Is your accounts payable automation platform really driving business value?
- Posted by: David Watters
- Category: Best Practices
Is your accounts payable automation platform really driving business value?
A candid look at the technology behind ap automation.
Accounts payable automation is a hot topic right now, with a recent report from the Tungsten Network identifying that automating and optimising the procure to pay process was regarded as the highest priority in the near term. It’s not a surprise, the pandemic threw many core business processes into disarray as people were unable to get into offices and follow their manual processes.
With such a prominent focus on Accounts Payable automation and optimisation, prospective buyers need to be mindful of the promise that AP automation can and cannot fulfill. To assist with the process, we decided to take a deep dive into the business value that accounts payable should deliver and what to watch out for if you are in the market.
AP Automation – fools gold or real value?
A simple google search for “AP automation roi” returns of 2.8m results, that’s a lot of people talking about the value that AP automation can bring. The big question is, does AP automation actually bring any value and does it have a suitable return on investment.
A bold IQ BackOffice claim is that “a negative ROI is the typical outcome of an AP automation project”, if this is at least half true its clear there is a big gap between what companies think they are getting from AP automation and what they actually get. To help understand this more, lets breakdown some of key value drivers for AP automation and questions you should be asking yourself and your platform provider to ensure that you are on the right track to achieve a return on investment.
Never deal with a paper invoice ever again! Sounds great and ideal in the current business environment but in reality, its reliant on your suppliers being compliant and joining on your journey. The benefits that come from completely digital are hampered massively by suppliers who continue to send in paper invoices because they didn’t know or haven’t been transitioned over. Supplier onboarding therefore becomes key to your success but is often mismanaged, a recent survey by Dow Jones Risk and Compliance found that a third of all new supplier onboarding undertaken in the last 12 months was “likely to have been executed incorrectly”.
Should you expect your platform provider to onboard all your suppliers? Probably not (although some will). The overall solution does have a big impact on how effective your supplier onboarding program is. Key questions include:
- How easy does your platform provider make it to receive digital invoices, do they include email, eInvoicing (such as PEPPOL) etc?
- Will your platform provider provide any support or guidance to onboard your suppliers? What value and experience do they bring to that part of the project?
Invoice fraud is a growing issue across the region with scammers working on very sophisticated ways to intercept invoices and manipulate them. Digital invoice processing and accounts payable automation solves this problem – or does it? Let’s look at what most platforms for invoice processing:
- Digital invoice receipt usually via email
- Basic Invoice data is captured automatically to varying degrees
- Basic data validation for duplication and active suppliers
- Invoice is routed to a reviewer for review and account coding
- Invoice is the routed to an approver for final approval
- Invoice is processed through for payment
Sounds good and covers you really well for reducing the risk of duplicate payments and payments to suppliers that don’t exist in your system. However, if you ran the type of scam through this same process where the invoice is intercepted before it gets to you and the bank account details are changed – it wouldn’t get picked up. When done correctly, data verification of invoice data can completely mitigate the risk of invoice fraud. Make sure you choose a platform that can perform the following invoice data verification checks:
- External Supplier validation – check against popular risk and fraud databases to ensure your suppliers are legitimate.
- Business Number validation – a check against government records to ensure the business is who they say they are
- Internal supplier details validations – do the supplier details on the invoice match your master supplier records?
- Duplicate check – have you received this invoice from this supplier before?
- Purchase order matching – does the invoice reference a purchase order and do the supplier and purchase details match what is on the invoice?
- Bank account verification – does the bank account listed on the invoice match the one in your supplier records?
Improved Accuracy and Reduction in Manual Work
The commonly held assumption, and what is typically sold to organisations by service providers is that you can ultimately reduce your headcount in your AP team. With ‘touchless’ accounts payable you need far less resources doing data entry and can make a direct saving with people.
In reality most optical character recognition platforms that power AP automation can boast accuracy rates of 90%. Sounds great? But let’s consider what that really means, a 90% accuracy rate means that 90% of fields captured are correct – not that 90% of invoices are captured correctly.
So, if you are capturing a conservative 8 fields on each invoice (supplier name, ABN, gross sum, net sum, tax amount, reference person, invoice date, invoice currency, invoice number and bill to name) than one in ten of those fields will need to be manually corrected. Add on top of this that manual entry of invoice data accounts for 3.6% of errors on invoices requiring to be fixed. (AP Association Facts and Statistics). You are still spending a lot of time manually checking each invoice and correcting data.
When engaging with an AP platform provider consider the following questions:
- What is accuracy rate of your platforms data capture service? And what is the impact to your resource planning and business case.
- What data validations and logic-based corrections can be automated by your provider to ensure only true exceptions are handled by your AP team.
AP Automation drives greater control over how your invoices are processed and ensure that financial and approval policies are adhered to. This control is driven by the approval and exception workflows that are created in the system. Consider that 54% of businesses said invoices were being sent to the wrong place (AP Association Facts and Statistics). Lots of businesses find themselves in a situation where the ‘silver-bullet’ of technology cannot fix their bad processes. For increased control to be realised you need have a clear delegation of authority and thought through, rule-based, invoice routing. You should be using the automation opportunity to apply best practice to your process.
Consider the following questions when engaging with an AP platform provider:
- How does you provider configure your approval chain and what role do they play in trying to align with best practice?
- What routing logic can be put into place based on data that can be captured from an invoice e..g supplier, reference name, business name etc
So, is AP Automation actually worthwhile?
Absolutely yes! But has we have highlighted here it’s important that you align the right technology with the right processes and people to realise the real business benefits of AP automation. Valtatech offer an innovative accounts payable automation service that drives costs down and charged on a pay-as-you-go model is available to businesses of any size. We work with you to ensure that business value is achieved. Find out more -> https://www.valtatech.com/apcloud/
Valtatech – a trusted partner
We are source to pay transformation experts with over 30 years of experience across the team and have been trusted partners of a number of leading organisations to deliver accounts payable automation and source pay transformations across APAC.