Processing invoices involves a great amount of time and manual labor for accounts payable (AP) operations. Indeed, one of our clients estimated that it was spending $15 per transaction to pay $300 to $400 invoices. Based on our data, gleaned from over a decade of working with clients, more than 28% of transactions are paid late or inaccurately because of data errors, process issues or both. Much of the work required to resolve these issues is high-volume, repetitive, rules-based and rote.
In other words, most AP processes are excellent candidates for automation.
Yet automation alone is not a complete solution to the high cost of AP. After all, automating an ineffective process doesn’t make sense. Organizations can achieve greater results by implementing what we’ve dubbed “touchless AP.”
Touchless AP combines reimagined policies and processes enabled with automation and intelligent technologies to streamline the entire payment value chain, encompassing invoice intake; indexing and data control; buying compliance; workflows; approvals; and debit posting. In our experience, by re-engineering and automating the execution of policies and procedures in each of these areas, organizations can reduce total cost to pay each invoice up to 80%, achieve over 70% first-time throughput of invoices, and improve delivery of accurate and timely payments by 90%.
Success with touchless AP requires organizations to combine upstream work on reimagined policies and procedures that set the stage for downstream processing efficiencies. We’ll explain the three key levers needed to implement successful touchless AP:
Obstacles to touchless AP
Even with solid upstream work and careful system configuration, obstacles arise in carrying out touchless AP. The following issues typically must be mitigated:
Unprepared suppliers. Procurement and finance teams must work together to educate suppliers about the benefits of touchless AP and how to follow new processes and procedures. Suppliers often are concerned that they will lose control by submitting e-invoices or flipping purchase orders. To counter this, businesses must make it advantageous for those suppliers to adopt e-invoicing by, for example, enabling them to monitor invoice status after submission.
Complex approval processes. Finance, procurement and risk management teams must work together to logically minimize multiple approval steps for a single purchase. Touchless AP can improve risk management and compliance measures. Automated rules can match an invoice against approved contracts and POs to provide an audit trail. Bots and automated processes can streamline purchases for key supplies, reducing expense reconciliation issues.
Manually overriding or working around automation. When designing processes, it’s important to overcome ingrained practices to automate as many functions as possible. Many AP associates grow accustomed to work-arounds (such as downloading data from one system into a spreadsheet in order to upload it into another program). Bots can often eliminate these steps. Similarly, manual reviews of automated approval limits, or rechecking for incomplete or erroneous invoice data, are unnecessary with well-designed processes and system configuration.
To get started on touchless processing, businesses should benchmark current metrics on efficiency, such as first-time through processing rates and exception rates. The next step is to deconstruct the process to identify the causes of errors and inefficiencies; sometimes, policies are largely at fault or a work-around between two disconnected systems is causing problems. Next, the organization should map the number of human touches and work-arounds required to process invoices.
Equipped with this information, a business can gather finance, procurement and risk management teams to apply policy, process and technology levers to work toward touchless AP.
For more information, visit the Digital Finance section of our website or contact us.