What’s Holding Up Your Payables Transformation Efforts?

By Mark Brousseau

Businesses are fed up with their manual processes for approving invoices and paying suppliers: nearly two-thirds of businesses are investing in payables automation, the Institute of Finance and Management (IOFM) reports. An eye-popping 88 percent of businesses expect to eliminate more than one-quarter of the paper invoices they receive from suppliers within the next three years.

Faced with ever-increasing global competition, businesses are determined to get more out of their payables departments. They want to streamline operations for greater profitability, better manage outbound cash flows, more tightly manage enterprise spending, and increase corporate agility.

But while transforming payables is at the top of the agenda, many accounts payable departments face serious technological and organizational obstacles to eliminating their paper-based processes. Here are four common obstacles faced by payables departments and solutions to overcoming them:

Obstacle #1: Winning executive support

Ardent Partners reported that 47 percent of AP departments say that getting executive support for automation is an essential element to the function’s future success.

But executives may be more receptive to automation than accounts payable leaders think. While accounts payable professionals cite budgetary limitations as a barrier to automation, finance executives surveyed by TechValidate do not think this is as important a factor in proceeding.

Nearly two-thirds of controllers surveyed by IOFM said that AP is a priority for improvement, and they would be willing to back up their plans with additional capital. More specifically, 60 percent of the controllers surveyed said they anticipated that AP will receive additional funding for automation.

Winning senior executive support for supplier-payment automation requires accounts payable leaders to focus on the strategic priorities that senior finance executives care about, including:

  • Higher percentage of invoices paid-to-terms
  • More opportunities to capture early payment discounts
  • Increased profit margins
  • Fewer duplicate and incorrect supplier payments
  • Enhanced cash-flow visibility
  • Improved spend analysis
  • Streamlined compliance

Incorporating these benefits into a business case is sure to win the support of senior executives.

Obstacle #2: Identifying a scalable, smart solution that fits

More than one-third of the accounts payable departments surveyed by TechValidate reported difficulties in finding a scalable, smart solution that fits their needs.

The issue isn’t that scalable, smart solutions do not exist. It’s that most accounts payable solutions only address one or two facets of the invoice-to-payment-to-reconciliation workflow. Many accounts payable departments have rightly concluded that solving only part of their workflow challenges won’t deliver enough value to warrant change, or that it could create new supplier-payment issues.

Advanced accounts payable solutions offer a more scalable, smarter fit by providing a single platform that automates and standardizes invoice capture, approvals, payments, and reconciliation.

Obstacle #3: Determining achievable value

A big reason that many accounts payable departments have not automated their invoice-to-payment-to-reconciliation process is that they do not know how to determine an achievable value for the effort.

IOFM found that there are six benchmarks for efficiency and effectiveness that distinguish highly automated accounts payables departments from organizations that rely on manual or semi-automated processes. These benchmarks are a strong indicator of the achievable value that automation delivers:

  • Top performers pay more than 90 percent of their supplier invoices on time.
  • Top performers capture 97 percent of early payment discounts offered.
  • Top performers process nearly 23,000 invoices annually per full-time equivalent (FTE).
  • Top performers spend just $1.77 to process a single invoice.
  • Top performers match 90 percent of their invoices and POs on the first-pass.
  • Top performers must correct only 1 percent of all the supplier invoices they process.

These six benchmarks show the value that businesses can achieve with AP automation.

Obstacle #4: Adapting to new processes

Frontline staff play a big role in successfully transforming payables. The problem is that accounts payable staff have a well-earned reputation as being resistant to change. And according to IOFM member research, most of these people perform the same job function for their entire careers.

Here are some guidelines to make the transition easier for front-line staff:

  • At the onset of the transition period, make it clear to staff members how the solution works and how it will positively impact their jobs.
  • Engage influential frontline staff by involving them in the planning of the solution deployment, coordination of specific deliverables (such as testing), and training of peers.
  • Identify staff members who have a positive attitude and who can advocate for the system while training their peers. Frontline user training should be a hands-on test environment.
  • During training, be sure to call out features that will directly benefit frontline staff.
  • Don’t allow staff to fall into the trap of trying to recreate tired, old business processes.

Businesses have too much at stake to let their efforts to automate accounts payable get bogged down. The strategies described above will help businesses overcome the biggest obstacles to automation.

Get White Paper