5 Steps to Zero-Touch Invoice Processing
If your organization is still processing invoices and vendor payments manually, it is time to institute a “hands-off” policy.
With resiliency being a primary goal of many companies in current business conditions, automation and digital transformation is a necessity. Even in the best of times, companies looking to preserve liquidity and working capital are aggressively exploring ways to increase efficiency and decrease costs. Many Accounts Payable departments are assessing the benefits of automating their invoice approval processes with a greater sense of urgency having experienced the challenge of operating in a pandemic environment.
In any process improvement play, however, optimization is key. It is a given that manual processes and multiple human touches decelerate the speed at which invoices are approved, but the ideal process is more than improving cycle time through automation. The lack of efficiency through manual processing affects your ability to manage cash flow, decreases your discount capture, and can adversely affect your relationships with your suppliers. Late pay is never a prescription for good relations and often comes at a cost in late fees and potential adverse credit ratings. All of this impacts your ability to gain greater control over your working capital. Now, imagine if you could accelerate your approval process by getting the number of human touches down…way down.
Automation provides significant benefits
With the optimal AP automation solution, you can accomplish the benefits of automation, and many companies have already done so. If your firm has not addressed improving your AP processes, you may be at a competitive disadvantage as compared to your peers. PYMNTS, in a 2019 study, found that most companies understand the benefits they can realize when they automate their B2B processes:
anticipate a reduction
look for cost reductions,
especially processing costs
indicate better allocation
The optimal way to realize these benefits is by going through the approval process with no human intervention…essentially with “zero-touch.”
There are 5 steps that an invoice goes through from the time it is received until the moment payment is issued, and at any one of those junctures, human error can derail the process and create roadblocks. Conversely, digitizing and normalizing all data and automating the approval process makes those roadblocks disappear.
Zero-touch, step by step
The path that an invoice takes, from receipt to payment, needs to be as efficient and accurate as possible. Manual handling and paper invoices slow the process down and are subject to human error. Accounts payable automation is best achieved by automating the entire approval workflow. This will streamline your invoice pathway, provide full visibility throughout the approval process, and ensure that payments are correct and on-time, thereby generating better relationships with your suppliers.
Each internal workflow step within the approval process is listed below. What makes automating the entire workflow so valuable is that there will be incoming invoices that require multiple or hierarchical approvals. Without automation, the flow of those invoices will take considerable time and effort. With an automated invoice approval workflow, the system will continue to directly move the e-invoice through the approval process. Pre-determining and configuring those approval controls means AP can avoid being a touch-point that slows down and creates unnecessary gates in the process.
For suppliers who have signed on to your AP automation solution, their invoices are entered into the system where all data is standardized and normalized and begins its journey through the approval process without any processor opening an envelope or downloading a pdf. That’s because an e-invoice is not a fax, email or pdf. It’s a fully digital electronic document from the time it’s created straight through to its approval and entry into the company’s ERP or AP system. By eliminating paper and the human component, you eliminate data entry errors and the possibility for lost or misplaced invoices. For suppliers who still use paper or email, the best solution will offer a scan-and-capture capability that will transform the invoice into an e-invoice. At Corcentric, our Invoice Virtualization Center uses invoice scanning and double-blind keying technology to extract 99.95% accurate information for conversion to e-invoices.
It’s essential that you retain control; that the solution and provider you select enable configurable approval (or Smart) routing. This ensures that vendor invoices can be managed based on your business rules. Since the parameters have been designed and mapped out prior to implementation of a solution, the system will be able to discern the appropriate approver and send the e-invoice directly to that person, again, without human touch. SmartRouting will streamline and accelerate approval and turnaround time, and quite remarkably, it will also enable each member of your AP team to handle up to 70% more invoice volume.
Invoice matching is central to ensuring accurate, on-time payments. The ultimate goal for AP is to have as many invoices as possible go through the 3-way match. When an e-invoice enters this step in the process, it’s matched against the original purchase order (PO) and the Receipt of Goods. The ideal is that a large percentage of invoices are matched to purchasing data to be sent straight through to the ERP system for payment. However, not every invoice passes the validation checks needed to be sent straight through to payment, without human intervention, and this may be due to a missing PO or other common invoice exceptions. When setting up the system before implementation, you should determine what your “workable tolerances” are when it comes to your matching rules. Should the match fall within that tolerance, it will be sent straight through to your AP or ERP system for payment. Otherwise, an exception will be flagged and the e-invoice will be routed to the authorized person for further action. That authorized person will either approve the e-invoice and re-send it through for payment, or will mark it for further action. It is only at this point that any interaction and “touches” may occur.
A truly optimized environment includes automating the payable process for B2B payments. This additional automation opportunity will enable centralization and management of 100% of payments electronically. Eliminating paper checks will significantly reduce fraud and automating the payable workflow will provide real-time visibility into every payment. Such visibility improves line of sight, and can eliminate such issues as duplicate payments. ACH or virtual card payments can be sent directly into your supplier’s AR system. No paper checks to process. No envelopes to address. No postage to pay. NO TOUCH. Although an electronic payment process provides much improvement with e-payments, you will still have some suppliers who insist on paper checks. With that being true, it is important that you work with a solution provider who can provide that service, provide provisions for immediate check issuance and check cancellation, and provide other secure “non-electronic” processes as needed.
For certain, there are enormous benefits to all stakeholders, from procurement to accounts payable to supplier, that an automated AP approval process and zero-touch provide. It all adds up to less errors, greater efficiencies, lower costs, more information, and faster payments.