6 Things to Look for in a Payables Automation Solution

By Mark Brousseau

Businesses are tired of manual accounts payable processes and they plan to do something about it. Over the next three years, 88 percent of businesses plan to reduce the number of paper invoices they receive from suppliers by a least 25 percent, per the Institute of Finance and Management (IOFM). Half of the businesses surveyed expect to eliminate most of the paper invoices they currently receive.

Businesses recognize that automating their invoice approval processes delivers big dividends. Compared to businesses that rely on manual processing, those with highly automated operations:

  • Spend 75 percent less to process a single invoice
  • Process more than 10 times as many invoices per full-time equivalent (FTE)
  • Report half as many errors on purchase order-based invoices
  • Capture 40 percent more early-payment discounts

These stats are according to IOFM’s 2017 report, “Is Your AP Performance Top Tier?”

Not surprisingly, automation is the top priority of accounts payable leaders.

But making sense of the numerous options for automating accounts payable can overwhelm even the savviest financial professional. To help you find a smart, scalable product that fits your business requirements, here are six key considerations when evaluating accounts payable solutions:

  1. Centralized, secure management
    Since accounts payable involves direct access to cash reserves, it is critical to institute proper controls and governance. Look for solutions with role-based permissions that help enforce the segregation of duties and configurable business rules for initiating disbursements, funding accounts, creating approval flows, and generating reports. An accounts payable solution should also provide configurable approval routing for invoices as well as payments, based on transaction criteria. In addition, accounts payable solutions should have built-in user and supplier audit trails, comprehensive reporting, and document storage for audit preparedness.
  2. Self-service supplier onboarding
    Automating supplier onboarding eliminates the need to scour e-mails for banking details, manually update supplier contact information, or send requests for tax forms. The self-service supplier portals in some accounts payable solutions automate the process of collecting supplier contact details, verifying banking details, collecting and validating tax information, assigning supplier IDs, and preventing duplicate supplier records in the vendor master. Some portals also enable suppliers to choose payment methods, currencies, and payment thresholds.
  1. Touchless invoice and purchase order workflow
    Physical paper shuffling leaves little time for value-added activities such as working capital management or spend analysis. Advanced accounts payable solutions provide a single platform that automates invoice capture, approvals, payments, and reconciliation. To achieve touchless invoice processing, look for automated solutions that do the following:

    1. Centralize invoice receipt via e-mail and a supplier portal
    2. Eliminate data entry with optical character recognition and adaptive learning
    3. Allow for unlimited invoice approvers and configurable workflows
    4. Enable multiple invoices to be paid in a single workflow or with batch processing
  2. Payment automation
    By automating disbursements, a business can eliminate data entry across multiple bank portals, exorbitant overhead costs, and high bank fees. An automated accounts payable solution enables the business to upload a single file for all their supplier payments, regardless of the payment method, country, or currency. The application then parses the payments and remits them using the appropriate format, with no interaction required by staff. The payment status and data for each payment method is automatically reconciled, normalized, and seamlessly uploaded to an enterprise resource planning (ERP) system. Suppliers can choose their preferred payment method and provide banking details via a self-service portal.
  3. Early payments
    The built-in early payment capabilities in some accounts payable solutions make it easy to capture early payment discounts. These solutions notify suppliers of early payment offers through a white-labeled supplier portal as well as e-mail. If the supplier does not accept an offer the day it is presented, a new payment amount is calculated based on the number of days prior to the due date that the supplier would be paid. When suppliers accept an offer, payment is remitted the same day. Look for a solution that automates supplier opt-in and provides full control over which suppliers are offered early payments, when early payments are offered, and how much of a payment is eligible. The solution should also support multiple payment methods and have finance partners to cover early payment balances.
  4. Real-time reconciliation
    Automated accounts payable solutions consolidate data on payment methods, currencies, subsidiaries, and regions into a single file that is available as payments are processed. Users can review all attempted and executed payments, drill down into invoice details and other data, and download the reports to Excel to help with the financial close. Be sure that payment results can be automatically synced with its accounting system and/or ERP.

Automated solutions with these capabilities eliminate up to 80 percent of the accounts payable workload, freeing finance staff to focus on accelerating growth, productivity, and profitability.

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