AP Automation Versus AP Optimization

Posted by Rich Arminio on Sep 23, 2021 3:45:36 PM
Rich Arminio

The shift to remote working has accelerated the digital transformation efforts of AP departments.

Seventy-seven percent of AP departments now have at least some technology for processing invoices.

That finding from the Institute of Finance and Management (IOFM) represents is a big shift from a few years ago when invoice approvals were a largely manual affair at most AP departments.

While automation is a step up from manual paper-based processes, most AP departments still lack the technology and tools that they need to process invoices in a highly efficient and effective manner.

AP Optimization - Next LevelConsider that more than half of all AP departments surveyed by IOFM paid a supplier late during the past year because of operational issues rather than cash flow considerations. That’s not all. Despite automating, many AP departments waste lots of time on repetitive manual activities, IOFM finds.

Don’t blame the technology. Most AP departments have evolved over time and have used automation tools for parts of their end-to-end process. AP departments have automated their processes, but they aren’t optimizing them across the entire organization and their suppliers. Many are relying on siloed, piecemeal AP solutions and technology originally developed for very specific functions.

That’s a big problem when it comes to optimizing AP.

Process consistency, enabled by automation, is the biggest driver of AP performance. While AP departments are embracing automation, they have been slow to improve their end-to-end business processes. IOFM benchmark data finds that only 38 percent of AP departments have standardized their processes. In many cases, AP staff are still doing their own thing, but in an automated environment. Less than 20 percent of AP departments operate in a continuous process improvement loop, IOFM finds.

Automating inconsistent or broken processes is not the answer to AP challenges.

The difference between AP automation and AP optimization

AP automation solutions provide the invoice processing efficiencies that businesses need at a time like this.  Best-in-class AP technology combines five critical technologies in a single platform:

 

1. Digital mailroom: all paper, emailed PDF and electronic invoices are aggregated onto a single platform.

2. Intelligent capture: all header and line-item data from invoices is extracted, validated, and matched against purchase order (PO) and proof-of-delivery information residing in an ERP.

3. Dynamic workflows: unmatched invoices or non-PO invoices requiring approval (e.g., high-dollar invoices, invoices from a new supplier, invoices from a strategic supplier) are electronically routed based on pre-configured business rules. Intelligent queuing of invoices eliminates the need for desk-level decision-making and accelerates processes. And built-in governance and controls ensure that best practices and guidelines for workflow approvals are adhered to.

4. Seamless ERP upload: data on approved invoices is automatically uploaded touch-free to any ERP, including those from SAP, Oracle, Sage, Workday, Microsoft and many others.

5. Reporting and analytics: Graphical dashboards provide instant insights into Key Performance Indicators (KPIs) and the status of invoices. Drill-down capabilities enable decision-makers to dig into AP information to uncover trends and the source of bottlenecks and invoice exceptions. Mobile capabilities keep senior management and other users in-the-know while on-the-go. Ad hoc reporting makes it easy for management to leverage data.

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AP optimization standardizes and further automates processes across the invoice-to-pay lifecycle.

  • Self-service vendor portal: Suppliers are empowered to submit invoices, check on the status of invoices and payments, and provide required invoice information.
  • Intelligent workflows: Artificial intelligence (AI) automatically determines how invoices should be routed or exceptions resolved and how payments are made. Machine learning delivers better results over time.
  • Electronic payments: Buyers earn cash rewards by paying suppliers using virtual cards. AI-driven tools identify opportunities for buyers to maximize spend paid via virtual cards.
  • Supplier management: Suppliers take the onus of providing their contact information and payment preferences and uploading tax documents and other forms through a secure portal.

Take your AP department to the next level

Automation can help AP departments wring inefficiencies from their processes.

But AP optimization takes things to the next level. Optimized AP departments:

  • Post more invoices directly to an ERP without human operator intervention.
  • Experience fewer duplicate payments and other mistakes and errors.
  • Position AP as an information hub for the rest of the enterprise.
  • Gain more opportunities to capture early payment discount offers.
  • Free AP staff to focus more on higher-value activities such as data analysis.
  • Strengthen supplier relationships through faster, more accurate invoice processing.
  • Significantly reduce the risk of payment fraud and compliance issues.

These are the types of benefits that AP departments need during turbulent times.

Interested in learning more?

Check out our blog - What is Accounts Payable Optimization?

OR

Contact IPS to speak with one of our optimization experts about your needs today!

 

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Tags: AP Workflow, Invoice Processing, AP Automation, Accounts Payable Workflow, AP Automation Solutions, Accounts Payable Automation, Accounts Payble Optimization