Accounts Payable(AP) automation may be defined as the amalgamation of detailed complex process knowledge and advanced technology to automate and derive efficiency. According to a recent Hackett Report, the top performers are processing over 40,000 invoices per person per annum, whereas laggards are processing less than 10,000. With reduced cycle times, also comes the opportunity to earn early payment discounts.
Craig Vaream, Managing Director, J.P Morgan Treasury Services, had once stated that the movement to paperless receivables is being driven by following 3 factors:
As the Covid-19 stretched, consulting firm McKinsey & Company surveyed 900 business leaders about their digital transformation efforts. Those leaders said that the pandemic sped up the transformation of many of their internal operations by up to four years.
Thus shift towards automation is evident across industries and as per a recent Forbes article, warehouse automation software and systems are anticipated to become a $47.4 billion market by 2023. Thus, in simple terms, automation is redefining management.
However, as automation increases, many worry that the rapid adoption of technology to reduce manual work will result in significant job cuts, in a time when unemployment is already a concern. According to a report from the World Economic Forum, which draws from the surveys of 300 major global companies, increases in automation would make some roles redundant, but it could also create 97 million jobs worldwide. We have seen this already setting stage in industries like Healthcare and Banking & Financial Services.
P2P is one of the most complex business processes as it involves several levels of cross-functional collaboration including sales, finance and operation. It also takes into account the integration of these functions with the existing system(ERP). As a result of which, the user journey becomes complicated giving rise to inefficiencies at various touch points.
The impacts of an inefficient are a hindrance to seamless organizational functioning due to its strong impact across pivotal business functions. Some of them are listed below:
Higher cost per requisition, invoice and expense claim processing
Silo-ed systems makes managing spending, cash flow forecasting and cost savings unpredictable
Inefficiency in P2P value chain leads to more exposed risk across supply chain due to reduced visibility and inability to spot exceptions
Goodwill is an intangible asset of an organization. Delayed and disputed payments leads to bad supplier relationship and this in long term impacts brand value
An interesting survey results show that, when respondents were asked the primary reason of not shifting to AP automation, the primary reason was Lack of Budget followed by Our current processes work well. So, while we understand the hesitancy of a drastic shift, a phased approach can be a suitable choice.
The first step in this strategic transformation is to reduce manual tasks as much as possible. With a smart mix of technologies like Robotic Process Automation(RPA), Artificial Intelligence(AI) and Machine Learning(ML), this can be easily achieved.
Once manual tasks are reduced to minimal, organizations will be capable of standardizing the P2P processes and removing exceptions and this will help mitigating risks.
The second step will be a deeper understanding of your business requirement. While automation is paramount now, it might not fit all the business requirements. So, a quick self-assessment to align requirements with technology will play a pivotal role in next phase.
Once these phases are over, organizations should plan the right and realistic implementation strategy that will include Roll-out plan, resource requirements, determination of risk factors, timelines and governance.
An automated invoice processing systems brings in productivity by freeing up time of AP staff so that they can focus on strategic initiatives. With automation, manual errors can be prevented, thus there is considerable increase in efficiency
Going digital means saving on paper, ink, office supplies etc. This generates savings that add up over time
With automated AP, visibility increases manifold. Now real-time budget checking before spend is possible. Adding to this is analytical capability that helps in prediction
With migration to automated AP workflows, all data will now be stored in cloud. This means the backup is secured and files are completely safe and protected
An early Accenture Report had once stated, “For many companies, invoice settlement processes are, well, unsettling. For one thing the processes are paper and people intensive, which is why the full invoice-to-pay cycle takes between 30 and 120 days. . In fact, up to 50 percent of paper invoices are past due when they arrive in accounts payable…[and]…between 10 and 40 percent of invoices involve an exception process, which can triple the transaction’s timeline and cost.”
Thus, AP automation is perhaps the first and principal strategic step that an organisation must take while aiming towards revenue growth by minimizing costs and risks. This will then lay the foundation to expand efficiency across other functional areas of F&A. So, now the question lies are you ready for the growth?
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