3 min read

The 6th Day of Christmas- Accounts Payable Process Exception Handling

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So in continuing our festive theme of exploring the optimal and whimsical approach to streamlining and improving the Accounts Payable process, we now turn our attention to an intangible, yet very real benefit of a successful AP automation program.  By deploying the approach (convert invoices and AP documents to data upstream in the process) and following the automation of processing queues, we impart a Christmas present worthy of the missing and unheralded 4th wise man…time.  What’s that you say…not connecting the dots…we shall soon remedy that!

Effective invoice processing is all about time.  That’s the whole point.  Invoices, especially invoices that can work in your favor from a profitability perspective (ie. invoices with discount terms offered) are essentially a document tied to a shot clock (for lack of a better analogy).  Every time one is issued and received, the shot clock begins or has already begun…the rest is on you to run and gun through the process and slam home for a 2% score (or whatever you negotiated).  If your offense (AP department & process) looks more like the Washington Wizards this year of course just avoiding late fees will be a worthwhile goal…but I digress.One of the core elements that AP automation measurably delivers is the reduction of manual intervention to document handling, invoice data entry and routing.  Not only does it deliver this, but it does it faster, better (more accurately), and is capable of handling more than a manual Accounts Payable process alone. 

So the take-away for your staff is that they are no longer buried under time constraints and strictures that bind them to invoice processing.  It’s no wonder that recent Aberdeen Group data suggests that ‘best in class’ organizations that have deployed Accounts Payable software for automation turn their invoices around in 4.1 days compared to the ‘laggards’ that turn theirs around in 16 days.  The delta there is significant...just about 75% difference.  (Imagine how awesome your Christmas party would be if you had 75% more time and resources to plan and invest into it!)   12 days of process time will definitely be the difference in achieving and earning the early pay discounts mentioned above, though it wouldn’t necessarily be a showstopper in terms of getting penalized for a late payment.

With the approach that we’ve been discussing the intervention that your staff will generally be taking on will be really from an exception handling basis.  In this aspect, the mundane task of data entry is lifted from the daily AP grind, and the position is elevated to a more strategic position.  Certain items will always require some level of human intervention.  For example, in any robust Accounts Payable software deployment, bi-directional integration to the ERP is the best practice.  With this in place, certain process checks can trigger automatically.  Namely, vendor master file and PO table information can be ‘pinged’ to determine if there is alignment between captured data from invoices to data within the Accounting system.  In the event of mismatch, some level of escalation and intervention will be necessary.  A vendor may need to be added to the ERP (if it’s a new vendor on a non-PO invoice) or there could be a PO number mismatch between systems that warrants further investigation. 

One of the common themes that we’ve seen is that AP staff who are unencumbered from a process view, have the opportunity to pursue more valuable tasks within AP.  The first thing that comes to mind is the proliferation of gaining supplier market share with respect to early payment discount participation.  This is most often a collaborative effort in conjunction with Procurement, though, it can become a bargaining chip to bring suppliers to the table.  In light of today’s uncertain and tumultuous economic conditions, many suppliers are willing to come to the table and concede a couple percentage points if it means they are getting their cash faster.  In the case of Aberdeen’s data above, the difference of less than one week, to three plus weeks between optimal and poor is profound, especially for smaller suppliers who feel heightened financial pressures.

So, from our view, time is a resource that you can’t regenerate, and as such, with respect to Accounts Payable Software, invoice processing, and process latency, there is a tremendous advantage to being able to expedite invoices through dynamic, automated exception handling by way of AP automation. Therefore, we feel that if there were a 4th wise man, he’d probably have time in a box, as a gift…wow…that is a brilliant idea for marketers to run with…think of the possibilities in your Secret Santa gift swaps (you just saved $10, you’re welcome!)!

Stay tuned for Day 7 of the 12 Days of Christmas AP Style – coming soon!

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