Accounts Payable (AP) is often part of larger transformation initiatives within an organisation. According to Gartner, 85% of CFOs are either implementing or planning to implement major Finance transformation initiatives such as payroll automation.
Additionally, a recent survey conducted by Workday found that cost containment is a top priority for 59% of CFOs. But how do they execute these high-visibility projects for their organisation?
76% of CFO’s reported lagging ROI from technology investments due to long implementation and slow adoption. Find out how to elevate your financial management capabilities now.
Finding value in accounts payable automation
The purpose of Accounts Payable is to pay supplier invoices according to legal settlement agreements entered into by company purchasing agents. Without an Accounts Payable function, a company’s suppliers would not get paid accurately and timely.
Consequently, suppliers could stop providing necessary goods and reliable services to the company. In addition to paying suppliers on time, AP is the last line of defence around spend control and must ensure the company is not paying for goods or services in error, while also verifying price accuracy for valid purchases.
Accounts Payable is often the largest department within the Finance organisation, though its efficiency varies greatly from organisation to organisation. In other words, the least efficient AP teams are five times larger than the most efficient, according to APQC.
| Bottom | Medium | Top | |
| Total cost to process a Supplier Invoice Source: APQC | $10.00 | $5.83 | $2.07 |
Therefore, the best way for an Accounts Payable team to add value to the organisation is to improve efficiency without compromising quality and spend controls.
The universal challenge — addressing accounts payable issues
Accounts Payable is at the end of the line within the purchase-to-pay process where problems collect. AP teams must fix all upstream issues to process invoices. The stakeholders involved are generally not part of the Finance team.
The typical Accounts Payable professional spends much of their time gathering data and obtaining clarifications and approvals from upstream professionals that have their own priorities, which often don’t include helping AP teams perform their jobs.
This follow-up work leaves less time to process invoices. AP teams that have offshored or outsourced work to lower labor costs are often frustrated when their costs don’t decrease as planned. They quickly learn that the key to efficiency is a clean end-to-end process.
For Accounts Payable to become more efficient and effective, they often must lead the charge and drive continuous improvement throughout the purchase-to-pay (P2P) end-to-end process.
Common pain points in accounts payable automation
A logical first step in fixing and optimizing the P2P process is to identify and prioritize pain points. They can often be highlighted by identifying the main inhibitors to processing invoices quickly without interruptions. The below illustration highlights the most common pain points:
Processing exceptions
- Suppliers
- Requisitioners
- Buyers
- Receivers
Manual effort
- Data input
- Follow-up management
Interruptions
- Supplier inquiries
- Buyer, Requisitioner, Receiver interactions
Spend control
- Poor PO compliance
- Lack of analytical tools
Month-end and projects
- Closing bottleneck
- No time for projects (e.g., DPO)
Workforce management
- Work-sharing challenges
- Difficulty evaluating individual performance
Leading practices in accounts payable automation
A useful next step in optimising P2P is to identify and prioritise leading P2P practices that make sense to implement in your organisation. Take a holistic approach and consider improvement beyond “process” to include organisation and technology. The graphic below provides the most common leading practices across several improvement dimensions. Highlighted are those we believe drive the most impactful and lasting improvements.
Technology and date
- Maximum systems integration
- ERP business rules and workflow to manage exceptions
- Intelligent OCR, RPA, ML & AI
- Invoice processing automation
- Semi-automated master supplier data management and exceptions management
- Spend control analytics
- Implemented supplier portals
Process, control, performance
- Laser-focus on straight-through-processing and exceptions improvement
- Strict policy controls — Standardisation, PO compliance, return-to-sender
- Focus on total cost per invoice first
- Start measuring spend control
- Measure against self and benchmarks
- Deploy daily dashboards for team performance
Organisation and talent
- Continuous improvement team & formal methodology
- Cross-organisational alignment — global process owner
Workday configuration
- Unify P2P approval process — All business units should follow the same approval process
- Simplify approval process — 3 approvals, or less, per transaction is ideal as it maintains speedy transaction processing
- Minimise number of “touches” per transaction — An approved requisition shouldn’t need to re-route for approvals when its downstream PO is created unless there’s been a change outside of tolerance
- Include match tolerance rules to support invoice exception process
For Accounts Payable to become more efficient and effective, they often must lead the charge and drive continuous improvement throughout the purchase-to-pay (P2P) end-to-end process.
Common pain points in accounts payable automation
A logical first step in fixing and optimizing the P2P process is to identify and prioritize pain points. They can often be highlighted by identifying the main inhibitors to processing invoices quickly without interruptions. The below illustration highlights the most common pain points:
Processing exceptions
- Suppliers
- Requisitioners
- Buyers
- Receivers
Manual effort
- Data input
- Follow-up management
Interruptions
- Supplier inquiries
- Buyer, Requisitioner, Receiver interactions
Spend control
- Poor PO compliance
- Lack of analytical tools
Month-end and projects
- Closing bottleneck
- No time for projects (e.g., DPO)
Workforce management
- Work-sharing challenges
- Difficulty evaluating individual performance
Leading practises in accounts payable transformation
A useful next step in optimising P2P is to identify and prioritise leading P2P practices that make sense to implement in your organisation. Take a holistic approach and consider improvement beyond “process” to include organisation and technology. The graphic below provides the most common leading practices across several improvement dimensions. Highlighted are those we believe drive the most impactful and lasting improvements.
Technology and date
- Maximum systems integration
- ERP business rules and workflow to manage exceptions
- Intelligent OCR, RPA, ML & AI
- Invoice processing automation
- Semi-automated master supplier data management and exceptions management
- Spend control analytics
- Implemented supplier portals
Process, control, performance
- Laser-focus on straight-through-processing and exceptions improvement
- Strict policy controls — Standardisation, PO compliance, return-to-sender
- Focus on total cost per invoice first
- Start measuring spend control
- Measure against self and benchmarks
- Deploy daily dashboards for team performance
Organisation and talent
- Continuous improvement team & formal methodology
- Cross-organisational alignment — global process owner
Workday configuration
- Unify P2P approval process — All business units should follow the same approval process
- Simplify approval process — 3 approvals, or less, per transaction is ideal as it maintains speedy transaction processing
- Minimise number of “touches” per transaction — An approved requisition shouldn’t need to re-route for approvals when its downstream PO is created unless there’s been a change outside of tolerance
- Include match tolerance rules to support invoice exception process
Optimising and automating your Accounts Payable isn’t a one-size-fits-all task, but it doesn’t have to be overly complicated either.
