Michael Cichy, VP Americas Operations at Palette Software explores how Invoice Workflow Automation could free businesses from inefficiency in Accounts Payable
How much is your business wasting with inefficient Accounts Payable processes? According to a new estimate, organizations are leaving millions of dollars’ worth of annual savings on the table by relying on manual AP processes.
This is because manual processes are inefficient, particularly when companies receive most of their invoices outside of a centralized, digital system. Handling and processing invoices, purchase orders and employee expenses using paper-based processes is slow and arduous, leading to issues that delay things further. Data entry errors and slow invoice approval times are a headache for finance departments and can cause tension with suppliers. All of these issues threaten the business’ bottom line.
Encouragingly, however,a recent report by Paystream Advisors found that70% of businesses are currently using or planning to use automation solutions in AP. The 2017 Invoice Workflow Automation Report, which surveyed over 400 back-office employees across several industries and market segments, revealed that those companies that have implemented invoice workflow automation (IWA) solutions do see quicker approval times on invoices (72%), greater productivity (57%) and reductions in processing costs (46%).
Other benefits reported include improved visibility over liabilities (26%), improved compliance with regulatory requirements (21%) and a reduction in late payment penalties and interest (21%). Despite this,30% of organizations surveyed said they are not planning to implement IWA irrespective of the benefits to be gained. So why aren’t all organisations implementing IWA solutions?
One key factor that is preventing organizations from adopting IWA solutions is cost – a perceived lack of budget is a key factor holding companies back from automation. Almost half (46%) of businesses in the lower middle market that have not automated their AP processes, cite a lack of budget – ora belief that these solutions will not bring return on investment – askey deciding factors.But IWA solutions help most organizations achieve improvements in employee productivity and lower processing costs, helping to improve the bottom line.
An additional factor is a perception held by businesses that their processes are too complex to automate. Large companies process tens of thousands of invoices each year, and with a large supplier base and a complex organizational structure, conducting invoice verification, validation, reviews, approvals and payment can be complicated. As such it can be difficult for larger companies to imagine how their AP processes could be automated, and easy to assume that implementing a solution would involve time, investment, and disruption that may not be worth the risk.
Given the significant benefits to be gained from advanced IWA solutions, clearly decision-makers should be educated on the value and return on ROI they can bring. Deployment can also be surprisingly painless, since software is available that is flexible enough to meet the needs of even the most complicated invoice management lifecycles.
Some sectors are leading the way
In terms of improving AP efficiency,the financial sector is leading the way. The sector has been historically more progressive when it comes to back-office automation, and AP software is no exception. 60% of finance, banking and insurance respondents have adopted an IWA solution as opposed to only 22% of respondents in education, for example.
What’s clear is that there is adisconnect between the barriers preventing businesses from investing in IWA solutions, and the benefits to be gained. Most organizations report their main pain points are manual data entry and inefficient processes, manual routing of invoices and high volumes of paper invoices: but it’s not always easy to determine the right solution for their needs. So how should organizations approach finding out what will work best for them?
Achieving IWA success
In order to choose and implement the right invoice workflow solution, organizations should properly map out their current state of processing. This means understanding the typical (and atypical) lifecycles of its invoices—all the elements that go into the fulfilment of an invoice, such as supplier characteristics, approval routing scenarios, budgets, and reporting requirements.
To achieve this, organizations should ask questions such as: how many invoices are we processing annually? How many suppliers do we have? How much staff resource does it take to review and approve invoices? Is the AP team centralized or decentralized? What back office systems does the AP rely on, and does the AP team utilize the organization’s ERP solution?
The answers to these questions will help to build a map of invoice-handling processes, and this detailed map can be used to identify areas of improvement in current processes.
Rather than forcing businesses to conform to the solution’s capabilities, the best IWA solutions adapt to an organization’s unique AP needs, and address the entire invoice lifecycle. The choice depends on the organization’s AP operations and will vary according to their size, industry, systems and processes and revenue.
Ultimately, organizations looking to improve productivity, speed up invoice approvals and reduce processing costs need to move towards an automated invoice management environment. If they don’t, they risk continuing with inefficient processes, leading to stagnation, and a diminished bottom line.
 Organizations with revenue between $101m and $501m