5 steps to automating Accounts Payable - Image by StockSnap from Pixabay Automating finance is increasingly a topic which concentrates the minds of CFOs/Financial Directors. They hear and see competitors introducing improvements to their financial systems and processes – and in so doing, reaping multiple benefits. These benefits can be as varied as reducing costs, improving productivity and releasing financial staff to focus on what is both more interesting and valuable for a business.

Yet the question remains: where does one start when looking to automate, especially automation of AP? This blog will suggest 5 steps to automating AP, where the objective is to possess analyses supported by data which can then enable actions.

#1 Obtain an understanding of the technologies

Understanding what technologies can assist in the automation of AP is the first step. Knowing what each can and, as importantly, cannot do, is essential to possessing a framework within which to make decisions. For example, the following six ‘technologies’ each have their own pro and cons:

  • ERP should be thought of as a database optimised to collect accounting information oriented to reporting rather than as a solution optimised around AP processes
  • Machine Learning (ML) exploits the ability of systems (or processes) to improve themselves over time (through feedback and continuous data processing); ideally, the more the ‘machine’ learns, the less human intervention is required (though this can only be as good as the inputs)
  • Natural Language Processing (NLP); it sounds good but is often frustrating (remember the frustration when interacting with automated voice systems for inputs before you can talk to a person)
  • Optical Character Recognition (OCR) enables software to scan sources of text—such as letters, images, or pictures of documents—and convert these into inputs usable by other automation tools; yet OCR is not a panacea – the 10-15% which it does not recognise accurately requires manual attention
  • Robotic Process Automation (or RPA) which seems to offer easy programming or processes; however, RPA in its current form has drawbacks that prevent it from becoming the be-all and end-all automation that financial professionals desire
  • secure Supplier Self-Service Portals (SSPs), often operating from a cloud solution; the internal productivity gains obtainable by enabling access to selected financial functions to a business’ partners via SSPs can have major implications, positive and negative.

#2 Obtain the metrics

If CFOs/FDs want a simple self-test to assess whether AP ‘merits’ automation, ask how many supplier invoices the finance function processes per month. For most businesses, the pain becomes acute at ‘only’ 100 supplier invoices/month. Above 100 supplier invoices/month, there is almost certainly sufficient justification for automating AP.

On a broader basis, CFOs/Financial Directors should possess the following metrics at their fingertips:

  • number of AP transactions per month, and transaction processing times/transaction exception rates, with trends
  • average AP transaction approval and payment times
  • the average cost to process an AP transaction
  • the AP finance staff turnover rate (as well as an estimate of the cost to replace AP staff).

If CFOs/Financial Directors do not know how many supplier invoices their staff process each month, they likely lack the full financial function operational picture to take a decision about automating AP. Finding out becomes a starting point.

#3 Identify candidate processes for AP automation

The pain in AP within each business will be different. In some, the pain may be internal – data entry, identification and correction of errors, and coordinating approvals (especially between procurement and accounting). In others, the pain may have more of an external focus – upset suppliers, late payment of supplier invoices, missed discounts or buying opportunities, etc.

Identifying which processes are most suitable for automation is critical. The greatest pain points may suggest specific areas. Nevertheless, adopting an incremental – rather than Big Bang – approach will likely keep AP staff onboard.

#4 Plan out candidate process workflows

This is critical. Process workflows are what should guide the selection and implementation of relevant technologies. One way to consider this is in the context of trigger, action and result.

A key point to make here is the need to satisfy two overtly conflicting objectives – the immediate pain point that needs solving and the big picture. There is little point in satisfying the former, only to discover it throws up problems when integrated into the latter. Testing of candidate process workflows, and their use by AP personnel, should throw up any contradictions.

#5 Iterate and reiterate

Thinking that the automation of AP is a one-step action is simplistic. It is not. Ensuring AP staff understand why, as well as how, their roles will change, and improve, is one dimension. Equally important is that the needs of other stakeholders involved in AP automation – including procurement, suppliers, and business management – are taken into account.

To achieve this, it is necessary to iterate and reiterate each step before and during AP automation. Such iteration reduces the likelihood of unforeseen errors. It also gives CFOs/FDs some added peace of mind as they introduce automation and refocus on what is more valuable to the business.

In conclusion

Automating business processes has advantages. The automation of AP has particular ones, including the opportunity to deliver digital transformation for internal and external (supplier) use. Digitising workflows means less time spent on tasks like data entry, bookkeeping and other manual processes. Automating AP should be more than just about these 5 steps or how much time a business can save. It should have as its objectives:

  • leaner operations
  • tighter controls
  • greater finance staff involvement and satisfaction
  • improved supplier relations.

To learn more about what automation exists for the finance function and how it can benefit your organisation, Tipalti has sponsored an Enterprise Times white paper, which is downloadable here.

Tipalti from March 2022Tipalti comes from the Hebrew expression for “We handled it.” Tipalti is the only company handling both Accounts Payable and Global Partner Payments workflows for high-velocity companies across the entire financial operations cycle: onboarding and managing global suppliers, instituting procurement controls, streamlining invoice processing and approvals, executing payments around the world and reconciling payables data across a multi-subsidiary finance organisation.

Tipalti enables high-growth companies to scale quickly by making payables strategic with operational, compliance, and financial controls. Companies can efficiently and securely pay thousands of partners and vendors in 196 countries within minutes. Thousands of companies, such as Amazon Twitch, National Geographic, Business Insider, Hopin, Cazoo and Time Out use Tipalti to reduce operational workload by 80 percent and accelerate the financial close by 25 percent, while strengthening financial controls and spend visibility.

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Charles Brett
Charles Brett is a business/technology analyst consultant. His specialist areas include enterprise software, blockchain and enterprise mobility tech (including metering). Specific industry sectors of interest and experience include finance (especially systems supporting wholesale finance), telecommunications and energy. Charles has spoken at multiple industry conferences, has written for numerous publications (including the London Times and the Financial Times). He was the General Chair of the bi-annual High Performance Systems Workshop, 2005. In addition he is an author and novelist. His Technology books include: Making the Most of Mobility Vol I (eBook, 2012); Explaining iTunes, iPhones and iPads for Windows Users (eBook, 2011); 5 Axes of Business Application Integration (2004). His published novels, in the Corruption Series, include: The HolyPhone Confessional Crisis, Corruption’s Price: A Spanish Deceit and Virginity Despoiled. The fourth in The Corruption Series - Resurrection - has is now available. Charles has a B.A. and M.A in Modern History from the University of Oxford. He has lived or worked in Italy, Abu Dhabi, South Africa, California and New York, Spain, Israel, Estonia and Cyprus.


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