For many enterprises, the accounts payable (AP) function is one of the last bastions of manual processes. Invoices in these organizations are still approved by hand, with paper checks sent out via mail or third-party to pay suppliers. This is slowly starting to change, as Ardent Partners research has shown over the last five years; the continued focus on cost reduction has brought into sharp focus the manual processes currently used by the AP/finance functions at enterprises left without an AP automation solution.
Market forces and technology innovation in the AP space, such as electronic invoicing, business networks, and electronic payments, make it harder and harder each year for enterprises—including many midsized organizations that have not yet been able to leverage economies of scale—to avoid automating all or part of the AP workflow. Enterprises that commence an AP transformation can take several paths, but one prominent one is to start with eInvoicing and move towards end-to-end AP automation. To that end, we’re looking today at what the future holds for AP automation.
eInvoicing: The First Step for Success
There’s an inflection point for most enterprises when it comes to accounts payable operations. Small organizations with only one or two AP professionals are able to work efficiently with manual processes because chances are there aren’t many invoices to process in the first place. Once an enterprise grows to around $50 million or so in revenue, and there are something like five to seven AP staffers, slightly more complicated workflows, and several thousand invoices, then the inefficiencies of a manual department begin to crop up.
These inefficiencies include a high cost of invoice processing, as well as a lack of transparency into what AP actually does once an invoice is received. Ardent Partners research has shown that it costs Best-in-Class enterprises $2.41 to process a single invoice; all other enterprises in the market experience a $17.61 cost to process an invoice—a more than 600% difference. Take this cost difference and apply it to thousands or tens of thousands of invoices each month, and it becomes clear that there is a huge savings opportunity available for most AP departments; eInvoicing technology is one proven path to start driving these savings
Lack of transparency into the invoice process is an issue because, according to Ardent research, the average AP team spends more than a third of its time answering questions about invoice status from internal and external stakeholders. In a paper-based environment, these queries about invoice status are onerous and time consuming—the responding staffer may have to physically walk around the department to see where an invoice is in order to answer the question. And the answer that the questioner receives will probably be delayed and/or only partially accurate at best. This is where automated solutions can come into play.
Social, Mobile, and Cloud: Changing the AP Game
Accounts payable is no exception to the transformative power of the social-mobile-cloud convergence. Legacy AP systems are almost universally installed in a corporate server environment behind enterprise firewalls. The cloud has shifted this particular paradigm, and allowed for small and midsized enterprises to gain some of the same efficiencies their large competitors enjoy already. Cloud solutions are in general faster to implement than installed software; there’s no expensive hardware to buy and enterprises don’t need to retain in-house technical support. Then there’s the pay-as-you-go model for many of these solutions, which has become another reason why many enterprises now default to cloud solutions automatically.
In terms of social capabilities, the business-to-business space lags the consumer realm, but B2B commerce networks have started to build some social technology into their software. This allows for discussions about invoices to take place—in real- or near-real-time—within the same portal as the invoice itself. This provides better visibility into the information being discussed, as well as greater transparency between internal and external stakeholders.
And then there’s mobility, where we at Ardent expect a massive shift to occur, particularly as IT organizations at large enterprises begin to shift their users from desktops and laptops to smart devices. Viewing or approving an invoice on a tablet or smartphone can transform the temporal element of work, but only if the user is able to perform their work efficiently. Some solution providers have struggled to shift eInvoicing tools to mobile devices, but as this improves so too will the usage of eInvoicing systems within enterprises.
End-to-End AP: The Final Stage of Automation
Enterprises with the best AP operations (the Best-in-Class) derive real advantages from streamlined workflows and automated processes; in these groups, invoices can be processed more than four times faster and processing costs are more than six times cheaper. This comes from using the available technology solutions, as well as standardizing processes, which increases visibility and creates an environment where more than half of all invoices can be processed in a straight-through or “touchless” fashion.
These top performers also enable, according to Ardent’s research, more than 40% of their suppliers onto eInvoicing technology. This makes the Best-in-Class better positioned to collaborate both internally and externally, as well as allowing an environment where invoicing operations are transparent and add value to suppliers as well.
But, organizations also need to continue to think holistically about the AP process workflow in order to foster additional improvements. This means not focusing solely on how much paper is coming into the process, but also on what the organization needs to do with that paper and how and when suppliers are paid. The time has also come for enterprises to think about the procure-to-pay process as a single transaction with connection points in procurement and accounts payable.
Final Thoughts
Top-performing enterprises hold many advantages over the rest of the pack, but that doesn’t mean that the capabilities of top performers are limited in scope to a particular organizational size or strategy. Rather, enterprises interested in achieving top performance in the AP space need to consider all stages of the process in order to find the most efficiencies and best methods of collaboration to move the proverbial needle.
Keep up with all the discussions about the future of accounts payable at the Ardent Partners LinkedIn group. Join us at https://www.linkedin.com/groups/Ardent-Partners-Supply-Management-Research-2843427.
