Companies don’t need to accept working with a manual accounts payable process, which is often costly, prone to errors and a drain on profitability. Wise CFOs and controllers are working to find ways to lower costs and streamline their invoice-to-payment process. Accounts payable automation tools are available, but where should a company start?
1. Map the Existing Process
Start by mapping your existing method of handling invoices. Odds are good that your current workflow steps need to be updated. You will want to start with a solid understanding of how the routing and approval scheme currently works, then eliminate those steps that you shouldn’t be doing in the first place.
As you go through this process, you’ll discover opportunities for improvement. You’ll gauge where there are bottlenecks, and you’ll be able to quantify things such as the time required to handle exceptions.
2. Map the New Process
With an understanding of what’s possible in terms of best AP practices, you can now lay out your new invoice-to-pay process as it should be. Start with invoicing, where you will receive digitized invoices or scan paper invoices early in the planning. Pay particular attention to resolving the bottlenecks and eliminating the problem areas you uncovered in step one. Work your way through the entire process, ending with automating your payments.
Paper checks remain as the payment method most susceptible to fraud, so making the transition to electronic payments should be a key part in laying out your strategy.
During this part, you can determine what type of reports you’ll need to manage the new process. Reports should provide statistics on a variety of topics, including the percent of invoices received in a digital format, and the number and dollar amount of discounts received.
3. Decide Where to Start
Automating the entire AP operation can’t be reasonably completed all at once. A phased approach will allow you to get the technology, staff and vendors on board as you initiate each phase.
This is a time when starting at the beginning may not be the most logical approach. You should consider starting with payments instead, for a number of reasons:
- You control the payment process.
- You’ll eliminate 80%+ of the time and cost of managing supplier payables
- Your vendors will be motivated to start using electronic payments because they will be paid faster. Compare that to the work they’ll need to do to generate digital invoices, supporting your front-end transition goals.
- You’ll improve your ability to take advantage of discounts because of quicker payments.
Considering the significant workload spent on managing supplier disbursements, payment automation can be an excellent place to start.
4. Implement in Phases
Consider that automating the start of the AP operations deals with digitizing invoices. Hopefully, your key vendors are working hard toward electronic invoices. For those vendors who aren’t, you’ll need to implement imaging and some form of intelligent data capture to locate and recognize vital invoice data.
What you’ll find is that streamlining each step in the AP process will require changes for your staff and technology, not to mention your vendors. Create an implementation plan that includes obtaining buy-in and providing training to ensure success.
5. Monitor Your Operation
As each piece of the process is automated, you can use reporting to ensure that your objectives are being met. For example, determining bottlenecks and confirming that they’re removed properly…. that you’re receiving more early-pay discounts. You will also be able to monitor overall payment activity and your vendors’ transition to electronic payments.
A streamlined accounts payable process can take an AP department from being a cost center to being a competitive advantage. The savings in time, paper and resources alone can offer a significant impact to profitability.
If you want to find the best place to start improving your accounts payable operations, know that the experts at ACOM can help you from invoice to pay. Call us at 800-699-5758 or fill out our online contact form.