Is Your Lack of Accounts Payable Technology Stunting Your Company’s Growth?
If you are looking at your accounts payable as simply a cost center that is part of “the cost of doing business,” then it’s time to consider automating and digitizing your processes.
Last March, I was interviewed for an article in PYMNTS.com that discussed how companies were realizing, albeit not as quickly as one would hope, that in order to avoid stagnation, they would need to take advantage of payables technology.
The reality is, throughout all aspects of a business, from operations to sales to finance and beyond, technology is transforming the way companies operate, offering faster, less costly, and more accurate ways to get the job done.
Why wouldn’t companies choose greater profitability and productivity?
Seems like a no-brainer, doesn’t it? Yet way too many companies are still using archaic forms of invoice processing and making payments. Paper and manual-based processes for invoice receipt and approval are notably susceptible to errors and roadblocks. This can be a matter of incorrect keying of information or the difficulty of chasing down designated signers for approvals. When it comes to payments, the most popular form of payment to suppliers is still the paper check…a check that needs to be mailed and then deposited by the supplier into their own business accounts.
As I stated in the PYMNTS.com article, “manual, paper-based invoicing systems are objectively worse in every metric when stacked against automated digital AP systems that leverage straight-through processing.” Companies that avail themselves of this technology have been able to transform their AP departments from cost centers to revenue centers.
But whereas the B2C market has warmly embraced changing technology when it comes to servicing customers, the same isn’t always true for the B2B market, especially when it comes to what are considered “back-office” functions. I describe this lagging behind as inertia, exposing a need for change management. It can be difficult to get people to accept that what they do isn’t working for the best interests of the business; however, as more companies make the move to automation, the expectation is that resistance to change will slowly break down.
4 metrics that matter
Businesses need to do their own internal evaluations of where they currently are before they decide upon a solution. When businesses actually do their due diligence, they find that they either overestimate or underestimate time, cost, and degree of oversight. There are four areas that need to be properly assessed:
- Time to process an invoice
- Days to make a payment
- Cost from end to end
- Management of cash discounting
The other aspect that is often overestimated is the cost of automating and digitizing AP processes. That is also due to the fact that most companies have no idea what it costs them to process and pay an invoice. When they are presented with actual statistics, when they see how much the company will realize in cost and time savings, many of these organizations become more willing to make the move.
Benefits that go beyond the basics
Certainly, AP managers and CFOs appreciate the savings in time and money that come with automating their processes. Of course, they are grateful for the increased accuracy and reduction in problems like late or duplicate payments. But few are ready for the benefits realized from full, real-time visibility into invoice and payment status and the data that they can now access. This data can be used for so many reasons:
- Stronger negotiating positions for Procurement and AP regarding supplier payments
- Payments become more predictable
- Reduction in the time spent dealing with supplier calls for payments and invoice disputes (this relies on suppliers having access to a supplier portal which a robust solution will provide)
- Optimization of discounting opportunities
- Better forecasting for Procurement
All of the above bullet points will help those in the C-suite have a greater appreciation for AP once they realize that that back-office function that was just a cost of doing business is now actually a revenue center.
See how automating your payables processes can unlock the strategic value of accounts payable.