Cash & Liquidity ManagementCash ManagementAccounts PayableAccounts Payable: Time to Automate

Accounts Payable: Time to Automate

No part of business today is immune from pressures to contain costs while increasing productivity and complying with regulatory initiatives. This means that companies’ finance and purchasing functions increasingly have to offer their internal operations up for scrutiny and review. In order to cope with this new level of scrutiny, finance departments are seeking new ways to automate the traditionally paper-based and labour-intensive processes that currently characterise many accounts payable (A/P) departments.

This impetus has been further magnified by a move, right across business, towards greater system integrity and accurate reporting. In the US, the move has been spearheaded by the Sarbanes-Oxley Act (SOX) of 2002, which sought to impose a regime where scandals and corporate collapses such as Enron would be impossible or, at least, far less likely. And certainly, within US companies, SOX has increased senior managers’ focus on the A/P function, by drawing their attention to the compliance risks inherent in manual, paper-based processes.

It is a focus that is being echoed in Europe. SOX, for example, is seen in some quarters as a ‘best practice’ guide that companies ought to aspire to, even if their European domicile means that they are not formally bound by its provisions. The focus is reflected indirectly also through the specific regional compliance burdens that European companies face, though these may not be as strict, or as wide-ranging as SOX.

Taken together, these twin developments – the need to improve both financial and operational efficiencies, and the more rigorous compliance environment in which companies operate today – present an undeniable case for A/P automation solutions.

The Paperless Dream

People have dreamed of a paperless workplace for decades. In the 1960s, for example, futurists predicted that organisations in the new millennium would exchange information in a fully electronic manner. This sounds quaint from our current vantage point, however it would have been almost impossible to predict the intricate difficulties involved in actually getting rid of paper. The unfortunate reality is that corporate processes remain mired in paper, and no one knows that better than A/P professionals.

A/P departments experience problems at each stage of the process and accounts payable professionals have a keen interest in technology-based solutions that will streamline and automate some or all of these functions. However, to squeeze more paper from the invoice-receipt-to-pay cycle, these solutions must overcome the challenge of converting invoices into standard electronic documents that enterprise and accounting systems can understand. In the past, the highly variable nature of invoices has made this impossible. Today, solutions are leveraging technology for processing so called semi-structured documents to bridge this gap.

A/P automation solutions streamline the invoice-receipt-to-pay cycle by enabling organisations to convert paper invoices into digital images, store them in a web-enabled repository for rapid retrieval, and extract data from them to enhance approval processing. These solutions may provide a combination of document and data capture, workflow and web invoicing capabilities in order to create an end-to-end invoice receipt and approval routing solution that integrates with enterprise and line-of-business applications.

Benefits of Automating Processes

An immediate and obvious effect of automating A/P is efficiency. Back-end imaging and archival solutions accelerate transaction research, discrepancy resolution, and response times to supplier enquiries by allowing accounts payable staff to retrieve invoices from an electronic repository rather than a paper filing cabinet or archive. As a front-end application, A/P automation solutions contribute further to processing efficiency by removing paper at the point where it enters the organisation. Invoices enter processing queues more quickly and their images can be used to accelerate their approval. Maximum efficiency is achieved when imaging and workflow are used together, as review and approval tasks can be routed automatically to individuals distributed across the organisation based on clearly defined and highly customisable business rules.

A/P automation also addresses the issue of containing costs, another of the key drivers for change, and can reduce the expense of invoice processing in several ways. First, they drive down document storage and retrieval costs by substituting electronic repositories for filing cabinets and effectively eliminating the need for long-term storage space. As the cost of electronic storage continues to fall, these savings will become more pronounced. Second, A/P automation eliminates late payment penalties and captures a higher percentage of prompt payment discounts. Powerful buyers may take discounts whether they are eligible for them or not, but this is a compelling benefit for smaller buyers.

Another benefit of A/P automation is the fact that it provides secure storage for invoices and support corporate policies and statutory requirements for document retention and disposal. Immediate electronic access to invoice images facilitates reporting and analysis by eliminating the need for physical documents. In a front-end role, A/P automation improves the speed and accuracy of decision-making by allowing users to access accurate, up-to-date information from any location using a web browser. For example, a supervisor could use such a solution to track the work of an individual or group of approvers to identify bottlenecks and optimise approval processing.

Of particular importance in a heavily regulated environment, A/P automation offers significant relief in the area of compliance management – enabling organisations to both adhere to regulatory requirements and control the costs of compliance initiatives. On both sides of the Atlantic, companies that have previously dealt with compliance on a departmental or project basis are now recognising the advantages of a centralised approach, where information related to a wide array of compliance requirements is organised, managed and stored centrally.

According to US-based analyst house, The Aberdeen Group, “There is more to A/P automation than just cost savings; imaging and workflow management solutions promote compliance with business controls allowing A/P staff to focus on more strategic tasks. Enterprises that have adopted various types of e-payables solutions have transformed the A/P function to a source of competitive advantage, supporting business planning and decision making.”1 The savvy finance manager is therefore also considering the more strategic impact of A/P automation on the entire financial supply chain and the working capital improvements that it can deliver.

With its wide-ranging benefits, A/P automation will only continue to develop and grow rapidly over the next five-year period. A/P currently occupies only a small proportion of the massive imaging, workflow and web invoicing automation market, but it is likely to expand rapidly as organisations turn to automation to streamline and optimise their accounts payable operations and adapt to changes in the regulatory environment. Over this period, it is vital that enterprise content management responds to the opportunities at hand and maximises the potential gains.

1 The “E-Payables: Imaging and Workflow” report, Aberdeen Group

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