CloudX Blog

5 Accounts Payable Automation Factors To Consider in Managing AP

Posted by Chris Cosgrove

Jun 20, 2013 1:52:00 PM

 Accounts Payable Automation Questions?

 There are no dumb questions!


If you’ve ever been around a 2 or 3 year old child for an extended period of time, it’s a remarkable thing.  Their seemingly insatiable curiosity is simply amazing, as they incessantly ask dozens of questions about everything in their surrounding world.  Like children, we too can learn quite a bit from asking good questions, and we here at CloudX wanted to share with you some answers from others interested in learning how to improve their Accounts Payable processes.  With the breadth of experiences we’ve had in Accounts Payable automation, we wanted to address a question that came up the other day:


“What factors are there to consider in Managing the AP process with regards to AP automation?”


That’s a broad question to be sure, but there are some major themes that we see to ensure successful Accounts Payable automation initiatives.  Also, this answer is relative to the user role within AP, ie. it’s different for AP Processors, Supervisors, Managers, Controllers, and CFO’s depending on where you sit in the stratosphere.


So, we’ll take a general look at the following 5 areas:

  1. Invoice Capture – There’s a lot of movement in the market to electronically supplied invoices.  However, despite advances in technology like EDI and E-Invoicing, for most companies, electronic invoicing simply means supplying a PDF or Tiff image on an e-mail transmission.  For AP staff, this adds additional processing steps and complexity as most organizations will first output the invoice and then proceed to physically route, and key the data off the invoice.  To improve this area of AP, it’s necessary to have a flexible capture component that is capable of processing invoices without reliance upon manual data entry. Ideally, this component can handle scanned invoices, emailed attachments, invoices posted to a website (through a crawling & extraction tool), EDI (by producing an imaged transaction record), and faxed invoice.  This way, you can begin to leverage the strengths of automated data capture to drive the process, while addressing pretty much every way an invoice is delivered to the AP process.
  2. Process Centralization – This has been a trend in recent years for most organizations, who have either gone to a central AP organization or to a Shared Services model.  With that said, we still talk to companies who have a distributed AP organization, and when we do, the issues around processing standards, efficiency, and benchmarking are glaring.  Further issues arise from a process cost perspective as a dispersed labor force can mean volatility in labor costs and higher CPI.  As much as possible, it’s better all around to centralize the process, especially to gain tighter process controls and have insight to what your AP staff is actually doing on a day to day basis and whether or not they are working to their potential.
  3. Benchmarking Performance – Which leads to the next point. We were recently on a call with a Corporate Controller for the North American market of a global company with revenues in the multi-billion dollar range.  Even with the aide of the North American Accounting manager, the two were not tightly clued in to their own KPI’s within their AP process.  By looking to post Accounts Payable automation benchmark data coupled with our client experiences, we were able to shed light on what optimal invoice processing looks like, but the conversation highlighted the latent need for improved process insight and reporting.  Like it’s been said, ‘if you can’t measure it…you can’t manage it’.  If you are presently not benchmarking your departmental effectiveness, then chances are you’re not as productive as you could be.  Take the time to figure out where you stack rank to industry data and it will be revelatory as you gauge what Accounts Payable automation could mean to you.
  4. Visibility – This is the big kahuna…and for those functioning in an entirely manual AP process replete with data entry manual validation, manual routing and exception handling really have no empirical knowledge of this.  However, if you’ve transitioned from an organization that has visibility into AP and dynamic payables reporting to a manual AP organization, you’ll instantly know what your missing.  No other aspect is as decisive at mitigating late payment fees, providing audit trails to invoice approval processes, delegating invoices for approval when there are bottlenecks, improving audit cycles and for boosting capture of early payment discounts.  Make sure that when you automate you have graphical reporting and dashboarding built in to your new AP automation system.
  5. Fraud Prevention – Another important area that rarely gets the attention it merits is with respect to preventing Accounts Payable fraud.  However, by leveraging the approach we’re advocating here, you an utilize capture, workflow, and business intelligence tools to catch potential duplicate payments by checking against vendor data, invoice amounts, and invoices consistently running within a close percentage of various invoice approver’s maximum thresholds. 


There are many factors to consider when tackling a broad initiative like Accounts Payable automation.  To be sure there are components on the Procurement as well as the Payment sides that haven’t been addressed in this brief article, but also merit consideration for a total AP overhaul.


To learn more about the costs associated with invoice processing check out our eBook below. 

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Topics: Accounts Payable Automation, Improve Accounts Payable, Invoice Processing, accounts payable improvement, accounts

Post Accounts Payable Automation Productivity Metrics Should Look Like This!

Posted by Chris Cosgrove

Jun 14, 2013 3:32:00 PM

Accounts Payable Automation has more in common with the B-24 than you might think!

Exactly how is AP Automation likened to the B-24?

During World War II, the United States Armed Forces turned to an interesting manufacturing and supply chain expert in order to beef up their production rates of military aircraft.  Henry Ford, the Founder of Ford Motor Company, at 81 years of age pioneered Willow Run, a massive facility boasting a one mile long assembly line production facility for the B-24 Liberator.  At its peak, it was producing one B-24 per hour, a stunning triumph for modern day manufacturing and validation of Ford’s operational prowess.  To this end, many wonder what the effects of Accounts Payable Automation should be upon a process that, in a manual fashion, has remained largely unchanged for decades…and it’s a good question.


How many invoices can be processed by a single AP clerk?


This obviously depends on the nature of the invoice processing, and for this answer, we’ll turn to some benchmark data courtesy of IOMA.   According to them in their ‘Effects of Automation on AP Operations’ from 2010, they provided two key pieces of insight.

For processors handling 100% of the two following invoice types in a post AP automation environment, the number of invoices processed in a month should be:


Purchase Order (PO) Based – 3,647

Non-Purchase Order  Based – 2,263


So with that said, figuring out where you stack up is fairly straight-forward.

Follow the steps below to determine how you compare to those metrics and whether you should look at some ways to automate and improve your Accounts Payable process.


  1. Determine your PO/Non-PO mix – Simply figure out what % of each category of invoice is being processed by your AP organization.
  2. Determine what your AP clerk processing load is by taking the total volume of invoices per month divided by your total number of AP processors.
  3. By applying your PO/Non-PO mix ratio to the Accounts Payable automation benchmark numbers above, you can figure out what the blended amount per month should be if your environment was automated.
  4. Finally, take your current state level of AP production and subtract it from your specific blended rate benchmark, and this will tell you what your shortfall or surplus is compared to the numbers above.

In most cases, for those operating in a non AP automation environment, the typical processor will handle anywhere between 1,000-1,750 invoices per month from our experience.  In some organizations the number is better and for others, worse.  However, one of the important distinguishing factors is that when we are discussing the role of an AP processor, we’re talking about an agent of the AP organization who is responsible for exception handling, vendor relations, internal liaising with other department heads.  The reason for making the distinction is that we have seen efficient AP operators in a manual AP environment that process upwards of 3,500 PO based invoices a month.  The distinction however is that they are solely utilized in a data entry capacity with zero responsibility for any of the more strategic requirements of a typical AP clerk.


The Main Take-Away


If you know that your processes are inefficient and that too many physical touches of invoices are occurring, and perhaps other process redundancies are happening, chances are your invoice processing could use an upgrade.  If you haven’t considered Accounts Payable automation before, or if you have and you’ve come to the conclusion that the juice isn’t worth the squeeze or the systems you’ve looked are entirely cost prohibitive, perhaps it’s time to consider a fresh, intelligent, game-changing approach!


To learn more about Accounts Payable automation best practices, check out the eBook below!

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Topics: Accounts Payable Process, AP Process, Accounts Payable Automation, Improve Accounts Payable, Invoice Processing, accounts payable best practices, ap automation

5 Free Tips on Successful Accounts Payable Automation

Posted by Chris Cosgrove

Jun 11, 2013 1:37:00 PM

Why Accounts Payable Automation is Not One Size Fits All!

Unlike your kid’s little league baseball hat, in the world of AP automation software, one size definitely does not fit all. 


With that said, there are many considerations that go into the buying decision to select and implement Accounts Payable software that is ideally suited for your business.  The needs of AP are definitely horizontal, but scale becomes a major factor as your invoice count increases, and as such different tools and components to robust automation solutions need to be considered.


So here’s a short hit lits of 5 tips to choosing the best Accounts Payable automation software for your business:


  1. Invoice Volume Determines True Needs - What does your monthly Accounts Payable invoice volume look like.? Low could be in the ballpark of 0-500 invoices per month, and in that range would generally necessitate no more than 1-2 AP clerks to process.  Mid range organizations could be anywhere between 500-5000 invoices, per month and the high volume organizations at 5,000+.  For the outliers who are in the ‘Fortune 1000’ scene this number can easily climb into the tens and hundreds of thousands per month.  The point is the lower your volume, the less the need exists for fancier technology like Optical Character Recognition.
  2. What’s your capital investment budget?  - No, this is not a joke.  Seriously, what do you have available to invest in automating your process?  For most organizations, getting funds to bring Accounts Payable automation tools is tough, but BPO and SaaS offerings are making this a reality for more businesses.  Consider the rise of tools from companies like Google, more specifically Google Apps for Business, and the encroachment that has had on legacy software companies like Microsoft and their Office suite.  The same shift is true of niche AP software, so take heart if you don’t have dollars…transactional models are making paths in the wilderness available to you.
  3. Unite the clans! – To implement any new system it’s absolutely mission critical to have departmental sponsorship.  Chances are though that you wouldn’t even be selecting Accounts Payable automation tools unless you had sponsorship at the department level, but what’s really important is to get the organization as a whole on your side, and that is an art form.  By educating other department heads and executives on the benefits to them and to the company as a whole, along with the kicker, how this will make their lives easier and better, you’ll be in a better position to get the user adoption you need from your organization GL coders, approvers, and users.   Don’t make the investment in Accounts Payable automation resources until you’ve got both Executive and Departmental buy-in, or you’ll be setting up for failure.
  4. Abandon the miracle diet mantra! – No, we’re not here to help you lose 20 pounds in 10 days.  Similarly, affecting wholesale change is generally not an overnight proposition on any level, especially Accounts Payable automation.  So, it’s critical to get rid of the infomerciaesque sales pitch of promising the moon in no time flat.  Instead, set about a steady progression of improvement by selecting an implementation plan that is workable by vendor, department, or invoice type.
  5. Accommodate your vendors, don’t force them to change! – While e-Invoicing has been touted as a radically different and novel approach to improving Procurement and Payment woes the world over, adoption of the technology lags far behind the prevalence of paper based or paper imaged invoices.  The reason...? Suppliers don’t want to be forced to do something that requires a lot of effort.  With that said, what is your current practice?  If new Accounts Payable automation technology requires you to get your supplier base to forcibly adopt your process…good luck.  Unless you’re Professor X, good luck getting them to comply.  Instead, improve the process by giving them options in working with  your new automation platform.  One way…Vendor Portal technology...which can offer multiple ways to upload invoices and a secure view to accessing their invoices while in the approval process.



We hope this helps you make some better decisions as you move forward with improving your Accounts Payable process.

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Topics: Accounts Payable Process, Accounts Payable Automation, Improve Accounts Payable, accounts payable software, Invoice Processing, ap software, ap automation

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