After a tumultuous year that saw traditional ways of working upended and altered, businesses and financial departments in particular, have adjusted their ways and are getting comfortable with the idea of digital transformation and its relationship with both remote employees and the "new normal." That said, no industry can afford to get complacent.
The world and the business environment with it continue to change at a rapid pace and, if the finance department is to lead from the front lines, it needs to integrate technology and digital tools into its processes to stay ahead of competitors.
Companies agree; according to a survey by Financial Director, the majority of finance leaders think that their department's digital transformation projects are lagging behind their competition. In fact, the survey found that 54 percent of respondents were either behind or not up to date in those projects, another 18 percent didn't know how they compared to the competition, and only 7 percent thought that they were completely up to date.
You might ask why are these projects so important, and why should finance leaders even care? The answers can all be found through Accounts Payable Automation.
The cost of a manual accounts payable (AP) process
Accounts payable is the lifeblood of a business. It is the system by which any business manages finances with their clients and suppliers by identifying and completing outstanding payments. At the most simple, superficial level it is the invoice in/payment out process.
Throughout history this was a primarily manual process with handwritten invoices and carefully counted out cash payments. Over time things got more complicated as business got larger and the number of transactions increased. Today, incoming invoices (and other documents) can number into the thousands. Trying to manually process all of these – and that means each invoice alone – is a time-consuming, labour-intensive, error-prone, rising-cost activity that relies heavily on paper and is dependent upon human accuracy.
The result? A system that can easily and rapidly spin out of control, open to a real possibility of error and fraud occurring in the early stages (as well as throughout). Not to mention the increasing costs associated with operating as well as reviewing and fixing issues. And, when suddenly the traditional office environment was upended and altered, nobody was in the office to receive and process anything. If somebody went back to pick up papers, they risked losing them in transport (assuming that they were all received). Adjustments had to be made. That adjustment was automation, specifically invoice payable automation software.
And, since automation implied the ability to continue operating, the whole idea of digitalisation took on a new meaning.
Nick Ludlow, regional vice president at Chrome River, believes that "there is a correlation between the number of finance leaders who have only just started their digitisation projects, and those who feel that they are behind the curve compared to their peers. Likewise, the number of companies who have almost completed their digital transformation is similar to those that think they are ahead of the competition."
The persuasive benefits of AP automation
The primary – if not only – focus of finance department digitisation should be the incorporation of AP automation. More specifically, an intelligent automated invoice process. This is how a business will achieve a cost-efficient, streamlined accounts payable process. Even better, thanks to cloud-based, software-as-a-service (SaaS), customisable platform payable automation is accessible to any size business and can deliver a fast, demonstrated return on investment (ROI) at a lower cost than ever before.
The reason is that accounts payable automation replaces the labour-intensive, manual tasks. It alleviates unnecessary administration, streamlines the invoice approval and payment process, decreases costs, and of course eliminates human error caused by manual data entry. More specifically, an invoice automation software process:
1. Saves time and money
AP automation replaces manual tasks and can labour at the same detail-oriented level all the time, every day. It reduces processing time from days to hours (or even minutes) which in turn drives more than £10.47 savings per invoice while reducing invoice processing and approval workflow time by 50 percent. When you consider that digitalising client and supplier documents is 50 to 75 percent more cost-efficient than paper processing... Well, what business doesn't want more work completed for less cost?
2. Automation benefits and incentivises employees
Manual data capture, invoice categorisation, and routing can lead to errors, loss of information, and mismanagement. Accounts payable automation, however, removes redundant, time-consuming administrative tasks from daily duties and gives staff more time to focus elsewhere.
3. Improves security and supplier relationships
AP automation’s end-to-end traceability and transparency make for a reliable, secure accounting process. It also allows financial departments to put authentication mechanisms in place, as well as secure classification (which is a record of historical classification decisions that can function as a source document) and electronic archiving for all operations.
This level of traceability means that a business can respond within minutes to payment inquiries, audit requests, or even just an operations assessment process.
4. Share insights and alignment with stakeholders
Before integrating a payment automation solution, it’s best practice to get buy-in from leaders in your accounting and finance departments, as well as purchasers, suppliers, approvers, and senior management. In fact, from anybody who interacts with the invoice and payment process and could therefore be affected by automation-induced change. This consultation process provides a shared understanding of the day-to-day challenges each stakeholder faces, helping to streamline and optimise working relationships and processes.
Additionally, as records and invoices are stored in one place, stakeholders get full visibility of the accounts payable process and its benefits. You can also analyse the data available to uncover trends and insights to support cashflow management and financial reporting.
5. No more late payments
Traditional AP invoice processing is error-prone, time-consuming, and costly. Until recently, accountants have had to push through invoices as quickly and accurately as possible to honour payments and satisfy vendors. This mounting pressure can lead to mistakes, delays, and late, inaccurate invoices.
AP automation uses intelligent technology to optimise the invoice process so that prompt service delivery is all but guaranteed. It also boosts efficiency and reactivity and ensures that there is less time spent handling and searching for paper documents. In fact, a business now even has the opportunity to develop a new profit center in their finance departments by replacing late payment fines (aka rapidly adding costs) with early payment discounts.
6. Promotes continuity of services
One of the best things about payment automation – especially a cloud-based software platform – is that it is a constantly occurring process. This has caused a mindset shift among senior management who in the past might have been hesitant to let employees work remotely for fear of a dip in quality or productivity that directly affected the organisation's bottom line. There is also the extra reassurance that no matter what happens, the entire payable process from invoice to payment will still run.
7. Instant and centralised access
In a manual based invoice processing system, employees used to have to chase paper. From collecting documents to input, transporting invoices for approval or further review, moving everything into storage (or looking for and retrieving it)... All these time-consuming and labour-intensive tasks throughout the entire process are replaced by automation. However, the automated system goes a step further because it centralises all of the data so that it is easily accessible and managed through a secure web portal and customised dashboard. Company operations really do become just a keystroke away.
The future of finance
While there was never a question of modernisation, now with the sudden realisation that change is needed just to keep business afloat, there is more pressure than ever to find ways to improve, faster. Now, with the technology in place to ensure that teams are connected and that it is easy for accountants to do their jobs from anywhere, only one question remains: does the finance department want to lead from the front using automation or sit back, ignore the cost of doing nothing, and miss out on all the benefits?