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Historically, accounts payable was viewed as a function not worth investing in as it did not drive direct revenue. This has now changed. Automating accounts payable delivers a very high and quick return on investment, often making this the critical first step in a business’ digital transformation.  

But more than delivering an attractive ROI through reduced costs and improved efficiency, automation plays an ongoing role in making businesses more profitable. With the help of automation solutions, accounts payable can play an increasingly strategic role in the business:  

  • returning savings,
  • providing insights,
  • advising on cashflow management, and
  • helping to accelerate business growth.

Technology can also help shift organisational culture and behaviours to drive stronger performance, enforce greater accountability, and create better business outcomes. Here’s how accounts payable automation can help optimise working capital: 

Reduce Invoice Processing Costs 

Automation solutions have in-built Optical Character Recognition (OCR) technology to capture and digitise data from electronic or paper-based invoices. The OCR transmits data to the intelligent business rules engine, which drives the approval workflow for non-purchase order invoices, or the two-way or threeway matching process for purchase order invoices, before syncing with the ERP or finance system for invoice posting and payment. 

This means accounts payable staff do not need to manually enter information into company systems. Currently 22.6% of invoices contain exceptions, and many of these may be due to data entry errors. OCR technology captures data quicker, more accurately, and at a greater volume than a person can. This immediately increases efficiency and productivity and reduces costs. Further, automation ensures compliance and accuracy in spend as payments follow a pre-configured matching and approval process. 

Accounts payable automation is set to become more efficient with the rollout of PEPPOL e-Invoicing, which is the direct digital exchange of invoice information between finance systems. This is because less data validation is required than with OCR, increasing the rate of straight-through processing and reducing the number of invoices that staff need to get involved with. A sophisticated approval workflow is still required to resolve invoice discrepancies and manage approvals for PEPPOL e-Invoices as well as traditional invoices.  

Automation enforces accountability

Automation forces organisations to allocate roles and responsibilities to managing, processing and authorising payments. Companies need to set their business rules, map out their workflows, determine who can do what, and decide how to handle specific exceptions.  

This undertaking brings clear accountability to payments, immediately strengthening internal compliance. Having a robust system in place also helps reduce an organisation’s payable balance. With automation driving efficiency and ensuring compliance, companies no longer pay late fees and charges or duplicate or fraudulent invoices. Further, all exceptions are identified and resolved to ensure the company pays the correct amount for the goods and services it orders. 

Procure-to-pay automation

Procuretopay automation inhibits ad hoc spending by requiring a formal approval process and purchase order for procurement. Purchase orders can be raised in the ERP or a separate procurement system, or through an integrated procure-to-pay solutionThe raiser makes a purchase requisition, supplying purchase details and any supporting documentation 

With procure-to-pay automation the business rules engine then generates an approval task for the requisitioner’s manager, or the next person in the approval chain. When approved, the solution will automatically generate and email a purchase order to the preferred supplier. 

When the purchase order invoice comes into the organisation, the solution will perform a matching process against the purchase order in the system and the goods receipt, before instigating the exception management process if required. These checks verify the business has not been over-charged.  

Automating the procuretopay cycle ensures transparency. All procurement needs to be appropriately authorised and each purchase has a full audit trail and history. This means there is significantly less unjustified or excessive spend. There is also less trade with unauthorised suppliers, who may not offer the most competitive rates or terms.  

A procure-to-pay solution not only brings the payables balance down by bringing new rigour to procurement, but also delivers clear cost savings from automating a time consuming, tedious, often error-ridden manual payment process.  

Strengthen accounts payable performance

Automation allows organisations to track and report on the performance of the accounts payable department itself. This helps support a performance-orientated culture. Accounts payable departments can set internal targets, such as:   

  • percentage of invoices linked to a purchase order,
  • invoice processing times,
  • invoice exception rate,
  • cost to process an invoice, and more.

Some automation solutions offer a dashboard displaying accounts payable activity and performance. With these results measurable over time, accounts payable departments can drive for greater efficiency and better outcomes by working strategically to meet and exceed targets. 

For example, to lower the exception rate, accounts payable staff may proactively advise suppliers on how to issue their invoices and refuse to process any that contain inaccuracies or do not adhere to guidelines. With less exceptions to manageaccounts payable can attain a higher rate of straight-through processing and lower operating costs.

Further, accounts payable automation can provide data and insights that can inform cashflow management, such as:  

  • Spend analysis
  • Monthly accruals
  • Aging reports
  • Day Payables Outstanding, and more.

Get more from suppliers

By dramatically cutting processing times and maintaining a track record of on-time payments, buyers build better relationships with suppliers and are in a stronger position to negotiate more favourable terms from their suppliers. This could involve:  

  • greater discounts for early-bird payments,
  • longer payment terms,
  • volume discounts,
  • periodic rebates.

Automation frees up capacity in accounts payable for more strategic work managing suppliers and securing discountsWith all supplier master data located in one centralised, online location, it’s easier for accounts payable staff to review contracts and track and report on supplier performance against service level agreements.  

With data readily to hand, accounts payable staff can generate value for the business by advising on: 

  • where money is being spent,
  • where it can be saved,
  • which suppliers should be retained,
  • how to optimise working capital.

In conclusion 

To sum up, accounts payable automation helps optimise working capital by:  

  • Reducing processing costs
  • Ensuring the business pays what it owes and no more
  • Eliminating late fees and charges
  • Providing a payment track record to negotiate better terms with suppliers
  • Bringing rigour and accountability to procurement and payments
  • Providing data insights to inform decision making
  • Helping to drive a performance culture across the organisation.

Account payable automation frees up additional working capital to meet expenses, make investments, and generate additional revenue. The upside is tremendous when people, process and technology work in unison. 

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