Despite substantial growth and adoption in technology, many of the challenges that AP departments have been facing for decades are still major issues. The 2019 AFP Electronic Payments Survey by JPMorgan found that companies still make 42 percent of business customer payments by paper check, which means it needs to be manually processed, mailed, filed, etc. Ardent Partners also estimates that about half of all invoices are still sent to the receiver manually, which often results in missing payments, delays, and errors in the payment and payment process. In addition to these challenges,
- Slow Processing: This one rears its ugly head when companies are manually processing invoices on paper. It also leads to longer approval times as documents are passed from desk to desk, printed, copied, and mailed, resulting in late-payment fees, missed opportunities for early-payment discounts, and reduced credibility amongst your customers and vendors.
- Matching Errors: AP automation systems, like MetaViewer, enlist the help of automatic two- and three-way matching to make sure that there are no duplicates within the document management system and the ERP that it is integrated with. This assures that the invoice matches the purchase order and other documentation. When automation software is not deployed, it is more likely that there will be errors caused by manual data entry, which could include duplicate payments.
- Exception Invoices and Manual Follow-Up: Exceptions are one of the biggest challenges facing AP departments, and many AP departments' main priority when it comes to streamlining processes with automation. In fact, Ardent Partners found that the average AP department spends almost one-quarter of its time handling supplier inquiries. If exceptions are not followed in a standardized, consistent way, it leads to errors and inconsistencies. In addition to this, exceptions are extremely time-consuming. According to Aberdeen Group, about 20 percent of invoices regularly have incorrect or incomplete information.
- Unauthorized Purchases: If your processes are manual, you may never know if purchases have been approved and authorized. Looking into approved and unapproved purchases is incredibly time-consuming for AP departments, and is often a step that is skipped because it is tedious. So, if processes are manual many of these purchases are likely swept under the rug with no system in place to catch them.
- Fraud and Theft: According to NetSuite, “a typical organization loses 5% of its revenue to fraud every year, with a median loss of $125,000.” This is according to findings from the Association of Certified Fraud Examiners (ACFE). Without a reputable, reliable and secure automation system in place, you open your organization up to an increased risk of fraud, like phishing and other scams, which could result in a huge cost and security burden for your company.
- Paying Invoices Before a Service or Product is Delivered: Sometimes we’re so busy with day-to-day tasks that we pay an invoice before the service has been completed or before the product has been delivered. The lack of visibility resulting from manual processes can be a large cost burden on organizations, as it restricts cash flow and reduces liquidity, according to NetSuite.
- Disappearing Invoices: Raise your hands if you have tried to solve the mystery of the disappearing invoice. When your office is handling piles of physical paperwork, invoices can easily get lost in the shuffle, resulting in limited visibility, late or missing payments and fees associated with them. It also leaves your leadership team in the dark about the company’s actual financial situation and could cause issues in the case of an audit.
- Double Payment: The opposite problem from the disappearing invoice is the duplicate payment. Coding issues, missing and rediscovered invoices and, again, limited visibility can cause team members to make double payments on goods or services, especially if there are multiple systems in place that are not integrated properly and no way to monitor payments and processes in real-time to see what's pending and what's completed.
In their report “The State of ePayables 2021: Operating in the New Normal,” Ardent Partners highlighted the importance of acting strategically within the AP department to combat these challenges and many more. Here are their strategies for success:
- Create a plan for automation and innovation that includes the standardization of your invoice and payment processing procedures. This should include plans for expansion to other areas of the enterprise, as well as timing, benchmarks and KPIs.
- Collaborate with key stakeholders within your organization to develop a plan that fits your organization’s needs and will work strategically with other areas of the business. This buy-in will assure you that the system will integrate into multiple departments and benefit various parts of the company.
- Take your entire workforce into consideration, including contractors, contingent workers and employees who may be remote. Figure out how they will contribute to your AP automation strategy, as well as how the automation solution will benefit them.
- “Integrate payments and payment-related approaches into how AP plans to evolve.” These areas are important to take into consideration as they will help your AP team achieve its goals and continue to adjust moving forward.
State-of-the-art, savvy technology is the key to eliminating old-school challenges and developing a plan for a successful future for your AP team. Paper is the ailment, but automation is the remedy.