The changing dynamics of supplier-buyer relationship has brought in larger number of new complexities in accounts payable (AP) management. The varying terms of engagement across time, geographies and volume of business poses innumerable challenges to the AP teams resulting in extended payables, slower delivery times and erosion in supplier relationships. AP functions are stumbling into costly bottlenecks from data entry errors, onerous payments and non-coherent communication efforts spent in tracking down invoices.
Careful yet efficient handling of invoices through superior invoice automation provides an increased level of certainty within any organization. Not only that, a well-managed system will free up working capital to fuel growth and realize the true value of your finance teams.
Some of our clients have a hard time articulating what is it about their AP process that’s so challenging.
Here’s a list of five most common challenges that plague businesses using traditional AP processes:
1. Missing invoices
2. Duplicate Payments
3. Delayed or Missed Payments
4. Huge manual effort
5. High Percentage of paper invoices
Are you experiencing any of the above problems? It might be the right time to consider a strategic shift. The five strategies that can help outline the move to a scalable Accounts Payable management are given below.
Centralized Accounts Payable
A growing company continues to add branches, business units and departments and sometimes they let each branch handle its own invoices. This leads to forming a team in charge of AP at each location. Splitting up AP duties into such separate teams poses a variety of problems. For one thing, it’s simply inefficient. You end up having to train multiple persons across your company to essentially perform the same task. Additionally, different departments may end up placing orders with different suppliers and forego best rates or bulk discounts. There is also the added effort in cumbersome reconciliations.
Significant cost and effort optimization with robust control can be achieved by consolidating and centralizing AP. Organizations are even looking at outsourcing entire accounts payable operations to an outside company, specialized in handing end-to-end AP functions.
A centralized AP is not limited to just personnel- it is just as important to eliminate the culture of fragmented systems in favour of an all-purpose accounts payable software which can handle all aspects of invoice automation.
AP Automation Platform
The rapid move of the world towards technology is making it essential for businesses to take a more strategic approach towards handling their business activities. A modern AP team needs to be empowered with an appropriate up-to-date AP platform to cater to all needs. A centralized cloud-based platform with a view to automate all activities such as work allocation, invoice matching, discount calculations, invoice and payment approvals and payment reconciliations, drastically reduces workloads and drives up efficiency.
Paperless Invoice Processing
Paper-based invoice processing poses multiple challenges- be it manual data entry or just simply archiving. Paper is easily lost, either in mail or in a pile of invoices and significant effort is spent in tracking and sorting.
Thus, comes the need for electronic invoices. e-Invoices go much beyond an invoice copy sent over email or an ‘OCRed’ pdf since they still involve some degree of manual effort. Although, a 100% elimination of paper invoices is hypothetical, the goal should be to eliminate the ‘entry’ from data by achieving the perfect mix through OCR, e-invoicing and managed services.
The most accepted notion of implementing e-Invoicing is through a cloud based ‘supplier network’. The network itself provides the in-built ability to raise and transmit e-Invoices. However, implementing e-Invoicing can be quite expensive and is hardly an all-inclusive solution. The cost implications to suppliers is often a hurdle. A good relation with suppliers and appropriate incentives may help accelerate the process.
Dedicated Supplier Portal
An alternate approach is the use of a dedicated supplier portal to track orders, shipments, receipts, payments along with the ability to submit invoices electronically. This ensures process streamlining, supplier participation and an overall decrease in supplier issues. Only suppliers associated with your organization are on-boarded into the dedicated portal at no extra costs to the supplier. Additionally, suppliers can maintain their own information, significantly reducing workload of Master Data Management teams. An additional value-add may be the capability to generate invoices for suppliers in federal tax authority approved formats. This new channel of communication with supplier can be extended to other areas to create a one-stop supplier collaboration function.
Robust Reporting, Reconciliations & Analytics
A key area in the responsibilities of an AP team is also the ability to identify issues and predict the future. Advanced analytics, dashboards and ready-to-go reports allow AP users to analyze spends, assess suppliers, and perform compliance checks. As the size of your organization grows, greater is the need to have access to analytical tools. In addition, the ability to seamlessly integrate with ERP systems to reconcile information like payments, discounts and taxes eliminates the need for manual intervention and mitigates risks of errors and losses.