APA (Accounts Payable Automation)

In the current AP world there are four elements necessary for AP success: Automation, Collaboration, Visibility and Control.

Automation

Automation is a critical foundation to lowering costs and streamlining each of the four AP sub-processes: invoice receipt, approval and inquiry, validation and reconciliation, and settlements. Technology solutions to manage invoices and workflow, and electronic payment methods reduce the inefficiency of manual and paper-based processes.

Collaboration

Cross-functional coordination among key stakeholders such as accounts payable, procurement, finance, treasury and suppliers creates an environment where key information flows easily between these stakeholders. Without this, treasury can’t make optimal capital decisions; procurement can’t identify negotiation opportunities with key suppliers, and suppliers and internal stakeholders can’t track invoice processing status. It will also be difficult to set up different approval and routing rules based on different types of invoices or supplier arrangements, such as PO-based, non-PO-based, preapproved and supplier maintenance.

Visibility

Visibility into liabilities and operating expenses is the basic requirement for most major functions within an enterprise. It is used to give an overall view of operations and establish standards on which to base strategies for performance improvement.

 

Research has shown that best-in-class organizations are 43% more likely to have enterprise-level visibility for AP transactions. The rest suffer from higher transaction costs and longer cycle times. Not seeing material liabilities that are not yet entered impact the timing and accuracy when closing accounting periods.

 

For a typical AP department, enterprise visibility remains out of reach. A high degree of visibility brings substantial advantages, including:

 

Low transaction costs;

Shorter processing cycle times;

 Decreased financial risk;

Shorter response times – improved productivity by reducing time wasted in low-value activities;

Improved forecasting and management of near-term cash management requirements;

Greater ability to monitor billing discrepancies and overpayments, recognize unclaimed negotiated discounts, contracted payment terms, early payment discounts, and late penalty fees.

 

Control

 

Good audit controls help organizations enforce corporate policies and achieve contract compliance. Audit controls ensure that AP transactions are processed in a way that complies with policies, procedures and regulations. They help reduce late payment fees, capture negotiated discounts and early payment discounts, eliminate duplicate invoice payments, and prevent fraudulent payments. Research2 has found the exception rates in top performing firms are 85% lower than other enterprises.

 

Benefits

 

An automated AP solution streamlines and drastically improves performance by utilizing e-invoicing, scanning and workflow, online tracking and reporting capabilities, electronic invoice dashboards and supplier portals, supplier networks, payment services and spend analytics for all invoices.

 

Using an automated AP solution, organizations will successfully drive transformation of their accounts payable departments to overcome the challenges of manual and paper-based processes.

 

What are the “Must Haves”?

Key areas required by organizations to ensure that a solution covers current and future needs as the process matures, include:

 

Automate your process: From arrival to post and archive, with efficient workflow to streamline verification and exception handling;

Any format, any source: Physical documents, electronic documents, and document images, via mailbox, email, fax and file transfer;

Improve what you have: Integrate with the major ERP/financial system of your choice;

Increase visibility: Improve your cash flow and invoice management;

Better control of received and invoiced goods, automatic purchase order matching, optional automatic posting of invoices, enhanced security, less manual work, shorter total processing time, decreased total cost for supplier handling and early notification of errors;

Improved day-to-day information on financial status (regarding current projects, for example) and basis for business decisions. This saves a substantial amount of valuable time at the end of every month, quarter and year.

Shared service centers: A centralized or shared services approach will help ensure that AP tasks are streamlined and standardized; best practices are documented and shared, and AP technology budgets are consolidated.

 

And not just for Large Organisations.

AP automation technologies have been limited to larger companies until recently. Now there is evidence that small and medium sized businesses are adopting the technologies for the following reasons:

 

A competitive business environment means even small and medium-sized businesses need to focus on reducing processing costs and increasing efficiencies for invoices and employee expenses.

Streamlining the AP process has become extremely important in a tough economy where cash flow and greater control over payables is critical.

An increased interest in early payment discounts is driving smaller organizations to investigate tools and technologies that enable them to shorten their invoice receipt-to-approval cycles.

On-demand and Software-as-a-Service (SaaS) delivery models have lowered the initial cost of implementing AP solutions and make them easier to maintain.

The convergence of electronic invoicing and front-end invoice imaging gives organizations a single, comprehensive solution that can manage both paper and electronic invoices through a common process.

Value added-services delivered by solution providers for supplier recruitment tasks mean that buyer organizations can engage suppliers more quickly.

 

So which Type of Solutions make the most sense?

 

Electronic invoicing solutions automate the invoice reconciliation and payment process and address most invoice types.

 

Workflow and imaging solutions manage all aspects of in-house invoice scanning and documentation and provide an effective electronic archival system. They are often part of a cross-functional enterprise solution.

 

Payment automation platforms specialize in accounts payable and accounts receivable processing. They offer relief in disbursements for payroll, benefits, regulatory and tax issues, as well as intra-company transfers. These solutions range from automated clearing house (ACH) and general payment processing to company-wide AP solutions.

 

Enterprise financial solutions, which manage the budget and general ledger of an enterprise, consist mainly of Enterprise Resource Planning (ERP) providers. They typically offer functions such as a general ledger, and sometimes more advanced capabilities like supply chain auto-reconciliation and AP workflow.

 

Purchasing cards (p-cards) are designed to streamline the front (purchasing) and back (payment and reconciliation) ends of the procure-to-pay process. They introduce greater levels of control and visibility for management of low-cost, high-volume categories.

 

Supply chain finance solutions provide full AP invoice dashboards, so enterprises can manage payables more easily. With ERP integration and supplier portal capabilities, these solutions can help move to an automated AP platform.

 

Treasury management services offer advanced financial administration by consolidating cash forecasting and handling foreign exchange affairs. These services provide management for deals and trades, and they also provide analytics and risk management.

 

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