A Roadmap for Accounts Payable Digital Transformation

Managing an organization’s Finance and Accounting (F&A) processes is a vital business function involving the organization’s financial planning. Accounts payable is a critical transactional process directly impacting cash outflow and supplier relationships.

Most organizations find the management of accounts payable challenging due to delays in payment, the high costs of processing, and the potential for monetary losses due to errors and fraud.

While organizations have transformed a part of their accounts payable function, some of the processes such as paper invoices and checks remain - slowing the process and making it error-prone. The accounts payable department in most organizations is a mix of traditional paper-based processes and some automation.

Preparing for Accounts Payable Transformation

The first step is to check whether your business is ready for accounts payable transformation.

End-to-end automation of accounts payable needs preparation and an assessment of the organization’s readiness for digital transformation in accounts payable. The business processes that need to be evaluated to assess the organization’s readiness for accounts payable transformation include: 

Automated Invoice Approvals:

If an organization has automated the receipt, capture, and workflows of invoice approvals, it is ready for accounts payable transformation. 

Separate Approaches to Virtual Card, ACH & Check Processing:

The existence of separate processes for each of the above indicates the organization’s process maturity and readiness for accounts payable transformation.

AP Team & Accounting Leadership have Visibility:

The accounts payable transformation roadmap in an organization will succeed if the accounts payable and F&A leadership teams can spot the bottlenecks in the invoices and cash process and their impact on the throughput of the approval process.

Key Challenges in Accounts Payable Transformation

The key challenges in the accounts payable digital transformation include: 

Lack of Visibility:

Traditional accounts payable processes lack real-time visibility of critical financial processes. With accounts payable transformation, users can access dashboards that display information needed to maintain operational efficiency. Automation will also enable efficient management of electronic queues, better workload distribution, faster dispute management and elimination of duplicate payments. 

Missing or Lost Invoices:

Invoices can be lost or go missing in a paperwork-based accounts payable process. This not only creates friction with suppliers, but an unpaid invoice also causes internal accounting problems. For example, a missing invoice means that the liability is reflected in the balance sheet late, leading to the dissemination of inaccurate information on the organization’s finances. 

Increased Number of Discrepancies & Exceptions:

Accounts payable teams spend a lot of time handling exceptions that include incorrect or incomplete invoices. According to a research report, almost 20% of invoices contain inaccurate and incomplete information.

Potential Benefits of Accounts Payable Transformation

The benefits of accounts payable process transformation include: 

Better Compliances & Lower Processing Costs:

The accounts payable processes are rules-based and transaction heavy. Transformation improves process flow and boosts efficiency through the deployment of process improvement techniques and automation. This leads to significant processing time reduction, lower error rates and better compliance. In addition to deploying technology, transformation of accounts payable involves re-engineering of the process for greater efficiency and a significant long-term reduction in processing costs.

Faster Approval of Invoices:

Transformation, using appropriate technology, enables efficient data digitalization. Data digitalization provides data-rich dashboards and analytical solutions that enhance end-to-end process transparency and real-time visibility into transactions enabling faster approval of invoices. 

Increased Employee Productivity:

Accounts payable transformation enhances operational efficiency and leads to superior business outcomes. The accounts payable process involves a large number of transactions and enormous volumes of data. Transformation extracts useful insights from this data to streamline cash flow, locate potential fraud, and identify the root cause of exceptions - all leading to increased employee productivity.

Conclusion

Accounts Payable is a critical process with a significant impact on an organization’s relationship with its suppliers and employees. Transformation of the accounts payable process by leveraging technology is critical to stay competitive in the market. The RoI, from the transformation, is obtained through cost savings, higher levels of satisfaction among vendors and employees, maintenance of working capital at optimal levels, and superior insights for strategic decision-making.

Frequently Asked Questions