Why your Accounts Payable Process is in need of a makeover

Most businesses approach digitalisation initiatives in order of importance. For example: they’ll digitalise customer-facing processes first because they need to compete with competitors who have already made a switch. But what about an internal process like Accounts Payable (AP)?

AP invoices received from third-party vendors, contractors, freelancers, and raw resource suppliers make up a large portion of a company’s costs. But these invoices might be sent through the mail, faxed over, or simply emailed in. This information is scattered across the organisation, forcing AP staff to make multiple emails or calls to verify just one invoice.

A PYMNTS.com survey showed that 80 percent of firms still use paper checks. And IDC’s 2020 SaaSPath survey reports that 64 percent of companies still use spreadsheets to manage their payments. The result: many companies are unaware of their current spending profile. 

In times of plenty, they might be able to survive. But in times of crises—like the COVID-19 pandemic—a poor grasp of finances caused the premature end of the business. SAP reports that automation of the AP process delivers an average of 29% reduction in invoice processing costs. It also saves time and increases cash awareness. 

For the modern business seeking to thrive despite inevitable crises, an AP process makeover is the only way forward.

Mastering the end-to-end AP process

Faster business growth corresponds with greater number of transactions. Strain on short-staffed AP professionals out of their limits causes errors, missed invoices, miscommunication and supplier issues, redundant and excessive payments.

Accounts payable process includes several distinct steps, including invoice capture, invoice approval, payment authorisation and payment execution. Since it involves a lot of tedious data entry and information management, errors can creep in at any step.

Accounts Payable challenges that most businesses face

Inconsistencies and variances cause delays and conflicts

The traditional AP process relied on AP personnel manually recording or typing information into a spreadsheet. Manual input errors are inherent in these kinds of systems because humans just aren’t made to do repetitive data entry for hours on end—mistakes are bound to be made.
 
Reconciling these errors one-by-one drains AP personnels’ already limited time and energy. It also frustrates busy employees from other departments. No one wants to waste their working hours trying to flip through weeks- or months-old records. 
 
As AP mistakes accumulate, the company as a whole must pay the price—in the form of inaccurate payments, confusing delays, and even fraud accusations from government auditors. Data discrepancies can also create conflict with important suppliers.

It can be costly to store all these documents

Once upon a time, businesses kept all of their documents in creaky old file cabinets. Globalisation has made this impossible—many modern Asian businesses must manage operations in multiple countries, which means information needs to be accessible and up-to-date no matter when or when it’s checked. 

Companies could invest in rooms upon rooms of file cabinets for each office in an attempt to ensure that every person has a copy of the right documents. Pen-and-paper documents can also get lost or misplaced easily. 

It’s wasteful to make new copies every time a document is updated and inefficient to store data in physical rooms (that valuable office space can be used for a meaningful collaborative space or meeting room).

Slow, outdated tools are a business risk

Businesses who experience rapid periods of growth often find their processes struggle to keep up: many rely on legacy systems which have never been updated. Not only are these slow and inefficient—they can pose serious security risks because of unaddressed vulnerabilities. According to IBM's 2020 Cost of a Data Breach Report, the average cost of a data breach amounts to USD 3.86 million. Additionally, it can take over 280 days to identify and contain a breach.
 
Invoices can contain information that businesses and employees don’t want others to see. These legacy systems are also difficult to update, so employees may waste time trying to verify whether their document is the most recent version. Lastly, older software may be incompatible with newer devices such as laptops and mobile phones. 

How can businesses remake their accounts payable process?

AP automation is a necessary response to the new challenges presented by the increasing complexity of businesses. As a function of spend management, AP automation:
Gives greater visibility into how employees and individual departments spend
Help you forecast future cash flows and time payments
Help you achieve savings as you can negotiate better fees and payment terms when you understand how much cash you have on hand
Capture vendor savings and discounts, allowing you to make intelligent decisions with your financial data

The first step to an AP process makeover is to assess your current processes and analyse workflows. Once you create a map of your current AP processes, you can identify gaps in areas where you need the most help. From there, you can consult with a vendor like SAP Concur to determine which steps to tackle first when adopting a new Accounts Payable system.

There are many different ways automation can help

Reconciling information between the org’s many business tools and departments

Like we’ve mentioned earlier, information tends to be scattered and disorganised across the organisation, and employees don’t always have the energy to consolidate that data. Employees aren’t just juggling invoices—they’re also using tens to hundreds of different business tools and solutions, each of which houses different information and plays a different role in the business.

Depending on the Accounts Payable platform you select, it could offer comprehensive integration with tens to hundreds of business tools and solutions, helping you streamline complicated and challenging workflows. 

Vendor onboarding and maintenance

Automation platforms are designed to receive documents from many different channels and manage numerous suppliers in a single setting. They can help you navigate invoicing and payment operations carried out in many different markets.

The cloud also means lower IT maintenance and no vendor-by-vendor onboarding. Some AP automation platforms allow your tech and IT team to access a developer platform, which lets you customise your workflows further.

Data entry and registration

Automation platforms use artificial intelligence (AI) and Optical Character Recognition (OCR) to smartly extract information from invoices, no matter the style or format. Employees save hours in their day because they don’t have to squint at lengthy documents all day and enter data record by record. 

Additionally, modern AP platforms enable automatic currency conversion between ringgit, dollar, rupiah, pesos, and any other currency. This is more accurate than manually calculating conversion rates with each invoice.

Lastly, automatic indexing reduces time spent on invoice registration. The accounting staff can spend their time, energy, and expertise on verifying invoices rather than entering them into a system.

Data analysis for business intelligence

Many modern AP platforms can seamlessly extract data and consolidate in a single place with robotic process automation (RPA). And because an AP platform like SAP’s uses artificial intelligence to analyse invoices, your processes will become faster and smarter as time passes. 

AP platforms also help you to spot patterns in data that ordinary humans might not be able to see. It could take a team of auditors or analysts weeks working around the clock to plot data and create reports. AP platforms can generate similar reports within hours or even minutes as long as you feed accurate data.  

Invoice management and storage

A platform’s user interface (UI) can have a serious impact on the speed and ease of invoice management. If the platform itself isn’t smartly designed, it will be difficult for you to access invoices, manage information, and collect insights. The right AP platform enables multiple input sources such as electronic data interchange (EDI), email, web portal, and physical document scanning. 

Another important factor to keep in mind: does the AP platform have web and mobile apps? Now that so much work is done on-the-go or remotely, employees need to have a versatile platform that can keep up. With a modern and accessible AP platform, you’ll be able to match invoices with purchase orders, track progress of submitted invoices, and expedite approvals and payments—anytime, anywhere.

Managing compliance

Security is a serious consideration for modern businesses—cyberattack frequency and severity have both increased significantly over the past months. Fortunately, SAP Concur’s AP platform  provides automatic platform updates compliant with changes to local laws and regulations. 

SAP also has its own team of security experts who work to enable a secure and highly efficient document exchange with all of your business partners and clients. This makes it fully compliant with modern data transfer standards. 

Lastly, an online archive stores invoices for as long as you need. Singaporean companies, for example, are mandated by the Inland Revenue Authority of Singapore to store financial documents for at least five years. Fulfilling this requirement would be nigh-impossible with manual AP processes. This is an example of an important business function that can only be completed with a cloud-based digital platform. 

Embrace the promise of tech with SAP Concur

Automation helps businesses move beyond the boundaries of traditional document exchange systems. Without a digital AP platform, you won’t be able to create a valuable AP and spend management programme.

If you’re confused about where to begin, get in touch with SAP Concur today. We can help you get started!

For more on our #BusinessSpendManagement series, click here.