Accounts Payable invoice processing is one of most proven automation areas that yields a higher ROI in both hard and soft costs to any organization when done correctly. However, AP Automation requires bringing the right solution, the right level of automation and implementation methodology in order to succeed.
WHAT IS ACCOUNTS PAYABLE (AP) AUTOMATION?
AP Automation is the process of digitally handing a supplier invoice from the point it is received until it is processed, paid and archived in the most efficient and effective manner. It essentially allows you to manage the lifecycle of an invoice with least amount of manual interaction and effort. Every organization has invested in an ERP or a financial accounting system which handles the AP process. The goals of AP automation is to identify the missing pieces of your ERP or financial system and fill the gaps which are repetitive, labor intensive, costly non-essential and error prone processes when done manually.
WHY AP AUTOMATION IS REQUIRED?
Accounts Payables function is an information intensive business process that usually requires a lot of manual data entry and data validation. AP teams needs to deal with a verity of invoices that arrives from suppliers in different formats. When an invoice arrives, data needs to be keyed into the finance system. If you are processing a large number of invoices per month this is a time consuming and an error prone task. Once invoice data is entered it needs to get approved from line of business managers before it is made available for the payment process.
Therefore, automating this process allows organizations to reduce costs, improves process visibility and improves supplier relationships and interactions. Most AP automation projects when done right bring a return on its investment (ROI) within 6 - 8 months.
WHAT LEVEL OF AP AUTOMATION DO YOU NEED?
There are different levels of an AP Automation solution. Your current AP process analysis will reveal the process intensity points where your AP staff spends most of their time. Your goal is to identify those repetitive process intensity points and bring the right level of automation. Process automation increases the process visibility, efficiency and ensures compliance and prevents fraud. The level of automation you need depends on the number parameters such as the volume, velocity and variety of supplier invoices. In addition to the volumes of invoices, questions such as; is AP currently centralized? What percentage of supplier invoices are PO based? Do you key the line items of the invoices that are PO based and NON PO based, do you perform receipt matching? Is there a current hierarchy structure of approval based on dollar thresholds? The answers to these questions and more will start to determine how the workflow should be configured to support your unique business process.
A workshop with the key stakeholders and the AP team leader is what we need to find answers to the above questions. Depending on the AP module functionality, once you find the answers to the above questions you need to plan your project. As there are multiple technologies out in the industry that brings different levels of outcomes it is important to select the right technology. The following tips will help you assess, evaluate and make a knowledgeable decision in making your project head in the right direction from the beginning.
TIP #1: DISTRIBUTED INVOICE CAPTURE AND CENTRALIZED PROCESSING
AP departments have to deal with a variety of invoices and related documents from different suppliers. The general rule of thumb is 80% of the invoices come from 20% of the suppliers. If you focus on identifying that 80% of the workload and treat it carefully you will naturally move in the right path. 20% of the workload always requires case by case handling due to the nature of the AP process. Depending on how the business is structured invoices would arrive at a central location or branch offices. Most AP operations today are distributed, and multiple teams are collaborated from different geographical locations. Your AP automation solution must be flexible enough to support distributed invoice capture and centralized processing model. It also should be flexible enough to support to distributed AP teams.
TIP #2: PLANNING FOR EXCEPTIONS AND INVOICE ALLOCATION/APPROVAL WORKFLOW
Planning to handle exceptions upfront is very important step. The system should be able to route rejected invoices back to suppliers with reason for rejection in an automated manner. What’s your strategy in handling non-PO invoices? How would you handle credit notes, multi-PO invoices in the automated world? How would you handle suspended invoices waiting for internal buyer approval? You would also need an audit log of all inbound and outbound supplier correspondence in a centralized and compliant manner. Once invoices are digitized and invoice data is extracted it needs to be sent to the right departmental manager for approval. This allocation is sometimes decided by the value of the invoice and delegation of authority established within your organization. Unless this functionality if handled well within via your ERP module invoice allocation and approval workflow needs to be part of the AP automation solution.
TIP #3: FINANCE SYSTEM INTEGRATION
The goal of a solution is to extend the functionality of your ERP or accounting application. Therefore, it is important to get the right level of integration between two systems for data lookup, data validation and data injection purposes. Secure CSV and XML based data integration is more popular with ERP systems.
TIP #4: AP PROCESS ANALYTICS AND PROCESS COMPLIANCE
What gets measured gets managed. It is important to measure the success of automation though process analytics. Constant process analytics help you identify bottlenecks early and resolve them as early as possible. Process analytics should be part of the AP automation solution that provides 360 degree visibility of the overall end to end operation. Top performing AP departments has SLA’s and key performance metrics that they need to report on.
TIP #5: INVOICE FINDABILITY, RETENTION AND ARCHIVAL
Once invoices are captured, processed and sent to the ERP system those digitized invoices must be retained for 7 years in most cases as per the organizational document retention schedule. Even though most ERP systems allow you to attach the invoice copy to the transaction it has never been an efficient or practical solution. Having all supplier invoices organized in a meaningful manner in a document repository gives you the best experience and efficiency when retrieving digitally filed invoices. It also gives your AP and customer services team the ability to retrieve invoices quickly and easily without having to access your ERP system with powerful search and meaningful index fields.
If you’re considering accounts payable automation for your company or just simply looking for information to decide if this is right for you or your AP department, feel free to register for one of our informational AP webinars.
Vision360 Enterprise Accounts Payable Automation Solution by BlueCreek Software reduces time wasted chasing down paper invoices by automating invoice approvals, eliminating manual data entry, eliminating paper invoices and reducing processing costs.