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5 Misconceptions About Accounts Payable Process Improvement

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People say the craziest things at times.

Anytime you’re dealing with novel or leading ideas in the marketplace, you’re faced with a slew of viewpoints on a given subject matter.  Some of these are born out of actual experience, others out of visions for the possible, and others out of doubt or cloudiness around a concept.  As time goes on, stories and understandings of stories change, and you ultimately get to a place where things are inaccurately understood or inappropriately represented.  So, we thought it would be good to set the record straight on a few misconceptions that exist in the Accounts Payable process improvement space.

In no particular order, here they are:

It’s overly expensive.  

If by it you mean Accounts Payable process, then you would be correct.   It’s not overly expensive to automate your AP process in the light of what a non-automated process costs to the average company.  When you consider that most companies have an average invoice processing cost of upwards of $8-9 per transaction while best in class companies get the number down to around $3 per transaction, it’s no laughing matter.  That means if you’re processing 1,000 invoices a month at a $6 delta per invoice, you either are retaining or losing $6,000 per month.  Keep adding zeros if the volume of your invoices is proportionally larger and you get the picture.  We'd argue that it's overly expensive to maintain an inefficient AP process actually.

Based on a traditional approach to accounts payable automation, this could be a showstopper as electronic document management systems, OCR technology, workflow, integration, and professional services fees can quickly add up to well over $100K, and in some cases well beyond that.  Because of this many companies who have looked at improving this area have abandoned it because it’s simply a bridge too far to cross.  However, because of cloud-based delivery and transactional costing models, much of the antiquated buy the software and deploy on site model is being challenged, so there’s hope for the small and mid-size companies who were the unchosen if you will.

It’s difficult to do.

Nothing is impossible or impossible is nothing, whether you’re a fan of the scriptures or Adidas’ marketing slogans.  Essentially the same applies for AP process improvement.  It’s certainly not a simple Simon thing either, however.  Anytime you have to automate a transactional document process, there needs to be a level of diligence applied that ensures that all project plan items are successfully documented and executed.  To achieve success in your accounts payable process improvement overhaul, you need to assemble a solid team, including that of your vendor partner and have a regular cadence until pre-defined milestones are achieved until you’ve realized the vision that launched you on the path towards AP automation.

It’s only for large companies.

Echoing point number one, there’s never been a better period for small and mid-sized businesses to pursue AP process improvement.  That’s because it’s less costly and within reach from an implementation standpoint thanks to cloud-delivery.  No more messy server implementations and having to have individual IT resources required to be around to manage clunky software.

It takes a long time.

No, Rome was not built in a day, and neither will your new-fangled accounts payable automation machine.  However, a realistic time frame for successful AP automation in a mid-sized business (say $100MM-$500MM, that is processing between 1,000 & 10,000 invoices per month in a central location), is about 6-12 months.  For companies with many outlying locations or that have multiple subsidiaries, this number goes up because it involves increasingly complex approval hierarchies and document conveyance.  When you consider it can take 60-90 days to bring a system from zero to live, you have to factor for training and onboarding of additional resources, hence the 6-12 month timeline.  A huge, and I do mean Donald Trump-esque huuuuuuuuuge, part of this is going to be how organized you are from a project management standpoint.  Additionally, executive sponsorship of this initiative is another major factor that can not be ignored.

Achieving returns will take forever.

Nope...that is unless you go with an old-school high cost accounts payable software package that you just broke the piggy bank for.  Even in that scenario though, you can mostly recoup cost in an 18-24 month window.  The problem is that the game has changed, and many CFO’s want that ROI realized in a sub-12 month time frame.  The good news is that with a cloud-based, transactional costing approach, that is achievable and consequently, there’s a much lower point of entry.

We hope these help you in dispelling some myths and misconceptions about the Accounts Payable process and that you get jiggy with turning your AP process into a fine tuned machine!


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