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Learn How to Maximize Accounts Payable Workflow Automation

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Monica Neumann

PMP | Sr. Manager - Finance Transformation

In today’s digital business landscape, pushing paper and manual approval processes are no longer a practical way of work. Accounts Payable workflow automation infuses the invoice payment process with cost-effective efficiency – reducing errors, mitigating fraud, and strengthening vendor relationships.

Forrester Consulting found that a manual AP process costs companies an average of $30 per invoice – compared to an average of $3.50 in a fully automated workflow. That’s an 88% reduction in processing costs. Business Insider reports that Finance organizations can also expect a 73% faster processing cycle when AP automation is done right.

Even finance teams that initially resisted moving away from the traditional, manual way of work are embracing automation. Gartner reports that finance leaders consider 89% of accounting activities highly automatable – and nearly 75% plan to use automation to tackle their top priorities this year.

But implementing automation is not as easy as it looks – and without a seasoned team, most enterprises struggle to achieve expected benefits. Adding automation without optimizing the AP process, for instance, simply makes a poor process run faster. Inexperienced teams also struggle to identify and solve for process exceptions that will cause automation to constantly break.

Read on to discover actionable tips for maximizing the benefits of Accounts Payable workflow automation at your enterprise.

Manual AP processes create many pain points

While specific workflows vary between companies, an AP workflow involves these steps:

  1. Verify a submitted invoice is correct. That includes validating the invoice against other purchase-related documents like order receipts and purchase orders.
  2. Resolve exceptions. If missing information or discrepancies arise, the invoice is sent to those who can fix the errors. Then the approval process starts again.
  3. Seek necessary approvals. When an invoice is thoroughly verified – and all discrepancies are resolved – it is sent to a predetermined invoice approver.
  4. Invoice payment. After the invoice is approved, payment is processed and the invoice is closed.

Performing this process manually creates multiple pain points. Assigning human workers to physically track down documents, manually enter data, and obtain approvals in-person or via prolonged email threads is rife with the potential for errors. Too often, that leads to duplicate payments or overpaid, underpaid, or missed invoices.

Manual AP processes also create a lack of internal controls and visibility into invoice status for the organization.

With such haphazard and inefficient execution, it’s not unusual for invoice approvals to take 30-90 days, Business Insider reports. These lengthy payment delays can significantly impact cash flow and supplier relationships. They can also increase costs through time-consuming rework, the loss of early payment discounts, and credit holds caused by late payments.

Manual AP processes increase vulnerability to fraud as well – one of the biggest challenges Finance Departments face. From check tampering to invoices that don’t match actual expenses, the Association of Certified Fraud Examiners states that enterprises lose 5% of their revenue annually to fraud.

Accounts Payable workflow automation resolves these pain points, eliminating human error, catching signs of fraud, and significantly decreasing the time and expense consumed by AP processes.

Automatic reminders ensure approvals don’t fall off the radar of busy staff in other departments. Automation can also eliminate the confusion and mistakes that accompany complex approval matrixes, utilizing system rules designed to select the right approver based on payment thresholds, user, or type of expense.

5 smart tips for optimizing Accounts Payable workflow automation

However, implementing Accounts Payable workflow automation is a complex task. While nearly 70% of respondents in a Shared Services and Outsourcing Network (SSON) survey were automating their AP workflow or planned to do so in the next six months, only 10% had achieved full optimization.

These five steps are key to getting Accounts Payable workflow automation right:

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1. Map the process and identify pain points before you automate.

Automating a poorly executed process doesn’t solve AP problems – and often magnifies them. For instance, automation won’t prevent other departments from taking a month to approve invoices unless process improvements are made.

Unfortunately, most businesses lack the time or expertise to fix underlying process flaws before applying automation. Partnering with an exceptional AP consulting provider delivers the business and technical knowledge to thoroughly analyze and optimize your AP process.

Look for a partner who utilizes a project management approach, including detailed process walkthroughs, as-is and to-be flowcharts, and optimized standard operating procedures (SOPs).

2. Implement best practices for managing master vendor data files.

Administrative tasks aren’t a focus of AP teams. But failing to formalize a process for updating and maintaining your master vendor data file makes it impossible to keep your records accurate, complete, and fraud-free.

AP workflow automation can’t function properly if the master file isn’t clean – struggling to automatically locate, validate, and utilize vendor information.

Unfortunately, managing the master vendor data file is a common AP challenge: 67% of respondents in a CFO & Controller poll admitted their file “could use a little cleaning.” Nearly 20% called it “a total mess.”

Best practices include implementing a structured process for adding vendors to your system, placing controls around who can add or update vendors, validating vendor data to reduce fraud, and cleansing the master file regularly.

3. Seek buy-in from invoice approvers.

Approving invoices can be a tedious, low-priority chore. Aligning business leaders to the ways automated AP workflows will improve their work life is essential for speeding the process.

Demonstrate how automation provides an intuitive interface that simplifies and streamlines approvals. For instance, approvers can receive invoices with context like previous invoices from the same vendor.

Automation makes it easier for approvers to ask questions and invite others to view invoices as well. It also adds controls like dollar amount thresholds that ensure pricey payments won’t be processed without the right approval.

4. Create a unique and single location for vendors to submit invoices.

No matter the workflow, a smooth AP process starts with a single location for vendors to submit invoices – ensuring nothing falls through the cracks. When an invoice is submitted to the department overseeing the work, for instance, it may never get forwarded to AP.

It’s also vital to create a secure AP mailbox that’s only used for invoice submissions. That eliminates the chance of other documents confusing the automated system.

5. Choose the right automation technology for your enterprise.

As demand for Accounts Payable workflow automation grows, the number of technology choices becomes daunting.

Whether your goal is streamlining workflows, reducing approval times, eliminating late fees, or something else, determining your biggest driver for implementing AP workflow automation is a critical first step.

But with so many diverse technology options marketing different strengths and capabilities, many companies struggle to avoid buyer’s remorse.

For instance, some automation options are truly payment solutions, with AP automation as an add-on feature. Others rely on a matrix-only system for approvals that doesn’t consider when someone is out sick or leaves the company.

In many cases, simpler workflow automation needs can be addressed by technology like SharePoint. More robust requirements are often met by off-the-shelf solutions or automation capabilities within your existing ERP package.

A reputable AP consulting provider can help you narrow down the overwhelming number of choices and implement the best solution for your company. Not only can they adapt to the software your company already uses, but they can also perform an assessment to recommend new tools or apply ones they have already used successfully at other businesses.

Realize the promise of AP automation

Accounts Payable workflow automation helps you optimize the invoice payment process. But the complexities of leveraging automation technology causes many Finance Departments to fall short of expected benefits.

Partnering with an exceptional AP consulting provider can help you implement a solution that solves process weaknesses, works the way your company works, and positions your business to better compete in today’s fast-moving business world.

Written by

Monica Neumann
PMP | Sr. Manager – Finance Transformation
Monica leads Finance Transformation Projects, including changes to processes, data, systems, roles, and responsibilities. With more than 15 years of accounting, consulting, and business experience with companies located in the US, LatAm & Europe, Monica has a strong track record leveraging technology to improve processes in the fields of Capital Project Accounting, Accounts Receivable, Accounts Payable, General Accounting & Financial Close, and Indirect Tax. Monica is a Certified Project Management Professional (PMP)®. She holds a dual bachelor’s degree in Public Accounting and Business Administration, and a Master of Science in Accounting from the University of Illinois Urbana-Champaign.

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