When earning executive stakeholder support for implementation projects, often the toughest questions come directly from the CFO or CEO – and for a good reason. C-suite executives must thoroughly vet potential projects to ensure future success as well as minimising financial risk to the organisation’s bottom line.
With accounts payable (AP) automation becoming one of the most critical areas for digital transformation in the financial process of a company, many executives will likely find themselves at the forefront of a project to modernise their company’s AP process. When it comes to gaining executive stakeholder support for AP automation, organisations need to sidestep the following four common pitfalls and squash misconceptions when embarking on the journey.
Misunderstanding the full capabilities involved in AP automation
Often, business leaders have wide and varied definitions of what AP automation entails. For some companies, the use of a scanning service and email of PDF invoices between departments for approval is considered an automated process. However, this is only the beginning of the process of end-to-end automation. Similarly, many organisations only employ the invoice management functionality in their enterprise resource planning (ERP) system as a means to achieve a paperless accounts payable process, but this leaves great room for improvements in operational and cost efficiencies.
Deep AP automation is touchless processing with invoices moving from receipt to being ready to pay in the ERP system without any human intervention. This process saves AP staff countless hours of manual labor and can unlock significant savings through discounts and early payment terms, as well as improve supplier relationships. AP automation removes manual tasks from the AP process and gives visibility into cash flow and budgeting. As a result, companies gain more control over financials, helping curb traditionally treacherous areas such as errant spending and Travel & Expense management.
Believing AP automation is only about reducing headcount
In the initial return on investment calculations, it can be tempting to reduce as much headcount as possible from the AP staff to validate investment in the automation project, but this is a big mistake. The AP staff is much more valuable when refocused on value-added work that drives the overall financial strategy of the company, rather than the superficial savings from eliminating their positions. This is a one-time savings that pales in comparison to savings that can be obtained through the other less obvious but more potent benefits of automation, such as discount management, budget control, compliance, and scalability with existing headcount.
The spend visibility that comes with AP automation significantly improves management’s ability to enhance not only the benefits mentioned above (particularly discount management) but also to view the entire working capital process, allowing them to choose the most advantageous vendor payment terms and payment timing.
Not understanding how to measure the impact of AP automation
A typical driver of AP automation projects is the drive for greater efficiency. However, many organisations struggle to define key performance indicators (KPIs) to regularly measure and monitor optimisation opportunities. One of the critical steps for success in an automation project happens before ever implementing a new solution. Organisations need to establish baseline metrics for their AP process so that they can accurately report on efficiency gains once the new solution is in place.
Furthermore, once organisations establish KPIs and begin monitoring them, it’s important to understand benchmarking and choose relevant peer measurements to measure against. What does best-in-class performance look like? To understand this, businesses need to use benchmarks that are data-driven and updated with real-time statistics.
Not taking into account the AP automation ecosystem
It’s essential that organisations select an AP automation solution that supports application interoperability so that data can flow among all relevant systems and minimise the need for human intervention or multiple-step iterations between different tools, which is error-prone and inefficient.
AP automation tools need to connect seamlessly with an ERP system and executives need to be aware of, and upfront with vendors about any plans to upgrade or replace the current systems. An ERP upgrade or implementation is often not a project killer for AP automation, but the solution provider needs to be aware of the plans to schedule the implementation for an optimal go-live plan.
While ERP is the most crucial system dependency for an AP automation project, it’s important to take into consideration all solutions that involve data from the AP process, including the data-capture tool, document management tool, and payment systems. It’s important to look for a tool that supports open APIs and connectivity with other platforms. For example, a cloud-based tool makes for an easier integration with existing systems and lessens the workload for the IT team. Plus, it translates to frequent and automatic system upgrades and software fixes that can be delivered from the solution provider’s cloud system, so an organisation always have the latest and greatest solution functionality.
It’s becoming increasingly clear to leading c-suite executives that embracing automation is a necessity if companies want to remain competitive. AP leaders must work with management to fully communicate these important elements to banish these misconceptions. This will ensure organisations are approaching AP automation strategically and with an open mind to make the AP department genuinely efficient, modernised and positioned to provide the greatest amount of value.
By Shannon Kreps, vice president of product marketing, Medius