There has never been a better time to propose transforming your accounts payable processes with digital technologies.
Automation is the top budgetary priority of accounts payable departments, according to the Institute of Finance and Management’s (IOFM) 2018 Future of Accounts Payable survey. Moreover, finance executives tell IOFM that accounts payable is the function that will benefit most from automation.
What is it that (finally) has senior finance executives so bullish on accounts payable automation?
Finance executives recognize that digital technologies such as intelligent data capture, workflow, mobile, machine learning and analytics deliver the strategic benefits that they crave most:
- Enhanced visibility
- Better working capital management
- Increased profit margins
- Lower cost of goods
Finance executives cite a lack of visibility into payment data among their most pressing accounts payable concerns, Ardent Partners finds.
There are five primary reasons for poor payables visibility:
- 1. Key information is not captured
- 2. Captured data is incomplete or incorrect
- 3. Information is not timely
- 4. Systems are fragmented
- 5. Decision-makers cannot access key variables
Digital transformation provides authorized users with real-time visibility into accounts payable data from any PC, laptop or mobile device, as well as rich reporting and the analytics required for decision-making. Importantly, this data can be disseminated throughout the organization or made available via a portal.
Digital transformation solutions provide senior finance executives and other users on the finance team with:
- Interactive dashboards and reports
- Real-time accounts payable performance metrics
- Accounts payable process, financial and Key Performance Indicators reports
- Configurable personal reports
- Immediate insight into financial performance to manage Key Performance Indicators proactively, spot problems and identify bottlenecks
- Purchase-to-pay spending transparency
- Real-time spend data from invoices and automated spending category mapping
- Ad hoc reporting
- Mobile access to reports
Better Working Capital Management
Cash flow analysis and liquidity management keep finance executives up at night.
Under-performing businesses could free $776 billion – or an average of $0.78 billion per company – by matching the cash management performance of top-performing businesses (typically, those with the highest levels of automation) in their respective industries, according to The Hackett Group.
One way to accomplish this is through the capture of more early-payment discounts.
Businesses that take advantage of just a discount term of 1/10 net 30 earn an annualized 18 percent return – a lot more than they can earn from a typical interest-bearing bank account.
But most businesses capture less than 21 percent of all early-payment discount offers, and 12 percent of businesses are unable to capture any early-payment discounts, IOFM finds. Only 27 percent of businesses surveyed by IOFM capture more than 80 percent of early-payment discount offers.
Digital technologies speed approval cycles and open the door to more early-payment discount opportunities. Digital transformation provides finance executives with visibility into outstanding invoices and other transactional information required to effectively manage working capital. And digitizing invoices facilitates easier collaboration between buyers and suppliers on discount offers.
Increased Profit Margins
Manually processing paper and PDF invoices chips away at profitability through costly and error-prone keying of invoice data, lost or misplaced invoices, long approval and exception resolution cycles (which result in late fees and missed discounts), compliance and security risks, high document storage and retrieval costs, delays uploading data on approved invoices to downstream systems, time-consuming supplier inquiries regarding invoice and payment status, and difficulty implementing best practices.
Digitization eliminates the manual keying of invoice data, the physical routing of invoices for approval, the back-and-forth phone calls and e-mails required to resolve exceptions and disputes, the manual keying of data into downstream systems, and the physical filing of processed invoices.
Importantly, the scalability of digital transformation solutions enable businesses to grow (either through organic growth or acquisitions) without necessarily having to add head count.
Lower Cost of Goods
Wasteful spending has a tremendous impact on a business’ bottom line.
A big contributor to wasteful spending is that 45 percent of businesses do not know where indirect spend lies and the amount, according to Supply Management magazine and Expense Reduction Analysts. Forty-six percent of businesses see misclassified items and poor reporting as a culprit.
Digital technologies provide the visibility required to improve spend management.
Configurable dashboards provide users with real-time visibility into critical data. Digitization also enables users to access the processing history and audit trail for each invoice, view any annotations or comment threads related to an invoice, and access archived images and data with just a few clicks.
The visibility provided by digital technologies enable businesses to more quickly spot bottlenecks, identify budget variances and “maverick” spend, ensure regulatory and contract compliance, improve the accuracy of supplier audits, and streamline purchasing processes for lower operational costs.
Each of these benefits is compelling to senior management. Together, they transform accounts payable into a partner that can help the finance organization achieve its strategic objectives.
IPS can help develop a plan for transforming your accounts payable processes.