Truths About Accounts Payable Automation No One Told You

May 8, 2015 Blake Evans

If you’re thinking about automating your AP process, you’re probably excited about getting rid of paper and streamlining your invoicing—and rightfully so. Automation can reduce your operational costs and speed up invoice approvals.

But simply automating a bad flow without process improvement will speed up bad data and bad processes. The mere act of automating your AP process won’t solve all of your problems, because AP automation focuses on internal processes to the detriment of external ones.

In fact, focusing on process improvement and getting better data from your suppliers goes a long way towards not only automating, but improving, your AP process. By choosing AP automation, you’ll leave substantial opportunities for improvement—as well as savings—on the table.

Here are just a few points about AP automation that you may want to consider as you choose a solution.

Standing alone, AP automation doesn’t eliminate certain steps—it just shifts them elsewhere.

Your new automated system works great, so long as everything goes according to plan. But what if it doesn’t?

  • What if your vendors submit paper invoices, or invoices in formats that aren’t compatible with your system? You’ll have to revert to your old process of data entry or scanning to add them to your system. With manual data entry, the chance of errors increases exponentially. Even with using OCR or capture technology, there are still steps needed to verify the results or correct poor quality images - resulting in shifting time from data entry to data verification.

  • What if your system can’t match the invoices to purchase order line items or to the right vendor? Again, you’ll have to rely on manual processes to sort out the conflict.

  • Who will handle vendors who have concerns about payments or purchase orders? Automated AP systems don’t address issues that require resolution outside the company.

In contrast, an eInvoicing system eliminates the need for entering data manually, scanning, and collecting invoices from email because suppliers input the invoices into the portal. And self-service portals allow suppliers to view their invoice and payment status in real time--so they don’t have to call your AP department for questions.

Overly complex AP automation designs can actually slow down your payment cycle.

Even the best workflow is only as strong as its weakest link. If you have a streamlined system but it’s not intuitive for users, then you’re missing opportunities to maximize your efficiency.

To be most effective, a system must have a straightforward, clear design that integrates with your enterprise resource planning software. Resist the urge to try to overcomplicate exception handling and approval processing, otherwise the end result might be a longer processing cycle than prior to automation.

AP automation won’t always correct root cause issues.

Automated AP systems are great at handling routine invoices, but what about ones with incorrect data, such as the wrong purchase order numbers, missing line items, or inaccurate pricing? What if you receive a purchase order after processing an invoice? What if you receive goods late?

If your intake process is flawed, automation will speed up your process—but it will simply deliver bad data more quickly.

The key is to catch the bad data as early in the process as possible. Unlike AP automation products that validate invoices on the back end, eInvoicing solutions validate data at the point of entry, improving the accuracy of invoices that reach the AP department.

In fact, being able to provide feedback to the suppliers--either at entry time to correct issues before submission or by sending errors back to the them for correction--helps the supplier understand how they can submit a better quality invoice. In turn, that invoice will be processed quicker and will be available for early payment options through advanced discounting opportunities.

AP automation can create missed opportunities.

When you automate AP, you might miss important yet unusual details provided on invoices. For instance, a supplier may offer a special discount or include a note that will go unnoticed. Moreover, automation can expedite the payment process, but it can still be difficult to capture available early payment discounts because of the cumbersome scanning, routing, and approval workflows.

This is perhaps the biggest difference between AP automation and eInvoicing and ePayment solutions. Using an eInvoicing and ePayment solution in conjunction with reducing up-front errors will reduce exception handling--and invoices can sail through the process quickly, saving you time and money. Plus, dynamic discounting gives suppliers the freedom to choose how quickly they’ll be paid; faster payments mean bigger discounts for you.

AP automation usually can’t address exceptions to the process.

No matter how good your system is, you’ll still have vendors or invoices that you must manage directly. For example, most automated systems can’t apply complex tax rules to invoices, which can lead to a tax liability, a missed tax exemption, or expose your company to tax audit risks. Or, you might receive invoices that are attached to multiple purchase orders or that span 20 or more pages and contain lengthy, detailed line items. And some departments may have special approval rules that your system can’t handle.

Fully automated eInvoicing solutions have the flexibility that automated AP products lack. They can apply a range of tax requirements, corporate policies, or vendor-specific rules to invoicing.

Let the truth set you free . . . to choose wisely.

In short, automated AP systems are a step above traditional methods, but they can still create a clumsy, error-prone workflow, particularly when you have to process and reconcile invoices manually. The best way to accelerate the AP process is to choose a fully automated eInvoicing, dynamic discounting, ePayment and portal solution that accommodates internal as well as external payment workflows.

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