Automating Invoice-to-Pay

Transcription

1 Automating Invoice-to-Pay a publication by and

2 Automating Invoice-to-Pay: The Business Case Introduction Everywhere you look technology is changing the way we live and work. We take pictures with our phones and talk to our bosses from the beach or the ski slopes. Soon enough a driverless car will take us to and from business meetings. Yet, many businesses are still processing their invoices and payments manually. Certainly there must be some technology that improves this very people-intensive and errorprone process. And there is. But before we discuss how and why invoice-to-pay automation helps, let s take a look at some of the issues plaguing most accounts payable departments. The Irritants of a Manual AP Process While most professionals who work in accounts payable do their very best to make sure the invoice-to-pay process runs smoothly, it often hits a few bumps in the road especially when the process is primarily manual. Like every other department, AP has limited: Time People and Money

3 There s no getting away from it; manual processes are people- and time-intensive and this makes them expensive. What follows is a look at some of the more common issues that cause the overuse of AP s limited resources. 1. The ongoing debate of who gets the invoice first is a common issue. AP would like it first so they can track the invoice but often times purchasing demands to be the initial recipient. Even when the policy mandates the invoice go to AP first, some purchasers will direct suppliers to send the invoice to them first. 2. When invoices are sent manually, approvals for payment are often delayed. Most purchasing professionals are busy and sometimes forget to approve invoices. Without some sort of automated monitoring process, some will continue to drag their feet. There are two unfortunate results of tardy approvals. The first impact of a delayed approval or an inefficient invoice handling process is the loss of early payment discounts, which often represent the best financial return available to any organization. The second impact is late payments, which can result in hefty late fees. 3. Without a doubt, humans make keying errors when entering data that lead to inaccurate payments or time wasted identifying and fixing the errors. With several parties wanting visibility into data, waiting for invoices to be keyed in can lead to inaccurate forecasts and potentially impaired decision making. 3

4 4. In a manual process, invoices do get lost. Sometimes they are missing in the mail and occasionally misplaced in your office. Either way, it does nothing to improve vendor relations and it takes time and effort to get a new one. And of course, a lost invoice can suddenly appear, usually after the vendor has sent a replacement and you ve paid it. 5. When there is a delay in getting invoices processed, vendors will send additional copies of the same invoice. Needless to say, they rarely, if ever, mark it as a duplicate invoice. It requires resources to identify duplicate invoices and weed them out of the process. Occasionally these duplicate invoices do get paid. And as readers are painfully aware, it is the rare vendor who voluntarily returns a duplicate payment. Rather, you have to spend your own human resources to recover the funds or pay someone else to do it. 6. As a result of inefficient practices, there is an increase in the number of vendors calling to look for payments. Resources must be devoted to answering the calls (or s), researching them and responding to the vendor. These problems often lead to frayed relations and finger pointing between the accounts payable department and purchasing staff. When these issues are removed, the two groups not only get along better but are able to work together to achieve process improvements, enhanced analytics and improved efficiencies. While we wish we could 4

5 say that most companies only have one or two of the above issues, the reality is that most who are still using manual processes experience all or almost all from time to time. Minimizing the Pain It s clear that automation is one of the best ways to eliminate some of the inefficiencies introduced by manual processes. For starters, in an automated environment, keying errors virtually disappear. So time that was previously spent trying to find and fix such mistakes can be spent on other tasks. With digital tracking and a more efficient process, approvals on invoices are rarely delayed in an automated environment. Hence, it is a lot easier to earn all early payment discounts and pay vendors on time. This means there is no legitimate reason for a vendor to send second and third copies of an invoice. The reduction in the number of these extra invoices frees the staff to work on more value-added tasks and lessens the likelihood that a duplicate payment will be made. What s more, there should be a decrease in the number of calls and s from vendors looking for payments. In an increasingly virtual world, everyone wants to see the data at the same time or close to it. There can be no claiming the invoice was never forwarded for approval when there s an electronic audit trail for all to see. That ends a good deal of the finger pointing. It also means the early visibility into the data that everyone wanted is available. 5

6 For organizations that are concerned about profitability, efficiency, and maintaining a competitive position in their industry, doing nothing to improve the accounts payable process is not an option. Selling AP Automation Alas, most professionals don t just make up their minds that their company needs to automate their invoice-to-pay process and do so without further ado. Inevitably, approval and budget allocation are required from senior management. When making the pitch, be realistic in what you propose. Before you get started, you should try to identify an executive sponsor who is likely to be sympathetic to the automation cause. Make sure to have a good understanding of what is likely to be approved. If you are unsure, discuss the matter ahead of time with your boss. Take the time to address all of the issues in a way that is easily understood with the full reasoning on how automation will impact these issues. If you can show tighter internal control, better regulatory compliance and/or a way to deter fraud, you ll have a higher chance of success. Have a solid understanding on the cost savings so you can show the positive impact on the bottom line. And, make sure you have the numbers to back up what is being shown. Sometimes this requires additional help from the solution provider. Lastly, and not to be overlooked, are those pet issues near and dear to the hearts of your senior management. If your invoice-to-pay automation project can help with those, your chances of getting approval skyrocket. Even if you think those issues are irrelevant, include them when building your business case. Think of them as greasing the wheels to your success. 6

7 Building The Business Case: Checklists The benefits of automating the invoice-to-pay process are patently clear and the cost of not adapting to the new age will be high as your competitors take advantage of automation to reduce their costs and become more efficient. Use these checklists to help you build the business case for getting invoice-to-pay automation approved for your organization. Establish the problems your business is facing in their current invoice-to-pay process Invoices delayed in getting to AP department Extensive data entry errors Duplicate invoices being processed Delayed payment approvals Late payments Increase in volume of invoices and payments Poor vendor relations Missed early pay discounts Fraud and security concerns Evaluate solution providers that solve those problems Vendors able to submit invoices directly to automation solution Invoice data capture Automated approval workflows Scheduled payments in advance Automatic remittance detail sent to vendors Guaranteed protection against online fraud Mobile approvals 7

8 Automating Invoice-to-Pay: The The Business Case Case Develop your required list of features Automatic capture Advanced approval workflows Electronic payment support Integration with your ERP Processes check payments on your behalf without intermediary accounts Guaranteed protection against online fraud Build the business case Clearly spell out the issues Show the positive impact on the bottom line Explain the improvement on internal controls Interview solution providers Does your solution contain all the features I need (i.e. invoice capture, approval workflows, electronic payment support, no intermediary accounts)? Does your solution integrate with my ERP? What makes your solution different from competitors? How long will implementation take and how will it affect my processes? How easy-to-use is the interface and how much training is required? What does the training process look like? Can I speak to some references? How much does it cost? (Wouldn t it be nice if this weren t an issue?) 8

9 Conclusion The benefits of invoice-to-pay automation go beyond the obvious cost savings and efficiency improvements. It is critical that when you build your business case you tie in the cost savings as well as the efficiency improvements. If management can see the clear cost-savings, they are more likely to greenlight your proposal to automate your invoice-to-pay process. As we hurtle into the future, the accounts payable function will become more analytical and reporting focused, and less transactional. Have you made the move to ensure your organization is one of the best-practice leaders in that change? Automating your invoice-to-pay process is a big step in that direction. About MineralTree MineralTree provides the easiest to use Accounts Payable (AP) and Payment Automation solutions for finance professionals at growing organizations. MineralTree streamlines AP, giving customers unparalleled visibility and significant cost savings in an affordable, integrated platform that is guaranteed secure. For more information visit or info@mineraltree.com About Proformative The leading online professional development platform for the office of the CFO, Proformative enables finance professionals to make smarter business decisions, connect with their peers, build skills and advance careers. In addition to an unparalleled peer-to-peer knowledgesharing community, members also have access to Proformative Academy, which provides excellence in online learning through highly focused courses taught by experienced finance practitioners. Based in Silicon Valley, CA, Proformative reaches 2 million users annually, ranging from CPAs and financial analysts to Controllers and CFOs, from startups to Fortune 500 companies. Learn more at 9