationship, which can offset some of the labor savings.
Eventually, the majority of suppliers will be equipped (and more importantly, accepting) to submit invoices via EDI or through an e-invoice supplier network. Receiving invoice data electronically rather than having to scan and capture data is by far the most efficient way to receive invoices. If you think about it, the invoice data initially starts out electronically in a supplier’s billing system, and then is converted into a paper invoice, which is then sent to AP only to be converted back into an electronic format. How inefficient is that process?
If suppliers could only send EDI directly from their billing systems to your AP system, we could eliminate the unnecessary costs associated with scanning and capture. That is where e-invoicing networks play a major role in that they bridge the gap between the supplier billing systems and accounts payable. So using an e-invoicing network ensures that AP will receive more accurate invoice data faster, leading to the ability to take additional discounts on invoices. Many companies using e-invoicing networks who were not getting discount offers in the past from suppliers have started reaching out to their suppliers to ask for discounts as e-invoicing allows for invoices to get approved within the discount terms, especially when automated approval workflows are used.
Getting your invoices in an electronic form should be the first goal. Now using that electronic data to configure automated workflows for approval-based invoices and to streamline the matching of invoices to PO and receipt of goods is the next area where significant AP automation savings can be uncovered. Automated workflows are particularly useful to companies where multiple locations for invoice approval exist. Using automated workflows to route invoices through the approval process to accounts payable and ultimately over to our AP system for payment provides significant savings. One decision to make is, do we try to build automated workflows internally in our AP or ERP system or do we use a third party software provider to automate the workflow process.
The advantage of using a third party software provider is that their software typically has ready-to-go AP workflows already built in, which only requires simple configuration changes to complete the workflows, as opposed to starting with a blank slate in our existing AP or ERP systems. Additionally, many AP or ERP systems require you to purchase an additional AP workflow module to have access to the AP workflow functionality, which typically then also requires significant professional services investment to set the AP workflows up. So using a third party software provider, especially as a Software as a Service [rd6] (SaaS) model, not only allows us to get our AP automation solution up and running faster but also relieves the burden of having to use your internal IT people to be heavily involved in the AP automation solution.
So in the end, choosing an AP Automation solution comes down to making some key decisions around trying to build or buy an internal solution to be supported by your internal AP staff and IT department versus using a Software as a Service model where you can outsource AP workflow software, scanning, data capture, and image hosting while still maintaining control over the business rules and functionality of the AP automation solution. Especially in our accounts payable world where supporting a back office function like invoice processing may not be the top priority or desire for an internal IT department, Software as a Service has been providing companies with the desirable alternative needed to get their AP automation projects off the ground and produce a positive return on investment and ultimately a successful AP strategy.
True Cloud Automation in Accounts Payable
Has anyone seen all these new Microsoft commercials lately where the catch line is "lets go to the cloud". The term cloud automation is being seen all over the accounts payable market these days also. Cloud Automation in accounts payable, in effect, replaced the term SaaS (Software as a Service), which in effect replaced the term ASP (Application Service Provider). In essence all these terms are catchy market terms used to grab our attention with cloud automation being the latest. However while the terms may catch our attention, the end result is that it becomes very confusing for the accounts payable consumer to differentiate between cloud, SaaS and ASP when on the surface they all may look the same.
As we look to automate our accounts payable departments, it can be confusing which type of automation to implement. We have many choices from different providers but how do we know which one to choose between cloud, SaaS, ASP or in-house alternatives?
Lets take a deeper look at cloud automation as that is where the top AP service providers are moving toward. On the surface cloud automation in accounts payable can be thought of as a software solution delivered as a service over the Internet. Hmm, sounds very similar to software as a service. Like software as a service providers, not all cloud automation providers are truly providing cloud automation. Although many service providers product marketing literature says cloud or SaaS, what is beneath the surface are cloud imposters claiming their solutions are cloud architected just because they are provided over the Internet as a service. This is where it is hard for the average AP consumer to know what is beneath the hood of a cleverly designed product marketing strategy because we as AP consumers need more than a solution just hosted on the Internet.
Many cloud based imposters are just hosting their in-house solution on the Internet which I suppose they can call being in the cloud or being a software as a service. However in-house solutions or single tenant solutions just hosted on the Internet being marketed as cloud or SaaS are doing the AP consumer an injustice because they have the same support issue flaws and upgradablilty flaws that have plagued AP solution providers since the beginning of Internet based solutions. A true cloud architected solution in accounts payable is one that is multi tenant meaning the provider has one code base to support for all their customers while allowing for changes to the look, feel and functionality of the solution handled by configuration files rather than "customer coding". Multi tenant architecture allows for the provider to reduce support and upgrade costs which results in savings to their customers. If the solution is not multi tenant in its architecture, that means the provider is most likely giving you an instance of the software that then gets customized to your needs. However the problem is when a service provider in a non multi tenant solution begins to get many customers, since each customer solution is running as its own instance, support and upgrades become a challenge thus increasing the service providers cost which you can guess where that cost gets passed to......the AP consumer.
So in the end no matter what the marketing department is calling the AP solution from cloud to SaaS to ASP, you need to be an educated AP consumer by asking a few key questions that will alert you to potential cloud imposters.
- If there is an implementation fee be wary of an imposter as true cloud architecture should not need to charge an implementation fee or at most a nominal fee to cover the configuration costs. Any time you see a large implementation fee greater than say $5,000, the signs point to a provider needing to cover their costs for a non cloud architected solution.
- If you have the option of not being on the latest release of the software, be concerned. This points to individual instances of the solution and not a multi tenant solution because in multi tenant solutions you should always be on the latest release.
- If you are not receiving 3 to 4 upgrades per year, this points again to single instances of the AP solution because it is hard for a service provider to upgrade all their clients sites at the same time for every instance of their code that needs to be updated individually. Multi tenant architecture only needs to be updated once for the entire client base.
- Ask for a SAS 70 certification report and specifically a type II SAS 70 report. A service provider not performing a SAS 70 audit is most likely not doing it because of the cost but rather because they may be hiding something that is being marketed as untrue about it's products architecture or service. Note that in June 2011, the SSAE No. 16 will replace the SAS 70 as the standard for reporting on service organizations.
Hope this information was helpful as my goal is to provide AP consumers with the knowledge to make educated decision when it comes to chosing the right AP automation solution for their AP department.
Benefits of Cloud Automation in Accounts Payable
Some of the advantages of cloud automation in accounts payable include:
No large up front costs
Fast Deployment and Flexibility
Predictable Expenses
Rapid Adoption
Continuous Upgrades
Low Cost, Low Risk
Why CFOs Need to Consider Accounts Payable Automation
Your company has a unique value proposition to its customers, that's why you're in business. Therefore the concerns of your CFO can be viewed differently from industry to industry and company to company. There are some, however, that seem to be universal. I am going to focus on three of them with respect to the Accounts Payable process.
The Problem with Paper-based Invoices
Financial statements should reflect the work and activities that occurred in the time period for those statements. But if your invoices are still predominantly paper based or still delivered directly to the office or requisitioner of the goods or services, you may still be looking at a lag time (sometimes substantial) between the time the invoice arrives and the time you can evaluate and accrue the appropriate value.
In these times of increase accounts payable automation, this should no longer be an issue. One of the better approaches is to outsource the process of receiving and data entry of your invoices, electronic or paper directly from your suppliers. With the proper controls in place, this could streamline the entry and quality of the information associated with your invoice processing.
Much has been claimed, over the last few years, about increasing the number of electronic invoices over paper-based ones. Although there seems to be ample agreement that this will improve the speed and quality of your invoices, suppliers in the US have lagged behind the rest of the world in managing the conversion to e-invoicing. Therefore most of us have to consider an operation that will not only deliver electronic invoices but convert the paper ones to electronic as well. Having all invoices electronic, validated and made available for both account coding and approval online allows you to consider all invoices as electronic because all of your information comes to you that way from the start. Doing this allows you access to the following:
- Increased ability to take early pay discounts
- Identification of all invoice and receipt of goods unrecorded liabilities for accrual purposes. In the past, this has been especially troublesome. If a paper based invoice is lying on someone's desk, the accounts payable department rarely knows it exists. By capturing the image up front, even if the approval process gets bogged down, accounts payable can still take steps to accrue it.
- During the approval process, identify where all invoices are within your organization, giving you the ability to estimate approval timeframe and potential payment delays.
The benefits of AP automation
Most Accounts Payable Departments are looking to increase the productivity of their workforce. As we previously mentioned, outsourcing the paper part of the operation alone will increase the accuracy and productivity of the AP department. Automating the workflow for your PO matching and approval based invoices reduces the burden on all those involved in processing invoices. Providing the automated workflow tools to oversee the movement of your invoices focuses the time and effort involved directly on the problems at hand, rather than spending their time running them down. These tools and processes, now automated, provide the following benefits:
- Straight Through Processing for your invoice matching process, allowing the automation of the matching process from PO to receipt of goods to invoice to occur without AP processor intervention. Using straight through processing to match your invoices means less people that need to touch the invoice, thus the more productive you become.
- Automating your workflow using SmartRouting to automatically distribute your invoices to the appropriate approvers reduces the time and effort necessary to manage the invoice approval process. This will have the side benefit of also increasing SOX compliancy and streamlining future audit requirements.
- Supervisor visibility into the process gives controls over the workflow, thus being able to balance the work appropriately in real time.
- Immediate visibility to the invoices enables a compliant, faster, and more efficient environment.
- Productivity for invoice processing alone increases, on average, over 40%. Less people required to manage the problem, less overtime to finish the job, less stress at monthly, quarterly, and year end closings.
Improve accounts payable processes
AP Automation, of course, cannot solve all of your working capital problems, but it can assist in the management of the outflow of cash as it pertains to most spend. Many companies today are trying to be proactive and strategic in their ongoing efforts to manage cost and working capital. Accounts Payable process improvements can be a source to realize some of the financial benefits associated with working capital.
Having full visibility over all invoices throughout the approval to payment process gives the predictability necessary to manage cashflow. Since all invoices are visible, their payments can be monitored, discounts can be taken and historical data can provide the means to make month to month predictions.
With the appropriate information in your hand, immediately available, so that decisions can be made in real time to affect the outcome, you can evaluate the opportunities that exist throughout your business. Small changes to your daily working capital can have a significant impact on available cash. This can have a substantial net impact to your bottom line.
In order to analyze key processes and identify opportunities for improvement, you will need the tools necessary to review the processes and transactional information associated with your invoice spend. A good AP Workflow tool in conjunction with good business practices can provide these.
