When an organization has made the decision to automate accounts payable, often the focus is on increased efficiency. AP Automation certainly provides measurable efficiency gains, but what about the soft gains? AP automation is making a difference for a lot of people and organizations outside of the easily measurable hard gains.
Gaining efficiency in AP will do a lot of positive things for a company such as paying vendors more reliably. The ability to approve an invoice quickly is great for leveraging discount capture and boosting internal control, but this solution is also praised by suppliers because these efficiency gains in their customers’ AP department equates to cash flow for them in addition with Dynamic Discounting. The vendor network knows that, in a pinch, they can get their payment in 4 days (opposed to 45) at a fair discount. This trait alone helps suppliers manage the biggest risk for them in business, cash flow shortage.
AP automation is also making a difference in furthering the careers of AP staff. Of course, when gaining efficiency with the automation of manual tasks we naturally see a decrease in dependency on the people who were previously tasked with data entry, matching, dispute resolution, etc. But at the same time we see a need created for value added positions overseeing these new, efficient processes. AP employees are given the opportunity to move up in the organization, perhaps to oversee discount capture, invoice audit, or administrative positions over this new automation software. Yes, decreasing headcount in AP is a goal for a lot of customers, but reallocation is often the most impactful.
As you can see there are many benefits that AP Automation provides for businesses. To some the greatest gain is for the environment. When an AP department is automated, that organization’s environmental footprint is reduced. All invoices which use to be paper are now electronic thanks to the many submission options offered to suppliers. All envelopes and stamps are obsolete when suppliers are e-invoicing. A company can save money, capture new revenue, optimize efficiency and decrease their environmental impact all at once.
The return on investment for AP Automation is not always measured in dollars and cents, but in other ways that I have described. This bigger picture is often unrecognized upfront. Rightfully so, these soft gains are not what we build our proposals on, but regardless, they sure have a positive impact.
ADAM LEVIN is Sales Manager for iPayables and contributed to this post
Having the right Accounts Payable solution can make a major difference for any organizations profitability. As the song goes, “it’s not easy being green”…“I am green and it’ll do fine, it’s beautiful! And I think it’s what I want to be.” Well I believe every organization wants to be green as in a profitable entity, but most Accounts Payable Departments struggle being a profit center for their company. By not having the right AP Solution in place you can cause your AP staff to become overwhelmed or confused regarding approval processes not to mention the un-necessary costs being spent. In other words AP Departments are viewed as a necessary evil. In short, they don’t have time to focus in on process improvement while running their business. Most AP Departments bring in little if any revenue, costing the company money while using the companies’ money to pay suppliers.
Although many AP departments sometimes get a bad rap, this standard is changing rapidly and improving in most industries. A few years ago banks were trying to get their clients to pay more people with Purchasing Cards. This idea was used to “float” money until they had to pay the bank card issuer. This was a great way for AP to get a small rebate back on that amount of spend used by the Purchasing Card. The problem is that there are not that many suppliers or vendors who are willing to give up three percent to get paid in a few days via a card.
Today Electronic invoicing has made a major impact on Accounts Payable Departments especially when Dynamic Discounting is included, making discounts viable and obtainable for suppliers with better cash flow as the results. Invoices are approved rapidly and suppliers are getting paid in less than 10 days on average for that three percent or whatever interchange they had negotiated. Now AP Departments are being noticed and are becoming more relevant!
It is basically the same general idea as in the past, but with Dynamic Discounting the supplier can choose when they get paid and the Payer can decide on what APR the discount is based. Think about a manufacturer who gets paid every 30 days. This means that he only has cash flow to turn his inventory 12 times a year. If he gets paid every ten days, he now has cash flow to turn his inventory 36 times a year. This makes cash flow forecasting more accurate and relieves some of the reporting burden placed on the accounting department. It is a pretty simple concept, and now it is starting to get the attention of some major Fortune 500 companies including companies like YUM Brands and JetBlue who have been able to make Dynamic Discounting a part of their AP strategy. AP Departments are more educated today than they have ever been before due to the internet. Now more organizations are using Dynamic Discounting and bringing Accounts Payable to the forefront. One day they may just find out that their AP Department has turned into a profit center.
I have noticed that most Accounts Payable groups like to start the year off with ideas and strategies that will help them in the coming year. Each of these departments are in different companies with differing sets of circumstances that makes it impossible for there to be a “magic bullet” for solving everyone’s problems. Whether you are a Fortune 500 Company operating with Purchase Orders or Non-POs, or if you have just installed a new ERP system, chances are there is something that makes your payables department unique. Also you may still be processing invoices manually with a portion of invoices processed through electronic invoicing. Maybe it’s time to evaluate your processes and improve your procedures. Here are a few ways to help jump-start your AP Department in 2015. First, figure out what your “current state” is:
- Where do You Stand? – Electronic Invoicing vs. Paper Invoicing – Taking a full evaluation of your AP Department and looking at how you are processing invoices is paramount to having a profitable AP Department. First look at what percentage of invoices are electronic. I mean fully automated, not a solution that’s really a scanning solution and claims to be E-invoicing. A solution should offer AP Automation that includes web-based data entry application as well as free vendor adoption and supplier support. Invoices are coming in electronically, coded, approved and ready to be paid by clicking a button or being 3 way matched before going into your ERP System. In other words, EDI or a Full AP Automation solution means no touch electronic. What Percentage of invoices are paper and do you have a plan to become completely paperless? Is AP Automation on your radar for 2015 or is it just a pipe dream? What steps are you taking today to make it a reality? Are you satisfied with the manual processes that you are currently engaged in?
- Where are the Biggest Benefits? – There are 4 major benefits that can be attained through AP Automation. Some of these may be more important to you than others. Those benefits include efficiency, visibility, discounts and error reduction. Once you start using E-invoicing/AP Automation (the right way) you can expect accurate data that will help your AP Department to become more efficient from day one. With complete and clear visibility you will be able to navigate through the system integrating E-invoicing and workflow with an ERP system. Early pay or dynamic discounting is also available with Electronic Invoicing allowing discounts to be captured and processed each month. These benefits distinguish those fully AP Automated Solutions that will help you with your ROI versus a solution like scanning and imaging which have less value to your organization.
- What to do About It? When you have the answers to these questions, now you can start the process of figuring out how much effort it would take to fix these issues. This really is key to being able to justify the cost and have an attainable ROI for your project. Many times people will focus on only one issue, and to solve this issue it will cost X amount of dollars to fix it. Then they work on figuring out the ROI for X amount of dollars and it just doesn’t always add up. If they were to look at the broader issues, then they may be able to get the ROI necessary for executive buy in. With an AP Automation solution, it’s more than just tackling one benefit. It’s looking at it with a broader scope, incorporating Dynamic Discounting, AP Workflow, E-invoicing and getting the ROI necessary.
Always available to give advice. email@example.com
I thought that it would be interesting to look back at the past 4 years and review the top 3 posts since our site, E-invoicing News has been in existence. The Number 1 post that has received the most views since October of 2010 has been, “Are You Ready for E-invoicing” In this post several AP managers and controllers were asked, “What was the turning point with your department when you started to see success with your E-invoicing implementation?
One answer came from an AP Manager of a Hospitality Company who said, “Making payments used to be time-consuming. We had to manually create tasks, use SMART cards etc. Now, as soon as we get the go-ahead from clients, we click a few buttons and have confirmation in minutes. The key benefit of E-invoicing or automating our payments process has been the amount of time saved, especially at the month end, when we can process up to 350 payrolls in an afternoon.”
The Number 2 post for all time has been, “The History of E-invoicing”. The most significant discussion on this post is that iPayables is one of the organizations that has pioneered the use of E-invoicing and holds the patent for E-invoicing that was first patented in 1999. Also in this article it was mentioned that the US government has mandated E-invoicing for the Department of Veteran Affairs.
The Number 3 post for all time has been, “What to do with your Old Paper Invoices”. It was a parody on what to do with your old invoices since you will no longer need them if you are using electronic invoicing and becoming paperless. An extensive diagram is included that shows you how to fold your old invoices and making them into boats that you can just send down the river. A video is included so you can see exactly how to make your paper invoices into paper boats. Finally if you want to see what those paper boats (paper invoices) look like after you make them, you can follow them as they float down the E-invoicing Stream.
When organizations are in the market for an AP Automation solution, they rarely think about how the solution they are investigating will also enhance their vendor relationships. This may seem like a selfish way of thinking, but that is not the case. The truth is, the problems they are trying to solve within their own company are enough to think about and probably justify the investment alone. But when we talk about ROI shouldn’t we be looking at the whole picture? This article will be focusing on benefits gained for your network of suppliers which is a category usually overlooked when reviewing solutions to automate the Accounts Payable processes.
When suppliers are asked to do something different there is usually some pain and effort involved in making that change a reality. But when significant benefits are at stake you will likely see that adoption rates increase dramatically, especially when there is no cost associated with gaining said benefits. When automating Accounts Payable with electronic invoicing, your suppliers will instantly reap the benefit of visibility. They will know what approval stage their invoice is in and any issues associated with them. Being able to communicate and fix issues within the platform expeditiously.
You and your suppliers will also gain submission efficiency with automated 2-way and 3-way matching. Vendors can submit invoices only if correctly matched against the PO. E-invoicing will actually tell them exactly what and where the errors are so they are able to fix the problems avoiding any match exceptions. Suppliers and customers also love this feature because Accounts Payable departments no longer have a pile of match exceptions in the office. Also suppliers get paid faster which helps to enhance business relationships.
Compared to emailing PDF’s or mailing invoices, suppliers can log in and drop an Excel file with all of their invoices in a matter of seconds. To ensure that customers are 100% paperless, Electronic Invoicing (as part of the service) will convert the PDF’s and paper invoices to the electronic format. There will always be those suppliers who won’t change how they do business regardless of the benefits they are missing out on. When we decrease the invoice lifecycle by cutting out the obvious delays like these prehistoric methods of submission, we increase incentives around capturing discounts. Suppliers can opt to get paid early at a fair discount percentage within the platform. They actually have the ability to weigh the discount term stated against how early they are getting paid to find the optimal timing for that transaction.
Since E-invoicing customers are paperless starting on day 1, Vendor Adoption Teams simultaneously start their work on converting the suppliers still sending paper. They pursue these vendors and educate them on the benefits they are missing out on. Many Vendor Adoption Teams average 50-70% supplier conversion to electronic submission within the first year! The pitch is easy, especially when there are no fees to the suppliers for any of the above benefits.
Supplier E-invoicing really does benefit everyone involved in the invoice lifecycle. Whether it’s the supplier, the AP clerk, AP Manager, Audit Team, Invoice Approval Managers; you name it…The benefits are everywhere.
ADAM LEVIN is a member of IPAYABLES SALES TEAM and contributed to this months post.
For most of us, the internet has become an integral part of our everyday lives. We can either choose to utilize the numerous advantages it affords such as social media, online learning, e-commerce, information resources and good entertainment; or we could ignore it and lead a slower, and far less productive existence. Because our world is undeniably becoming more tech dependent, it would be foolish not to recognize that business processes are also on the same trajectory as the rest of our internet-centric world.
So why aren’t more organizations fully committing to advancing their processes at the same rate as the rest of the world? Doesn’t it make sense that companies become more “E”-centric and use technology to enhance efficiency and increase profit margin? The Accounts Payable department is no exception. Companies like iPayables have made it possible to automate the payables process by which an organization can approve an invoice in a matter of minutes using the cloud.
Recently, I was on LinkedIn and I posed the question to my discussion group; “why is E-invoicing so important to the modern Accounts Payable professional?” One respondent, David Kallsen, the Assistant Project Leader at Lourdes University, replied with the following post:
“The short answer is, companies are under intense pressure to do more with less. ‘Less’ typically means ‘less staff.’ E-invoicing and other A/P automation and systematic tools help allow companies to meet this challenge and stay competitive. A few years ago, I had read Daniel Pink’s A Whole New Mind: Why Right-Brainers Will Rule the Future. In it, Mr. Pink discusses the three A’s—abundance, Asia, and automation—three competitive pressures of our current economy. In the section on automation, the author uses the stories of John Henry and Garry Kasparov to illustrate that, simply put, there are some tasks better suited to today’s machines compared to human beings.
It has been my experience that fear drives many, if not most, people who work in Accounts Payable to prefer processes that are based on clear-cut rules with no exceptions and are documented with detailed, step-by-step instructions. However, is that not the very essence of a computer program? Strictly by the bottom line numbers, compared to their human counterparts modern computer systems can often perform rules-based, sequential tasks in much higher volume, with significantly fewer errors, and with significantly lower material costs.”
I particularly agreed with the point he made about how some tasks are just better suited for machines rather than humans. Case in-point, iPayables customers (who are now fully automated) have reported a dramatic reduction in invoice errors and exceptions with AP Automation compared to the manual processing of the past. David expounds on this point stating:
“Many so-called exceptions can be included as part of the rules. Those few transactions which violate the assumptions of the programming logic may be loaded into a queue for manual processing. In one example from my past, EDI allowed us to drop the manual processing portion for a 40,000-invoices/month-supplier from 100% to only a few invoices/month. A hard-nosed management team might also subscribe to the concept that, when properly implemented and maintained, such systems do not take sick days, lunch and bathroom breaks, or succumb to fatigue. They typically do not chat at the water cooler, feel threatened or slighted, play politics, experience performance anxiety, or fall prey to any of the myriad other human productivity drains which play out in the typical work environment. Certainly, this is all true.
However, beyond that, I would propose such automated techniques bring the opportunity for improved resource management. Many tasks (e.g., resolving supplier complaints, troubleshooting GRNI issues, collaborating on continuous improvement projects, etc.) in A/P require human interaction and judgment. Freeing employees from the daily grind of mindless processing permits them to engage in tasks which are more appropriate and satisfying to today’s knowledge workers, and (I believe) benefits an organization with a more productive allocation/ratio of equipment and human resources to the discipline of Accounts Payable. Certainly, there is much more, especially as one gets into the details of implementing e-invoicing systems, but this gives you a general overview of my philosophy on the topic.”
I would like to thank David for his participation on this topic. I wish more AP decision makers could recognize how positively impactful a conversion to automation really is. If you need more convincing, please refer to our library of informative blogs or feel free to ask us questions by calling 1-866-874-7932 or you can email us at firstname.lastname@example.org.