When modernizing AP is a priority
At a conference I attended last year, an AP manager joked that, naturally, as a child she had always imagined her future would be running an AP department. She then mentioned the quote above. Indeed, in most businesses accounts payable is a support function, without strategic importance. In this article, I want to briefly consider when modernizing AP makes sense.
For companies who have supplier invoices as a significant part of their cost, such as manufacturing, distribution and retail, modern processing of supplier invoices is critical for two main reasons:
- To gain control and accuracy of financial processes and reporting
- To release time for value add activities in the AP team
Control and accuracy of financials
With a modern AP process you can achieve:- Accrual reporting – accruals for manual AP departments are either very time-consuming or guestimates.
- Control over approval and cost accounting of general expense invoices – manual process provides no real control/audit over how people code or approve.
- Error in hand keying invoices – industry analysis shows expected error rates of 0.5 - 4%, meaning out of 100,000 invoices keyed in 1 year, anywhere from 500 to 4,000 invoices are likely to have errors!
We found an eviction notice on one of our properties! Then we found a box of unpaid invoices that nobody knew about.
- Executive at a retail company
Value add activities vs clerical work
Modernizing the AP process will help save time within the entire organization, not just the AP team, such as:- When admin tasks are automated, valuable resources are freed up for activities that bring significant value to the business. The old way of managing AP is a resource drain on approvers and buyers from mid-level up to CFO.
- Manually pulling up POs for matching and email/paper communication for approval is very time-consuming and inefficient.
- CFOs want to show that their team provides value to the company (analysis, vendor negotiation, cost savings) while keeping the cost of that team low.
We doubled the number of invoices, and we are still the same number of staff.
- Andrew Ainsworth, Finance Manager Elekta UK (read full case study)
At dinner at a recent conference I challenged our own CFO on what makes automation of AP a priority. For him, it was the ability to undertake important finance initiatives with the extra resources automation would free up.
For another one of my clients, it was the time saved to all the managers, who used to spend hours in the office with a stack of invoices. With an automated AP process these managers could instead focus their time on meeting with clients up-selling their products.
We have saved $50,000-60,000 per year at a very minimum in processing costs
- Laura Jurica, Andrews Distributing (watch case study video)
If you see value in modernizing accounts payable in your organization, start by defining the state of your current process to identify where you have inefficiencies and issues today and where you can/want to take action. Then set targets for what you wish to achieve and identify partners who can help you get there.
If you need help getting started, this white paper might be a good resource for you: A buyer's guide to AP invoice automation solutions
