It is not always easy to understand how AP automation can benefit your structure and it is even more difficult to build a strong business case around it. Most companies looking to automate their AP automation already have a structure in place, either by using a one-stop ERP system or by integrating multiple accounting systems, which makes it even more difficult to assess their current situation. Chances are that you are in this case as well and maybe you explored the web in search for more information, attended a couple of webinars and downloaded some whitepapers but some aspects are still unclear to you.
Thanks to our experience and to our numerous and different clients, over the years we have been able to build a strong business case guide that we to share with our customers. Today, we decided to share that with any company looking for an AP automation solution as they are too many tools out there that, in our opinion, lack the key features and push companies into an uncomfortable position.
In case you are still new to Accounts Payable, you can read our accounts payable explanation first and come back to this article after.
The guide structure will be as follows, so feel free to skip the parts that you already know:
- AP Automation Benefits
- How to Build a Business Case for AP AUTOMATION
- Traps to Avoid
AP Automation refers to software that is used to streamline and automate accounts payable process, expelling manual tasks and giving better visibility, control and authority over significant financial information.
The goal of Accounts payable automation is to empower organisations with a near-touchless procedure with minimal human intervention. By enabling digital framework and invoice life-cycle management functionality it makes it easier to oversee and manage the steps formerly dealt with by an AP staff member.
The Benefits of AP Automation
Reducing Costs & Time
Of course, the first benefits with AP automation are the reduction of costs and time. By streamlining processes, using flexible business rules, having exception management capability, extracting data with no errors and integrating the system to your existing structure, you can reduce your costs and time drastically.
The wholesale industry has an average invoice processing cost of $3.50 while non-for profits companies and government agencies’ average cost is around $16.50 with more than 10 steps to process the invoice. While the best in class are using the latest technology to achieve such results, companies still using manual invoice process or outdated software are in some cases not even aware of their precise cost.
User Permission & Transparency
Paying your suppliers on time is a necessity to remain competitive in today’s market. However, many companies still fail to achieve it and of course, don’t get access to discounts and other “good behaviour” benefits.
A good AP automation tool provides more transparency and control over the massive flow of information. Not only can you see all the invoices and their stages according to your workflow but also which team or person is in charge of these invoices and tasks. Configurable business rules can be applied to provide some users with admin permission or send a particular invoice to a specific team for X reasons. Best-in-class software also provides instant notification on desktop and/or mobile to remind users to process invoices, handling exceptions or paying on time.
Permission settings and business rules are the features that will allow the software to map your structure and enable the creation of an efficient workflow.
If you work in Finance or Accounting, then you are more than likely familiar with the process of 3 way matching in accounts payable. It refers to matching three documents – the invoice, the purchase order, and the receiving report – to ensure that payment should be made. It ensures that only authorised payments are made, and act also as a prevention to fraud.
Although efficient, the automation makes it much more powerful as you automatically match a much larger number of invoices without any manual intervention.
Reduce Payment Errors
Payment errors are accountable for $12,000 of loss per month on average. That’s mostly due to duplicates but in some cases also by sending the money to the wrong account number. AP automation systems prevent such errors by checking all details including banking number accounts, business register numbers etc.
Streamline all of Your Processes
There is a multitude of steps associated with handling invoices. Streamlining all AP processes, whether that be the data entry, auto-coding of Non-PO invoices, the matching of PO invoices and/or managing the potentially enormous amount of time-consuming exceptions, make your finance function increasingly more effective. If a discrepancy happens during any part of the process the AP automation system can even notify the correct person with a task and how they can fix it.
If you want to read more about the benefits of AP automation, we wrote an interesting article on the key metrics your organisation can achieve by adopting AP automation.
Incorporate with Existing Financial Systems
Obviously, there is no AP automation without the possibility to integrate your current set up. Integration improves AP department effectiveness and guarantees all information stays precise, starting with one system then onto the next. More importantly, with a fully integrated system, it will be easier to scale up when necessary so make sure you choose an AP automation tool that provides this feature.
The business case for AP automation
Most of our clients have encountered difficulties to assess their own AP automation requirements. With so many AP automation solutions available it’s easy to get buried in detail and confused as to what you really need. Obviously, needs such as being able to automatically extract information from invoices are common but it becomes a bit trickier when it comes to streamlining processes, attribute roles and permissions and set up business rules.
1. Specify your AP automation requirements
Make a point to distinguish the requirement for automating your AP functions by building up an amazing plan. This should be possible by:
– Deciding the means and procedures of AP that you’d prefer to automate.
– Deciding the greatest difficulties your organisation experiences with your AP forms.
– Recognising the benefits you’re planning to get from consolidating new AP solutions.
– Creating clear goals such as reducing invoice processing lead time by X% or achieving X% fully automated processing of PO-based invoices
– Including your group in recognising key AP process issues.
Here are some questions you should ask yourself when considering your next AP automation requirements:
– Can I integrate this new solution with my existing set-up?
– Am I looking for a cloud-based AP automation solution or on-premise solution?
– Do I need to create complex workflows or is that not necessary?
– Is this solution user-friendly or does it require extensive training?
– Can this solution extract information from different document types?
– Can I achieve a 90% plus a reduction in doc prep and handling?
– Can I achieve a 90% plus reduction in keys stokes and data entry errors?
– Do I need 2-way duplicate supplier Invoice check?
– How can I maintain and access a complete audit history on any and all actions performed during the invoice life-cycle – who, how, when and why?
– Should I have the ability to show the status of every invoice inflight, even once it’s been paid within the ERP?
– How important is it to allow for an automatic lookup to the ABR website to retrieve entity details based on the extracted ABN from the invoice and perform tax algorithm checks for compliance?
– How important is it to auto-match Govt. ABR details against master vendor file with the ERP and identify those charging GST when they should not be and check entity details against our ERP?
– Can I automatically check BSB and Acc Details off the invoice against the master data within the ERP as part of a compliance process?
– Do I need the ability to add supporting documentation, collaborate and add notes at any point during the invoice life-cycle?
– Do I need auto-escalation on invoices based on financial delegation limits not being met?
– Do I require broad-based exception management and invoice tracking functionality enabling on time, every time payments?
– What if people go on leave, do I require the ability to auto-assign tasks to another User?
– Do I need deeper search capability and be able to link images to transactions in my ERP?
2. Core functionality
Some AP automation systems offer an all-in-one solution while others just focus on one specific part of the invoice process. If you are looking for an all-in-one system, make sure some core features are available without having to pay extra add-ons:
- A powerful OCR for high extraction rates – When a vendor demonstrates their system to you, get them to run some of your invoices through on the day (not beforehand), this is the real acid test! The system should be achieving a 95-100% extraction rate off your invoices without having seen them before….. this determines good OCR technology!
- A document library to monitor your invoices – from inception through to the payment within your ERP, every touchpoint, action, state-change should be monitored and visible at the click of a button.
- A flexible business rules capability – configuration is the key to a good system, not customisation. Look for a solution that has very broad and deep which has configurable business rules to allow for speedy deployment, lower-cost and quicker ROI to be achieved.
- A user-friendly interface – nowadays people are expecting systems to work fast, be intuitive, have a nice design and add value to the staff members working with it. A system with all of these key points means quicker user adopting and greater positive sentiment being filtered to the wider business, which also helps with determining what a successful AP Automation project looks like.
4. Focus on the ROI
Once you’ve finished your findings and research, it’s important for you to concentrate on the potential Return on Investment (ROI). Luckily for you, the arrival on AP automation is anything but difficult to evaluate! To start with, figure the complete cost to process your invoices, and be real! – data entry, queries, authorising, printing, collaboration, discrepancy resolution, duplicate payments, support, and so on. Next, ascertain the funds. This segment of your calculation will be to a great extent dependent on the information you revealed in your research stage and incorporates ‘hard’ savings (diminishing staffing hours spent on invoicing and information entry, disposing of the expense of manual mistakes, storage and retrieval costs, early payment discounts, time saved on approval procedures and payments, and so on.) and ‘delicate/soft’ ones, similar to reduced time for approvers, better vendor relationships, increased audit capability, compliance and spending control. The best AP automation system available on the market at the moment tends to guarantee a return on investment during the 1st year.
5. Collaborate with stakeholders
By keeping stakeholders separate from the research, your business case has minimal possibility of turning into a reality. Each level of stakeholder, from administrators, IT, to AP staff functions will have various targets and need from an AP automation solution. Ensure the entire team understands the numerous advantages and is included in the whole process, research and dynamic program.
6. Set up everything
The last step in consolidating the AP automation solution is to separate it in quantifiable and practical information for all stakeholders to survey. Utilising the figures and measurements you revealed in your research stage, it’s an ideal opportunity to compose the math of your findings in a reasonable manner while featuring the significant advantages of the solution(s) you’re proposing.
Traps to avoid:
× Poor extraction software: While extraction is vital to diminishing manual steps if the OCR used isn’t precisely catching data forthright, at that point, you could be including extra tedious work for your group. Some solutions catch key information fields from invoices such as ABN, ABR, company name, total amounts, tax system, bank number when others are limited to the amount of information they can extract. A typical deficiency we see with some AP automation systems is the inability to recognise some key fields consistently. They may fail to perceive a supplier’s bank account for instance, which results in the impossibility to operate a background check. Further, what occurs if your provider changes the invoice form and the fields are in different places, under different names? – ensure the OCR is not template-based! In other words, having just a piece of the data caught or fail via automation will require a person to contribute and add the missing key fields which can end up being more laborious than manually performing the whole task without any automation.
× Inflexibility to meet your business requirements: finally, and this is more related to the well-branded solutions out there, some out of these systems required customised = cost/time/resources, which means that you are left with a poor solution. This implies you won’t augment the potential advantages of automation you believed you would be based on your business case. A good automation solution will be light-weight, on-premise or cloud, and be extremely configurable to meet the needs of many organisations requirements out-of-the-box!
A good AP Automation solution provider will ensure that the gap between your systems and theirs can be filled and that the solution will meet all your requirements in the shortest possible time frames and with the least amount of effort from both sides.
Cautious research and investigation can show how automation can make work processes significantly more efficient, decrease fraud, and move AP from a cost community to a benefit place.
For most organisations, the quantity of invoices being handled every year is expanding. If your organisation follows this pattern, the agony of paper and email-based AP will increase, as well. The right plan will decrease or kill the need to stumble through heaps of paper or email invoices and carry a noteworthy lift to an organisation’s primary concern. In any case, finding a hero for automation will require recognising and recording issues with existing practices and measuring the advantages of progress.