Cash & Liquidity ManagementCash ManagementAccounts PayableWhy SMEs Should Protect Credit with Automated Accounts Payable

Why SMEs Should Protect Credit with Automated Accounts Payable

As organisations look to tighten control of costs in the current downturn and protect lines of credit with their suppliers, the need for accurate financial processes has become imperative. A recent survey among accounts payable (A/P) professionals cited cost reduction, process improvement and increased control as the three major challenges facing them in 2009. As A/P is heavily reliant on paper-based procedures, control and visibility are two of the biggest issues that companies must battle with.

Paper-based invoice processes present problems of control for A/P departments, as the invoice is passed between people in many different departments, geographically spread throughout the organisation, for approval and validation before processing. This generates challenges, with unpaid invoices being left waiting in in-trays in all corners of the office with little or no visibility until the invoice is approved for payment and recorded in the finance system. This creates a considerable amount of non-value-add (NVA) workload for A/P to manage the process and provide feedback to suppliers that chase payment of any delayed invoice. The high amount of NVA in these processes is extending cycle times and makes it very difficult to benefit from any prompt payment discounts and could result in credits limited being withdrawn altogether.

A/P automation systems to address these challenges have been available for many years. Typically, these solutions optically scan the received invoice, allowing the end-to-end process to be managed electronically. Extracting the key information from each invoice through OCR and controlling the approval workflow, query management, posting into the finance system and archiving all support documents with much reduced effort and complete visibility throughout the process at the touch of a button are all possible with automated systems.

Traditionally, these systems have required a significant investment in infrastructure (hardware and software licenses) and long professional service engagements to install and setup. The scale of this required investment results in the benefits these systems can deliver being only accessible to the larger corporations with a dedicated IT team and considerable budgets.

Removing the Barriers

This is now changing, with the providers of A/P automation systems utilising advancements in ‘cloud computing’ to provide these same benefits in an on-demand model, removing the need to buy, install or support any infrastructure and speeding up the deployment and setup from months to days, or even hours. While on-demand solutions have benefits for organisations of all sizes, the minimal upfront costs and quick deployment are particularly suitable for small and medium-sized enterprises (SMEs). Analyst firm Gartner predicts that by 2011, 25% of new business software will be delivered by externally hosted, on-demand services.

On-demand offers a ‘pay as you go’ system, so businesses only need to pay for what they use; there is no hardware to maintain or hidden costs. For A/P departments, this means that documents can be automated, resulting in quicker invoice payments and cost savings. It is estimated that organisations can save between 40-60% of A/P operational and administration costs by adopting an automated A/P module. The electronic communication enables the A/P department to create alerts for payments and invoices and implement workflow to organise the process.

Another key aspect of A/P automation means invoice information is instantly available for reporting and analysis to balance workloads and identify process bottlenecks. The result is a fully optimised accounts payable process that supports effective business management, decision-making and forecasting in financial accounting by streamlining tasks ranging from invoice processing to vendor enquiry management.

Lower Cost, Lower Risk

Through eliminating paper-based processes in A/P departments, organisations will see significant financial rewards, including lowering purchase-to-pay process costs by as much as 60%.

On-demand provides a quick return on a smaller investment, ensuring that SMEs looking to tighten control of budgets and reduce costs can do so whilst streamlining processes and minimising human error within A/P.

A highly flexible solution that can be altered and updated to reflect the changing needs of a business, the A/P automation market seems set to grow further as companies look to regain control and visibility of all costs. The accounts payable process is at the heart of every SME and to streamline and automate this will help keep the heart beating.

Comments are closed.

Subscribe to get your daily business insights

Whitepapers & Resources

2021 Transaction Banking Services Survey
Banking

2021 Transaction Banking Services Survey

2y
CGI Transaction Banking Survey 2020

CGI Transaction Banking Survey 2020

4y
TIS Sanction Screening Survey Report
Payments

TIS Sanction Screening Survey Report

5y
Enhancing your strategic position: Digitalization in Treasury
Payments

Enhancing your strategic position: Digitalization in Treasury

5y
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

5y