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AP Automation: How It Empowers the Accounts Payable Departments

The advancements in technology have drastically changed the way accounts payable departments function in business payments transactions. The level of change has increased in recent years as increasingly organizations have adopted modern solutions. Accordingly, the role of AP staff has begun to move away from data entry to a more value-added role.

Traditionally, the core function of an AP department has been to receive paper invoices and manually enter these transactions into the accounting system. The key skills that made an employee valuable were speed and accuracy, or the ability to enter in invoices as quickly as possible without any making mistakes.

Globalization caused many organizations to rapidly increase the number of transactions processed. Shared services have come into the picture to create efficiencies in processing. But, in a paper-intensive environment, more volume created the need to increase the team. More and more businesses began to turn to the outsourcing of AP functions.

Content management systems emerged to help AP teams better manage paper, allowing for scanned copies of invoices to be stored and later retrieved. Advanced data capturing tools took this process ahead, allowing for crucial invoice data to be extracted from scanned images and verified automatically by the system for a seamless transfer into the accounting system. Moreover, the system provided the functionality to route invoices for approval based upon configured business rules. This functionality streamlined the process and provided an accurate audit trail of every step in the invoice approval process.

Content management systems have helped to reverse the trend toward outsourcing, creating ways to process increased volumes of transactions with less staff. It allows skilled employees to focus on more essential finance operations. Automation has become an important part of the AP department, mainly those operating in a shared service environment, where the ability to process a large number of transactions rapidly and accurately with less staff is required to achieve the expected ROI.

While many have feared that adoption of technology would mean the end of careers in accounts payable, it has actually preserved and improved them. With the latest technologies, companies find they can operate AP economically without outsourcing this function.

The Impact of Automation on Accounts Payable

Automation has brought many distinct advantages to accounts payable operations that have changed the way they operate:

Removal of Document Filing: AP teams traditionally used to keep paper invoices on-hand for one or two years and then ship them to a store. In a modern AP department, invoice storage is not required because records are available digitally in the content management system. These records can be automatically removed based upon document retention policies. This eliminates not only the storage costs but also the fees related to retrieval and clearance of records.

Retrieving and then re-filing invoices during an audit can also create an enormous burden on an AP team. With a document management system, these records can be retrieved without going to the physical files. All invoices are located in a single repository, which significantly simplifies finding information when resolving invoice matching errors. Automation eliminates a task that is both time-consuming and annoying.

Reduction of Data Entry: The usual task of an AP team member is to review invoices and enter all related data into the ERP system – repeatedly, working as quickly as possible while not sacrificing accuracy. The ability to complete this process quickly and with minimal error has been a key skill for an AP staff member.

Automated data capture reduces manual keying by identifying the data from the image, including invoice number, total due, due date, and line-item details. Since invoices vary from supplier to supplier, robust solutions find the data regardless of where it resides on the image by combining an array of methodologies, including searching for specified data labels. Data capturing tools can also remember where it found the information the next time that supplier’s invoice comes, further accelerating processing when the invoice format is seen again.

Once the data fields have been captured, any data errors can be corrected. Since major errors are reduced, and the data is authorized against specified business rules, accuracy is greatly increased.

Acceleration of Cycle Time – Automation allows invoices to move faster through the entire process, from invoice receipt to payment. Workflows enable users to set rules for evaluation of documents and automation of tasks that have generally required movement of paper within the company, such as approval of invoices.

Standard approval rules are created to direct the invoice to the appropriate approver and to automatically require further approvals based upon configured business rules. Every approver has the choice to view the invoice, select the suitable general ledger coding, and send the invoice for further approval as required.

Automation replaces the time-consuming process of sending invoices to approvers and back to AP through emails. It facilitates invoice matching discrepancy resolution for purchase order invoices between AP and purchasing departments. Advanced AP teams find several creative uses of a workflow to streamline communication and invoice processing.

Workflows provide an extensive audit trail of every step in the invoice approval process. This helps find bottlenecks using precise and accurate data so management can take action against non-compliant staff. Finally, there is a significant reduction in the invoice approval cycle time – means that invoices are approved quicker and available for payment earlier. 

The New Focus of Modern AP Team

As AP teams increasingly adopt automation, their role within the business is developing. Modern AP departments are focusing on providing more business-critical activities. Here, we present a few examples of how an AP can leverage the resources created by automation to enhance value:

Find Financial Opportunity – AP teams increasingly use a direct position to influence their companies’ financial success. The most tracked financial opportunity is the ability to take discounts recognized on invoices. AP team can evaluate contracts to ensure that suppliers are set up properly in the supplier file to replicate negotiated discounts. Further, these negotiated discounts can be checked during the data capture stage to ensure they are being given appropriately.

Enhance Compliance – AP departments use the additional time created by automation, and the tools, to boost consistency and compliance with policies and procedures. They are developing specific rules to ensure compliance and act upon compliance violations by suppliers or internal staff. With an automated system, the AP team can build new rules to ensure audit checks that were too labor-intensive to be practical in the manual invoice routing process.

Focus on Customer Service – AP teams are often judged by their companies based on their response to small things. Any unpaid invoice can result in escalation to the higher management, ruining the AP department’s reputation.

Quality customer service is attained by having a committed team whose priority and focus is to respond to and resolve customer service requests from suppliers and internal staff. AP automation technologies make active customer service possible because they speed up the approval process. The software can be used to check invoice status, retrieve invoice copies, and advanced workflows facilitate invoice approvals and resolve invoice matching discrepancies.

The New Responsibilities of Modern AP Team

As automation enables AP teams to gain confidence in their leadership and create consistent control over the daily invoice flow, AP departments will find that they have the chance to take on new roles to expand their teams’ role.  Here are a few examples of increasing the strategic role of the AP function:

Managing Cash – The modern AP teams will continue to have a more strategic role in supervising the company’s cash flow. Working with finance departments, AP teams will play a key role in determining the best ways to leverage cash and decide whether suppliers will be paid on a timely basis or delayed. 

Managing Suppliers – AP staff will take a more strategic role in managing supplier relationships, working with buying departments. Armed with new metrics and data, AP teams will challenge suppliers with high rates of matching discrepancies to ensure that invoices match issued purchase orders.

Optimizing Payments – AP teams are now able to find financial opportunities through discounts in their purchasing and payment card programs. Occasionally, AP operations have been able to earn discounts that exceed their cost of operating their entire departments.

AP has the chance to maximize the company’s financial return by creating a multi-solution payment strategy that matches each supplier with the best method of payment to get the best return. This plan will need constant review and adjustment as market conditions change.

An advanced AP system makes invoices available for payment at the earliest possible point, creating maximum flexibility in using the best timing and method of payment.

Compliance Management – AP teams are increasingly taking new and significant roles in monitoring compliance with business policies and procedures, including those developed and implemented by other departments. They are also using advanced reporting tools to conduct self-audits, finding their errors before internal or external auditors find them.

Modern SutiAP staff will need to enhance their skills to succeed in this new environment. Quality customer service will be a foundation for advanced accounts payable operations. Adopting metrics and ad-hoc reporting is essential to continuous development through the identification of bottlenecks. Data should also be used to find trends in invoice matching discrepancies, such as common items producing errors or problematic suppliers. Modern AP staff should be provided with access to pull-out data and develop custom reporting without approaching the IT team. A robust AP software solution makes this possible through intuitive reporting tools and superior out-of-the-box dashboards and reporting.

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