Fundamentals are a big deal...because everything is built on them!
As in basketball so in AP, & invoices have been around since the dawn of time…well maybe not, but we’re pretty sure that back in the day, someone ancient business owner had one of their lackeys bust out some hieroglyphics on a stone tablet, or at least a papyrus scroll to be couriered to their customer for payment. In actual fact the word invoice derives from the French ‘envoy’ and ultimately English ‘envoy’ meaning sent, which was popularized in the mid 1600’s and which really took flight in the early 1900’s. So, you see, not that far off from papyrus scrolls, just a few millennia.
With that said, invoice by definition means - a list of goods sent or services provided, with a statement of the sum due for these; a bill.
That’s common parlance today, and what’s equally common is to see that Accounts Payable clerks the world over struggle with the burden of reconciling data from disparate systems and people to resolve accounts and billing scenarios with between customers and vendors.
So, though we’ve changed in many other ways with respect to societal and technological advances, other items have lagged behind and invoice processing is no exception. Sure, there have been some real innovators who have built P2P systems and others who have championed Electronic Data Interchange in their organizations, but for many people these technologies are out of reach and as such their AP departments are still mired in processes that have stood still for decades.
Three fundamentals to making your Accounts Payable process more strategic!
- Leverage time for money. – AP has for too long been viewed as non-strategic…an entity that exists to simply pay the bills and keep the lights on. However, by leveraging a rapid payables cycle, AP organizations can transform themselves to strategically valuable components of the organization by pushing the envelope on early payment discount capture. Most suppliers will willingly shave from 1-3% off their bills in exchange for rapid payment, because the time value of money is an extremely compelling factor.
- Help the environment. – AP has to be one of the most paper congested areas of business process that exists today. Companies ship reams of paper to each other every day in the form of invoices, statements, credit memos, and other account related documents. This does not include internal memos to get checks cut like check requests or capital approval requisitions. However, it doesn’t have to remain that way. With electronic document management solutions, whether cloud based or locally deployed, there are many alternatives to paper storage and copying. Unfortunately though, environmental impacts are diminished without other advanced tools like electronic workflow, vendor portals, or advanced capture technology. These all enable the eradication of paper and simplification of manual processes that typically are paper driven.
- Try visibility on for size! - It can be very hard to express in words the value of visibility to someone who has not had it before, but it is a similar revelation to those who deal in the AP space on a day in and day out basis. The difference in AP organizations that do and don’t have visibility is vast. Those who do have it have the benefit of being able to find the documents they need when they need them. Additionally, they can circumvent potential process pitfalls and workflow bottlenecks that can happen, especially in the case of the approval and escalation process that typically happens on Non-PO based invoices as they typically require department head approval. However, this visibility can be extended to assist in the treasury management function by looking at pending payables in queue, which is largely an area that at best has been marked by an accruals based month end guessing process for decades.
These are just a few fundamentals to what a healthy accounts payable process should look like, and one of the keys to getting there is through a robust accounts payable automation approach.