Accounts Payable function is fundamental to operational and financial success of many organizations across the globe. Yet it continues to be viewed as a cost center.
It was never uncommon to hear of documents buried in paper trails, missed discounts and strained supplier relationships, etc. But recently, the pandemic added to these woes and proved that, the ways in which many Accounts Payable teams still operate are not just dated and costly, but may also put the health and safety of employees at risk.
Stuck in the dusty alcoves of the back-office and bogged down by a myriad of time-consuming, manual tasks, an un-optimized AP Function is host to a slew of redundancies, avoidable costs, and frustrating friction areas.
Not recognizing and dealing with these redundancies will become increasingly costlier to businesses – competition is already at an all-time high and teams are being asked to deliver more every year. And in addition, issues like climate change mean that uncertainties and global disruptions will only become more frequent with time. In this backdrop, organizations that still haven’t got on the AP Automation bandwagon need to ‘level up’ to survive.
Fortunately, as per the latest bodies of research, these problems aren’t just easily rectifiable but they’re also ones that are likely to pay the most dividends once solved. Case in point: Gartner’s research found that AP (APIA in specific) is one of the best applications of artificial intelligence in a business, both in terms of business value and in terms of feasibility.
But before getting ahead of ourselves, let’s first understand the most frustrating points that can become especially problematic in any accounts payable department (and by virtue of that, one’s that need thorough upgrades):
COMPLEX PROCESSING & WORKFLOWS:
The key metric to identify the operational efficiency of an AP function is the time taken for an invoice to be fully processed. This time covers the entire life cycle of the invoice from the generation, extraction, matching, verification and finally, settlement. The life cycle is also inclusive of the approvals and reviews at each stage. Manual invoice processing takes a lot of time, and this can culminate into – late fees, missed early payment discounts, hours spent on routine paperwork, etc. Best in class AP organizations are 50% more efficient in managing invoices than their peers.
Manual data entry is extremely error-prone and slow, and OCR solutions are expensive to maintain. Suppliers send in invoices in many different formats, resulting in endless paper trails that are hard to organize and retrieve. Clunky records like these mean response time is slow, because manually searching for invoices consumes time. Extracting line-level invoice information is an especially tedious task.
Introducing automation here can simplify the process significantly. With a centralized, standardized, and 100% digitized repository of data, one can easily locate and retrieve information via functionalities like a keyword search, retrieving line-level data, etc. This ultimately makes audits and tracking simpler and more accurate.
Learn More : AI for AP Automation
Inefficient invoice processing puts organizations at risk of losing money. The longer it takes to process an invoice the higher is the cost-per-invoice. In addition to this, labor costs make up a huge portion of how much it costs to process an invoice. Invoices getting lost in the labyrinth of clunky data can mean duplicate payments, overpayments, and even missed payment deadlines – all of which can cause a significant blow to the bottom-line and may also strain supplier relationships.
MISSING INVOICES AND EXCEPTION HANDLING:
Paper trails and huge piles of unattended invoices on the desks of AP professionals can mean that invoices are often lost or misplaced, this can in turn delay payments and result in monetary losses. And not all invoices tend to be standardized and similar, there are some exceptions along the way that may end up being bottle-necks in the whole process, as exceptions need to be dealt with, with more time and patience. This problem can be solved by freeing up time spent in processing standard everyday invoices. Initial set-up can give teams a chance to pay special attention to exception cases.
RISK OF FRAUD:
Catching and preventing fraud requires an understanding of how fraud works, tight controls, and constant vigilance, easily traceable audit trails, and retrievable records. But implementing fraud controls is difficult to accomplish in a manual AP department. With automation software, AP teams can set up custom checks and balances that enforce company policy and notify immediately in case of suspicious activities or fishy invoices.
The above-listed issues are only some of the friction points that AP teams have to struggle with on the day-to-day. Luckily for all, a majority of these can be easily remedied by automating processes and doing away with endless paper trails. Redeployment of the AP team’s bandwidth with digitization of labor-intensive, repetitive tasks can make them much more efficient, and free up their time to focus on more strategic activities that drive value for the business.