Is paper that much of a monster in AP?
Recently, interesting studies have been done across a breadth of organizations to address the status of how Accounts Payable Automation and Automated Data Capture technology are affecting AP efficiency and productivity. Before getting into some of the findings presented, its important to get a holistic understanding for whats actually happening in the market, as it has broad implications for strategic planning and organizational improvement.
Lets begin at the beginning shall we?
Paper is on the decline
Or is it? According to The Institute of Financial Operations, in their 2012 Global Trends in Automated Data Capture in AP, nearly 62% of invoices are still being sent to AP departments in paper format. While this trend is on the decline from paper invoice levels in the not so distant past, its important to understand that it belies the true nature of the percentage-volume of paper-formatted invoices still coming into AP organizations throughout the world. Additionally, nearly 22% of invoices submitted into the survey participants AP process are sent via Email as attachments or via fax. Essentially then, nearly 84% of invoices still are bound by traditional paper invoice document formats, and as such require intervention or an automation component such as data capture to process efficiently. The remaining 16% or so are spread across EDI & E-Invoicing format which begets the question, whats the best approach to efficient invoice processing in 2013? Glad you asked, you can learn more about that here!
So what are the implications of such a prevalent percentage of invoices still being submitted in a traditional paper (or paper-based) format?
For starters, the fact that the vast majority of invoices still entering the AP process are paper based means one thing, paper isnt being made obsolete anytime soon. Ironically, many organizations that we have consulted with still print email submitted invoices as part of their AP process, despite it being an additional (and inefficient) step. So based on that assumption its up to Finance, Shared Services, and Accounts Payable leaders to recognize that and deploy Accounts Payable software and automation solutions that give them strategic, operational, and financial advantages. You could of course take the leave it alone route, but based upon conversations weve had with numerous CFOs & Controllers, there is a latent desire in the market to see processes improved, especially when they know that manual invoice processing often means limited visibility and redundant process steps coupled with poor process controls.
Automated Data capture as the report suggests is certainly a fundamental building block to AP automation, but by no means is a comprehensive AP cure-all.
Other items to consider in a full process overhaul could include:
-Vendor Portal Technology Providing Vendor Self-Service for Invoice Status Reporting & Invoice Submission
-Automated Payament Technology ACH Payment & P-Card approaches as perfect examples to improving payment cycle times and payment processing costs.
-Automated Workflow Enabling Auto-Approval Routing & GL Coding, along with Auto Escalation
-Mobility Solutions for AP These can promote faster processing especially for Non-PO invoice routing and approval protocols.
-EDI Data Releases, E-Invoicing Platforms, Supplier Settlement Networks, & on
There are many ways to improve AP in this globally, networked economy. The key is to defining what areas of improvement offer significant impact at the three core levels Financial, Operational, & Strategic. Beyond assessing these impacts, its necessary for the organization that is looking to improve to consider what is achievable based upon technical and professional constraints. To be sure, intelligent, adaptive data capture is a huge start as it can help transform payables from a data entry and validation function to an optimized business outcome function by removing process obstacles in a big way.
For this reason, we believe that cloud delivery (or cloud based AP services), as opposed to traditional systems implementations is paving the way for organizations of all size to harness the power of AP automation through the deployment of many of these technology approaches in the cloud. Essentially, companies automating their AP process can now benefit from a cloud delivery model instead of having to install, manage, and support new, non-core systems(like automated capture), and instead derive immediate, sustainable, and scalable business impacts in a more cost effective format without having to become capture experts.
To learn more about cloud based delivery and Accounts Payable Best Practices, check out our e-book here!