September 12, 2023 | Accounts Payable
There is no better example of siloed processes and technology roadblocks in the back office than in accounts payable. Manual processing and approvals, legacy systems and outdated practices have left the function way behind several other technology-driven functions.
Even today, accounts payable in many businesses has a slow, error-prone invoice-to-payment lifecycle, which leads to payment delays and missed savings opportunities. Lack of transparency leaves suppliers frustrated as they often have to chase a business to get their payment.
The entire process makes it challenging for accounts payable to effectively manage supplier relationships, especially as they have to share this responsibility with procurement. Both teams often engage in a blame game when a payment is missed or delayed. This can hurt relationships with key suppliers, which, in turn, can hamper business growth.
In organizations that have started to use digital invoices, there is still the time-consuming task of matching invoices to purchase orders.
Thankfully, there is a realization that things need to change.
Up to 69% of accounts payable and finance leaders believe the function needs smarter systems that drive more efficiencies, according to a survey by Ardent Partners. 60% of the survey respondents believe invoice and payment approvals take too long, while 48% of respondents blame the high percentage of exceptions for the delays.
So, how can the adoption of technology address these challenges?
The biggest advantage of deploying technology in accounts payable is automation. AI-powered technology can work in tandem with optical character recognition to scan, ingest and extract the most relevant data from invoices such as vendor details, invoice numbers and amounts. It can verify invoices by matching supplier information to vendor master data.
It can also match invoices to original purchase orders and negotiated prices, thereby increasing accuracy and eliminating the time-consuming task of invoice processing. Automated invoice matching also helps create a verifiable, end-to-end audit trail. Auditors can thus track the entire history of how and when an invoice was processed and approved.
Advanced AI technology can detect duplicates, reject bad invoices and auto-route invoice mismatches for resolution. It can also help prevent fraud by carrying out invoice data validation and hygiene checks. Advanced payment controls such as two-factor authentication minimize the possibility of unauthorized payment.
Combine these capabilities with machine learning algorithms, which can get smarter with use and detect patterns in a high-volume invoice operation. This helps to improve the system’s accuracy by learning from past experiences.
Automation can also streamline accounts payable workflow and approval processes that involve multiple stakeholders. It can expedite payment approvals by digitally routing invoices to concerned approvers based on predefined rules. If there is a chance of a payment getting delayed, it can send automated reminders for outstanding payments and approvals. This can speed up invoice processing, reduce the cycle time and improve cashflow management.
Also Read: Accounts Payable Can Finally Be Paper-, Error-, And Touch-Free With AI-Powered Automation
Studies suggest that accounts payable (AP) automation makes a lot of business sense. Invoice processing costs go down significantly when processes are automated. In fact, individual invoice costs can be reduced by a whopping 76% on average, according to the Ardent Partners survey. Apply this to thousands of invoices processed by the function over a year to estimate potential savings.
Yes, there will still be some exceptions that will require human intervention. But automating processes will significantly reduce their number. The above-mentioned study suggests companies using AP automation have a third of the exceptions of their non-automated peers. And with this reduction, a business can realize savings and get back some time that can be spent on value-adding tasks.
With real-time visibility of invoices, all payments can be made on time. Early payment discounts can be availed to realize savings. Increased process transparency helps build trust and strengthens supplier relationships.
The application of AI is not merely limited to automation and invoice processing. AI-powered chatbots can simplify day-to-day operations by providing instant access to information. These virtual assistants can also answer common queries related to invoice payment and vendor details.
AI enhances the capability to accommodate the different ways in which AP teams operate in different regions. It can tackle different forms of variability such as regional taxes and compliance rules.
AI can also be combined with analytics to translate all accounts payable data into actionable insights, which can then be used to improve productivity and make informed decisions. It can derive spend analysis and insights and share these with stakeholders across different lines of business.
Further, there is growing realization that AI can be used to streamline both accounts payable and procurement. Technology can transform the entire procure-to-pay cycle, increase spend under management and help both functions work seamlessly.
Also Read: 6 Ways Automation Makes Life Easy for Accounts Payable Teams
By automating routine manual tasks, AI can simplify accounts payable operations, eliminate human error and enable the team to focus on strategic, value-adding tasks such as budget control and compliance. When fully utilized, technology can transform accounts payable from a back-office function to one that contributes to achieving business goals and objectives.