In this post we examine the 3 step formula that every AP team can use to decrease costs and increase invoice processing speed.
Accounts payable automation is a priority for many organizations because AP teams don’t have the resources to manage the volume of paper and PDF invoices in a timely manner. Today many AP teams process the vast majority of their incoming invoices by hand, scanning paper invoices, and using optical character recognition (OCR) or manual keying to transfer the data into an ERP. The manual nature of this process is not scalable for businesses, and many AP departments face the unpopular and expensive option of hiring more full-time employees to increase processing speed. If invoice volume continues to grow, more staff must be hired, increasing AP costs and driving down profit.
Manual invoice keying and OCR also lead to invoice exceptions, which 62% of AP professionals report are the number one challenge they face on a day-to-day basis. Invoice exceptions are such a big problem because they require manual intervention to address, which increases costs, slows the approval and payment process, and contributes to friction with suppliers. The good news for AP is that they can now use software to achieve 100% accounts payable automation, removing all manual effort from the equation.
Let's examine the 3 step formula that every AP team can use to decrease costs and increase invoice processing speed.
Before we dive into the “how,” let’s quickly align on what exactly accounts payable automation means, as businesses can often have varying definitions. Accounts payable automation means that there is zero manual effort required to process an incoming invoice. In other words, the invoice is processed “straight-through,” which means that when an invoice arrives from a supplier, it is validated and transferred directly into the AP or ERP system, ready to pay. Keep in mind that straight-through invoice processing is a key component of AP automation. By definition, if invoices are not straight-through processed, they become invoice exceptions requiring manual resolution.
Follow this three-step formula to transform your AP department and unlock huge operational efficiency gains.
To achieve accounts payable automation, first and foremost you must transition your AP department to a technology platform that is capable of straight-through invoice processing. A key consideration when selecting a new platform is that suppliers are likely to resist major changes to existing processes, so you need to meet them where they are, regardless of their system or sophistication level. Many suppliers send invoices via postal mail as a piece of paper, or by email as a PDF. Some suppliers may also be hooked up through EDI. This means that your new platform must be flexible enough to account for a variety of situations and use cases.
Many platforms attempt to convert paper and PDF invoices into a digital format through scanning services and OCR technology, but these methods produce errors that need to be manually corrected. The best solutions on the market use advanced mapping technology to convert incoming invoices into readable data without OCR, and apply AI and machine-based validation to match invoices to POs without manual intervention.
The second category that must be addressed is your team. Automating invoice processing and eliminating exceptions will give you the opportunity to shift resources within your AP department. Because the new platform will take care of all of the heavy lifting, the people that once handled manual data entry and payment inquiries are free to tackle new problems. You will also need to ensure that your AP, Procurement, and IT teams are working closely with one another so that everyone is on the same page during the transition. Start by auditing your current team and their roles and responsibilities to determine how they can be deployed.
Transcepta’s client, a Top 10 public university, was able to redistribute employee resources into a new business unit called iHelp which assisted with questions and inquiries for the whole AP department.
With your new platform and reorganized team in place, the final step is to evaluate your internal processes to identify opportunities for efficiency gains. Accounts payable automation provides tremendous benefits, even when organizations do not use POs, however, promoting PO usage across every department is a great place to start. Using POs will allow your new platform to associate each invoice with a PO, and validate it using two and three-way matching. Your new platform will automatically verify invoices and ensure they can be matched and approved without manual intervention.
Businesses who achieve accounts payable automation and “straight-through invoice processing” stand to benefit in myriad ways, from decreased costs and stronger supplier relationships, to increased profit margins and shorter cycle times. There has never been a better time to invest in technology that enables your businesses to create a competitive advantage through efficiency.
If you would like to learn more about how Transcepta can enable accounts payable automation within your organization, click here.