Building Faster, Leaner and Efficient AP Processes With Intelligent Automation
Amidst an uncertain business environment, regulatory complexities, and evolving customer demands, organizations that recognize the value of automation and leverage it to optimize their operational workflows demonstrate resilience and adaptability. Among these workflows, the Accounts Payable (AP) process holds great significance as one of the most important transactional finance and accounting processes. It directly influences cash flow management and planning, making it essential to streamline and optimize. By digitalizing AP workflows, businesses can significantly reduce costs, streamline operations, and enhance overall efficiency. Moreover, digital enablement empowers finance teams to become strategic drivers of value, enabling the implementation of initiatives that fuel business growth.
The Reality - Efficiency Killers in Today’s AP Process
Outdated and semi-automated AP processes are, however, all too common, even among enterprise-level companies. Conventional processes come with a host of challenges that drain resources, impose high costs and increase the risks of fraud and compliance issues.
Invisible costs
The AP process involves multiple stages, including generating and issuing purchase orders (POs), validating supplier details, keying invoice data, matching invoices to POs, obtaining payment authorizations, and reconciling invoices and payments. Unfortunately, the entire cycle time can range between 30 and 90 days. Lengthy processing times strain relationships between vendors and buyers, potentially damaging the organization's reputation and limiting future business opportunities. However, as the costs associated with these delays are intangible, they often go unnoticed or are not given sufficient attention.
Lack of visibility
Fragmented and scattered data along with a lack of visibility hampers AP analysis and deriving valuable insights a cumbersome task. Without a clear overview of the AP workflow, organizations may struggle to identify bottlenecks, inefficiencies, or patterns that could help optimize operations and drive improvements. For instance, if invoice processing data is not readily available or easily searchable, finance teams may have difficulty tracking the status of invoices, identifying overdue payments, or evaluating vendor performance. This lack of visibility can result in delays, errors, and missed opportunities for early payment discounts or negotiating better terms with suppliers.
High risk of fraud
Accounts Payable involve numerous transactions with multiple vendors, which escalate exponentially with organizational size. Fraudulent activities in AP processes can take various forms, such as fictitious vendors, inflated invoices, duplicate payments, or collusion between employees and vendors. These fraudulent transactions can go undetected without proper monitoring and controls, resulting in significant revenue leakage over time.
Siloed functioning
Across many businesses procurement and finance AP teams work in silos. For instance, in the absence of a formal mechanism for information sharing, regarding invoice discrepancies, payment issues, or vendor performance, teams rely on incomplete information, leading to suboptimal sourcing decisions. For instance, if AP teams identify recurring invoice discrepancies or payment problems with certain vendors, they have valuable insights that can help procurement teams address these issues. However, without a formal mechanism for sharing this information, procurement teams may remain unaware of these problems and continue to engage with underperforming vendors or make decisions based on inaccurate information.
Need for Change
As businesses grow, the limitations of semi-automation become increasingly burdensome. Multi-subsidiary businesses, for instance, face the challenge of managing larger volumes of supplier invoices, diverse types of suppliers, and the constant pressure to support greater business speed and scale. Organizations need to harness the power of automation to achieve operational excellence, empower finance teams to focus on strategic initiatives and deliver significant value to the organization.
The Promise of Intelligent Automation
Intelligent automation offers a transformation solution to enterprises, leveraging a set of next-generation technology levers such as cloud-based solutions, cognitive/AI capabilities, and mobility. These advancements rapidly transform AP workflows, starting from purchase order (PO) requisition and invoice processing to supplier payments and invoice reconciliation.
Benefits of AP Transformation
By embracing intelligent automation, organizations can reap a multitude of benefits, including:
Boosting process efficiencies
Intelligent automation enables organizations to re-engineer AP processes and implement touchless invoice-to-pay workflows. POs are digitally sent to suppliers. Supplier information is collected electronically and automatically validated. Invoice data is captured leveraging Optical Character Recognition (OCR), without employee and finance staff intervention. Invoices that match POs are posted directly to an accounting system or enterprise resource planning (ERP) application. Electronic payment interfaces embedded in the AP platform simplify payments to suppliers. And real-time supplier reconciliation puts an end to the hassles of manual reconciliation. These advancements significantly reduce processing time and error rates.
Optimizing costs
Implementing an efficient AP process enables businesses to achieve significant cost efficiencies, enhance their supplier relationships, optimize cash flow management, and improve overall financial performance. Businesses benefit from sourcing efficiencies by identifying redundancies in the procurement process and streamlining their operations. Consolidating and forging stronger relationships with suppliers, helps businesses negotiate more favourable commercial and payment terms including extended payment terms or discounts for early payments. This helps optimize cash outflows and working capital management. By maintaining a strong track record of timely payments, businesses also build trust and credibility with their suppliers enabling them to negotiate optimum pricing terms and conditions that align with their cash flow requirements.
Enhancing spend visibility
Digital data, combined with the right dashboards and analytical solutions, provide real-time visibility into transactions. AP practitioners can derive meaningful insights from their invoice data to improve cash flow, identify exceptions, and drive continuous process improvement. Advanced analysis can help identify overpayments, fraudulent vendors, and opportunities for optimizing payment and contract terms with suppliers.
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Providing intelligent digital interfaces
The integration of mobile solutions and AI-based conversational interfaces enhances agility, efficiency, and end-user experience. AI-based conversational solutions, such as chatbots or virtual assistants, can provide a user-friendly interface for business users and vendors to interact with the AP system. Business users can use voice commands to access information on invoice processing, approvals, payments, payment dates and amounts, enabling them to stay informed about their financial transactions.
Conversational interfaces can offer self-service options to vendors, allowing them to check the status of their invoices, update their contact information, or request payment details without needing to contact the AP team directly.
API-first cloud-native architecture
Software-as-a-Service (SaaS)-based, API-driven solutions enable businesses to achieve cost-efficient transformation, eliminating the need for extensive infrastructure investments and ongoing maintenance. SaaS-based solutions also provide the benefit of regular updates and enhancements, ensuring that organizations stay up to date with the latest functionalities and industry best practices. An API-driven approach enables seamless integration and smooth data exchange between disparate systems including accounting, procurement and enterprise resource planning systems, banking systems and payment gateways involved in the invoice-to-pay process. This integration enhances process efficiency, reduces errors, and improves data accuracy.
Guide to AP Transformation
The AP transformation journey may vary from one enterprise to another, but businesses need to follow some crucial steps for a successful AP transformation:
Identify and diagnose current issues
It is essential to understand the pain points and challenges faced by employees, suppliers, approvers, finance, and senior management functionaries in the AP process. AP teams need to conduct a thorough assessment to identify inefficiencies, manual interventions, delays, and other obstacles that hinder smooth operations.
Capture current workflow and systems
Document the existing AP workflow and systems involved in the process. This includes mapping out the flow of POs, invoices, approvals, payments, and other related activities to identify areas for improvement and set a baseline for measuring progress.
Define the desired future state process
Based on the assessment, define the desired future state of the AP process. Identify key objectives, such as streamlining workflows, improving data accuracy, and enhancing overall efficiency. This helps set a clear vision for the AP transformation and provides a roadmap for implementation.
Evaluate the right AP solution
Assess whether the existing AP automation solution is suitable for the desired future state process or if there is a need for a new solution. Consider factors such as scalability, integration capabilities with existing systems, data security, and user-friendliness. Ensure that the chosen automation framework aligns with the organization's goals and can effectively address the identified issues and requirements.
Address organizational change management impacts
Accounts Payable transformation involves changes in processes, systems, and roles and impacts employees, suppliers, and other stakeholders. Engage stakeholders and communicate the benefits throughout the process to facilitate smooth adoption.
Continuously monitor and optimize
AP transformation is an ongoing journey. Establish key performance indicators and regularly monitor the performance of the new AP process and systems, gather feedback from stakeholders, and identify areas for further optimization. Continuously refine and improve the AP function to ensure it aligns with evolving business needs and industry best practices.
Final Thoughts
The ongoing digital revolution presents a crucial opportunity to modernise the AP process and bolster financial resilience. Leveraging next-generation technology levers such as zero-touch workflows, analytics, cognitive/AI, and mobility can streamline and optimize AP processes, leading to enhanced cash flow, strengthened supplier relationships, and informed spending decisions. To achieve these transformative outcomes, organizations need the right technology partner. Zaggle Zoyer, a data-driven business spend and embedded finance platform, empowers businesses to achieve operational excellence, drive growth, and deliver significant value to the organization.
Contact Zaggle Zoyer today to learn more about our AP transformation solution and start your journey towards operational excellence and business growth.