Sometimes it’s difficult to see the forest through the trees.
In fact, it’s easy to get buried by the grind of the typical accounts payable process and for vendor issues, and internal requests to make seeing the way out of a bad process near impossible. So today, we want to outline a few critical steps that we see to make the accounts payable process strategic, effective, and profitable for you and the organization as a whole.
Here's our plan for conquering AP:
- Dynamically ingest and convert invoices and related documents. Whatever the method, whether you receive and scan physical mail, auto capture emails with attachments, monitor a vendor portal, or have your invoices routed to a designated lock-box scan service, they need to be digitized at the process outset.
- After digitizing, they must be run through advanced OCR, which will remove the data entry burden from you. Instead of dealing with 100% of data entry, you’ll have to clean up maybe 2% of exceptions, that the OCR is unsure of. Alternatively, you can offload this function to BPO or DPO providers.
- Bounce the captured data off your other supply chain data, including purchase orders and receiving data to validate line item data to comply with your two or three way matching protocols. This can alleviate a tremendous amount of time for your AP staff, and if there’s an issue push it to an exception queue for a person to troubleshoot. This can generally automate 70-80% of PO based invoices, unless you have major data issues internally from your procurement or receiving silos, but that is a bigger, stickier issue.
- For Non-PO invoices build intelligent workflows, mimicking your approval rules, and escalate invoices so you can automate GL coding efforts, while having a solid audit history.
- To get extra awesome, integrate a payment optimization component to your accounts payable automation initiative. This way when you literally approve an invoice you can invoke the vendor-preferred payment method. For the smart cookies in the crowd reading through this, did you know that you can literally monetize your payments and drive monthly cash rebates into your coffers by embracing virtual payments. (Just an aside here, but the gains can typically be 1-1.25% of your eligible spend, which can often fund your AP organization, as well as all ap automation technology initiatives too and then some!) **By the way, on this point, you may want to look at outsourcing the whole check cutting process, since there are organizations who can take this on more efficiently than most companies can do it for. Basically, if you have an opportunity to slash your check cutting to $1-$1.50 from the industry average of $5.14, you’re going to want to do that at every turn, since it’s only going to help you. However, if you can take your vendors to the electronic routes of ACH or better yet to virtual credit cards, you’re going to basically eliminate the entire transactional cost associated with paying them, which is a total win. Our advice would be to avoid wires, unless you have to on international accounts, as the fees are typically over $10, and therefore a major cost contributor.
- Create custom reports from all your newfound data. Also, you can use dynamic dashboards to manage your process on the fly. Identify process bottlenecks like Approvers sitting on unpaid invoices, or invoices approaching early payment discount term deadlines. You can also view invoices approaching due dates. The point is you can make the data actionable and strategic, elevating your level of controls over the process and making your company healthier.
- Extend your document management capabilities to augment annual or bi-annual processes to include your audit efforts. Why not let them access your invoices records and data on a designated eyes only basis? This is a sure-fire way to keep your people productive and on task, and not pull them off when the suit-people come walking in.
- What’s more is that you can take your invoices that are submitted by vendors and include them in the process too. By providing them with access to a vendor portal, they can view their invoices in process and see when they can expect to get paid, alleviating your AP staff from unnecessary phone calls and promoting productivity.
And that's how you make an accounts payable process of legends...
So, that’s kind of a holistic, utopian vision for the high-levels of what a streamlined accounts payable process can look like. Making that a reality however, is a trickier issue, but can be done by aligning with the right strategic partner who understands your vision for the future state and that has the ability to execute diligently.
Also, this approach is not inclusive of the concept of e-invoicing, for numerous adoption related issues, but if that’s what floats your boat, by all means go for it. We’re just all about helping you get on the shortest path to glory with the least friction.
If you’ve found this helpful, check out our eBook below on best practices to AP automation.