Analyzing the Pain in Accounts Payable

Do you ever get the sense that something is wrong, but you can’t seem to put your finger on one specific thing? As a leader in finance, it can be frustrating to not know why something is happening. After all, you can’t measure or correct it if you can’t even isolate it. It’s customary to say “correlation does not imply causation,” and that’s true—mostly. For example, let’s take accounts payable. AP has a certain amount of pain associated with it—often deemed the most time-consuming process in finance. But the pain doesn’t just emanate from one cause. It’s often the result of many factors contributing to the larger pain.

Let’s start with a basic argument. 

  1. Accounts payable is a pain in the neck.
  2. Accounts payable involves keying in a lot of invoices. 
  3. Therefore accounts payable is painful because of having to key in invoices.

That’s a linear conclusion many organizations arrive at. But hold on! While #1 and #2 are true, #3 doesn’t necessarily consider other factors or variables that are part of the equation. 

Accounts payable is more than just keying in invoices. If it wasn’t, the process would already be solved because there is already technology to solve that specific part of it. Yet most organizations still have to employ someone to deal with payables. That points to the fact that there is pain emanating from other areas, not just how bills are accepted into the process. And much of that pain may also be interrelated. This phenomenon in research is known as multivariate causality—that multiple issues may all contribute to a situation.

When it comes to automating accounts payable, nearly every single solution out there focuses on dealing with invoices—most of the time, exclusively. It’s very limiting to not examine each step in the total AP process and how pain, inefficiency, error, and effort are part of them. 

During supplier onboarding, the act of collecting and validating the required information (banking details, contact data, tax identification) and ensuring the supplier is payable is basic to the AP process. Yet many payables departments do not do this until they get an invoice (if they do it at all—since paper checks are so easy to write and send out). But if they do onboard a supplier, it’s often based on information from the invoice or they email the supplier for the data. Those processes are neither secure nor efficient. Invoice data is varied. Some vendors post bank account information and/or tax details. Some don’t. That puts the onus on a staff member to sort it all out and hunt down information from the vendor if they didn’t provide it.

Here’s another pain that often isn’t considered in accounts payable: the actual act of paying. Once an invoice is approved for payment, there are still several processes to finalize the transaction. Bills have to be scheduled for payment runs based on their due dates. Where you draft a payment might be important. And of course, the payment method itself can be tricky. It’s a very different process to cut a check or conduct a wire transfer. AP automation doesn’t always address that. And who will approve these payments?

The point is this: AP isn’t just about paying an invoice. That’s not the end or even the beginning of the process. Any business that believes invoices are what AP is about likely has improper controls and efficiencies in place to do it right.