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Don’t leave money on the table in your AP

As well-known management consultant Pete Drucker once said, “If you are not measuring it, how can you manage it?” This statement rings particularly true for finance and accounting teams. It’s the ability to accurately measure performance and process efficiency within Accounts Payable (AP) that provides much-needed visibility for effectively managing cash and improving operations.

And yet, the unfortunate truth is that few teams have this kind of insight into their cash position. In a recent Ardent Partners survey of nearly 200 AP and finance executives, at least a third of respondents cited lack of visibility into invoice and payment data as a top challenge faced by today’s AP functions. 

As it turns out, truly effective cash management needs more than just measurement. In the digital business era, data and analytics should be thought of as an enterprise layer of the digital business fabric that will power intelligent business processes. This is especially true when it comes to AP functions – functions that are critical to the well-being and success of the enterprise. 

Why is visibility important?

To work like the digitally transformed business of tomorrow, enterprises need intelligent data transformation and analytics to power AP processes. Without contextual data and analytics, it’s nearly impossible to detect critical AP problems that, if left unchecked, result in operational issues and missed opportunities for effective cash management. Gartner named data and analytics as “competitive weapons” that will propel organisations towards digital transformation, predicting that 90% of corporate strategies will list analytics as an essential competency by 2022.

Visibility into basic information such as vendor data and invoice images is, of course, valuable. But accounting and finance professionals need deeper insight into accounts payables processes and systems. Visibility into documents such as delivery notes related to a given invoice and the total volume and dollar amount of open invoices by vendor, month and payment status provide deeper insight into the overall health and well-being of accounts payable. Metrics around the time it takes to approve and pay invoices, as well as the workload for each AP employee, provides actionable information that enables AP professionals to identify bottlenecks, reallocate resources appropriately and improve overall AP operations. 

The Ardent survey uncovered concrete data on just how much money is being left on the table when AP visibility is lacking: 24% of the average AP staff’s time is spent working directly with suppliers to fix invoice, processing and payment errors. 

But it’s not just finance and accounting teams that aren’t able to see the full picture and paying the price. Most CFOs also experience their own blind spots, which make it impossible for them to answer questions like:

  • How many invoices are paid on time?
  • Which processes within the organization are causing the most delay in invoice processing?
  • How much time are my teams spending on processing low-dollar, low-value AP transactions when they could be doing more value-added tasks?
  • How often do we see exceptions and are able to resolve bottlenecks in the AP process?
  • Are we effectively managing the days payable outstanding (DPO)?

Visibility into liabilities and operating expenses for all major functions provide CFOs with a high-level view of operations that can be used to establish standards and craft strategies for operational and process improvements. Specifically, AP analytics give CFOs as well as accounting and finance executives the information they need to answer such questions as:

  • What volume of payments is overdue?
  • Who are the top outstanding vendors and how will this impact cash flow in the future?
  • Who are the top vendors by spend and can we renegotiate better contract terms with them?
  • What’s the cash flow impact of invoice payments on time versus late payments?
  • What’s the relationship between invoices paid on time versus late? 
  • What type of resources are spent on delayed invoices?
  • How does the current year compare to the previous year for items such as average time to pay and an average value of outstanding invoice?

Eliminate AP blind spots with Intelligent Automation

Intelligent Automation combines a set of features including analytics, process orchestration, mobile interactions and cognitive capture that drive Accounts Payable transformation. With intelligent automation (IA), organisations proactively improve AP operational efficiency and mitigate the risks of non-compliance operational processes. When intelligent automation capabilities are integrated within AP, financial and accounting teams begin to work like tomorrow. With IA, every aspect of AP is transformed to achieve unprecedented levels of efficiency and quality through:

Improved employee productivity: AP teams process thousands of invoices. But when even a portion of these is handled manually, employees waste time on simple data entry tasks. AP automation frees employees to spend their time working on higher value tasks, while invoices are processed faster. Cognitive capture and workflow automation-based solutions complete invoice processing up to 71% faster than manual methods. Accounting team members spend less time looking for information and more time acting on it. 

Improved process efficiency: Manual AP processes generate errors and delays that result in late payment fees, leaving money on the table. Automation reduces errors and speeds processing times. In fact, AP automation reduces invoice processing costs by up to 80% through early payment discounts and the reallocation of staff to other tasks. AP analytics enables finance and accounting teams to identify inefficiencies in processes – such as capture, classification and validation. Analytics helps AP teams discover which invoices have longer cycle times, while automation helps them resolve the bottlenecks, thus improving processing and payment time.

Improved vendor relationships: The downstream effects of on-time payments and a streamlined procure-to-pay process are stronger relationships with vendors, who are more likely to extend discounts and other mutually beneficial contractual arrangements as their confidence in your enterprise’s ability to pay increases. 

Improved cash flow: Another way to leave money on the table is by failing to manage cash flow. AP analytics helps businesses improve forecasting and manage near-term cash requirements. AP automation makes sure enterprises don’t accidentally pay the same invoice twice or overpay an invoice. Enterprises know exactly which payments are due and when allowing them to maximise cash position accordingly. Supervisors can find out where an invoice is in the workflow and how long it has been in the system. That means they can avoid late payment penalty fees and even qualify for early payment discounts. 

Mitigated risk of non-compliance: Without visibility, AP teams put themselves at higher risk for errors. Even more troubling, they risk not being in compliance. Key information is not captured. Data is disorganised and not updated in real time. But an automated AP solution ensures invoices are routed to the appropriate people and tracking information provides full transparency. The addition of analytics to evaluate processes allows enterprises to identify bottlenecks and catch potential problems such as breaches of policy, violation of segregation of duty, or procedural requirements early, thus reducing audit risks. 

Operational excellence: Data embedded deep within an organisation and reflected in the AP processes can offer a wealth of information and insights that drive new opportunities. Analytics and IA allow CEOs, CFOs and finance teams to see the big picture as never before – which means they’re able to make more informed decisions that mitigate risk, reduce costs, increase profits and make their firms more competitive. Executives have valuable information that allows them to make informed decisions for optimising investments.

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