The first step to creating a business case for automating AP processes starts with understanding where you are today; this is referred to as “documenting the state of the as-is process” in project management jargon. The outcome of this step is the identification of all additional steps that will be required in order to accomplish a process. This is important because some of those steps are likely unknown to decision-makers and stakeholders that aren’t “in the weeds” of daily tasks.
Tasks and steps identified during this process may include receiving, processing, and coding invoices and getting the right approvals to pay. In order to gain a more in-depth understanding of existing processes, you will need to interview team members, observe the process, follow it as it happens in real-time, create surveys, and, if necessary, build a task force composed of team members who own different aspects of the job, process management experts, or both.
A few questions to ask for a deeper understanding of the invoice processing cycle:
- What is your monthly invoice volume?
- What format (Paper? Email?) are invoices in when you receive them?
- What methods (Digital? Snail mail?) do you receive invoices through?
- What is the level of invoice detail you currently collect? What level of detail do you need in the future?
Invoice management is a time-consuming, labor-intensive task for AP. Coding must be verified or they may have to hunt down approvers, causing invoices to become overdue and leading to additional fees. Multiple invoices requiring approval can also become overwhelming. Being aware of these details helps when you’re establishing streamlined processes and alternatives to manual processing.
Quantify the Time Spent on Tasks
Doing so helps to identify work that doesn’t add real value. The people involved in implementing automation in accounts payable are valuable to the project as they can speak to the crucial activities that may be check-the-box activities. While not everyone embraces change, the insights of those with front-line experience and a deep understanding of how things run can maximize the benefits of AP automation.
Invoice approvers often work across multiple business functions; automated approval processes bring not only financial benefits, but cross-function operational benefits as well, allowing business managers to regain time they need to continue to run the organization. These managers are looking for ways to improve processes and run lean cost centers. When transitioning to AP automation, these points help with configuration of the solution to the specific needs of your business.
Commonly occurring inefficiencies include:
- Manual data entry
- Lost invoices & identification of duplicates
- Matching errors & invoice exceptions
- Supplier inquiries & escalations
- Duplicate payments
- Late payments
Identify which of these affects your department, rank their importance, and quantify the time your FTEs spend correcting each.
Today, businesses of all sizes are moving toward consolidating the procurement and AP functions. The sourcing aspect remains manual in most companies with little oversight and transparency into purchase history. The benefit of automation over manual processing is the metric tracking and analysis that facilitate confident decision making across business functions. Data from accounts payable can be shared with the procurement team to support their efforts in vetting vendors and provides real-time insights into what AP is paying. When negotiating terms with vendors and aligning your business to manage cash flow needs better, data may become your competitive advantage.
When assessing your as-is processes, take a deep dive into the collaboration between the AP and procurement departments:
- Are there work processes in place?
- Is communication clear, timely, and accurate?
- How is data shared between the two departments?
- How do the invoice approval processes look? Which stakeholders are involved?
As a manager, you have an opportunity to review documentation and have ongoing discussions with team members who are performing the daily work. A general understanding of the different mechanisms makes it much easier to identify bottlenecks within existing processes. You can then create action plans to minimize these inefficiencies, or even eliminate them with an automation solution. Because AP impacts most areas of a business, these improvements will be felt immediately, not only by the AP department, but in other parts of your organization as well.
Promoting a culture of ongoing process improvement within your department and across your organization will have a dramatic impact on the motivation and morale of your team. When employees see management identifying high-level opportunities for improvements and savings, it motivates them to do the same within their roles. Employees who are closest to daily processes can delve into the hows and whys of current practices. These insights are essential for documenting processes and customizing an automated system to your business’ specific needs.
Think of AP automation as a solution that improves functions with your AP department while also providing benefits across other business functions like operations, procurement, and beyond. Taking time to assess and analyze the current state of accounts payable is the first step towards identifying bottlenecks in processes and taking corrective actions. You can then correlate those inefficiencies to specific steps in the process and focus your efforts on improving those particular areas. Keep in mind that is an ongoing process; it’s essential to create a repeatable review methodology that can be applied to improve other areas of the business.