Accounts payable (AP) has a reputation problem

By Steve Smith, Esker

In many ways, it’s well-deserved. In a recent survey conducted by the Institute of Finance and Management (IOFM), controllers unloaded about the aspects of AP they found most burdensome and backward. Compared to accounts receivable, payroll, tax and audit, AP was considered by controllers to be the most time and labour-intensive function of all.

And honestly, it wasn’t even close. The survey revealed that AP received almost twice as many votes as the second-most burdensome function. The reasons for this are well-known among controllers, finance professionals and AP staffers themselves.

Longstanding manual processes that depend on authorizations and signatures of people in multiple locations inevitably expand the amount of time required to get a paper invoice from submission to payment. In fact, the odyssey of a single invoice can often span continents and require the direct involvement of numerous people who don’t speak the same language. Multiply that laborious process by thousands (or even millions) of invoices and it’s easy to understand why so many financial professionals hold such a dim view of AP.

But the extraordinary effort that is often required to get an invoice through accounts payable also makes it a process ripe for automation. This is particularly true today, because AP processing is only getting more complex due to globalization, multiple invoice delivery channels and increasingly complicated compliance obligations. And just as the complexity of the work they’re expected to handle increases, AP departments are expected to do more complicated and higher volumes of work with fewer staff and resources.

The good news, however, is that advances in technology – including cloud-based solutions, artificial intelligence (AI) and machine learning – have emerged to provide sophisticated solutions that can address current challenges and optimize the AP process. It’s a transformation that is already taking place. Controllers responding to a separate IOFM survey indicated that 30 percent of the invoices they receive today arrive in an electronic format of some sort. This is important because it is a building block of automation – invoices received in an electronic format can be completely processed without any manual intervention.

The shift from paper to electronic invoice submissions appears only to be accelerating. In the IOFM survey of controllers, more than half said they expected to eliminate all paper invoices received from suppliers over the next three years.

While this is clearly an important step toward improving and increasing the efficiency of the AP process, it’s also only the beginning. The advantages promised by AI and machine learning can supercharge the automation possibilities that AP departments so desperately need. AI and machine learning technologies have the capability to handle many of the tedious processing tasks AP staffers once performed. But there is one big difference: AI and machine learning technologies don’t get tired or make mistakes because they’re distracted or multi-tasking. This means that even complex AP organizations can depend on technology to automatically and efficiently perform tasks that may have otherwise been slow or vulnerable to mistakes.

Add intelligent data capture that quickly and seamlessly captures and validates data along with procure-to-pay automation to the toolbox of AP departments and it’s easy to see how the fundamental role of accounts payable changes dramatically in the future. For example, once regarded as a cost centre, top-performing and highly-automated AP departments can meaningfully contribute to profitability.

One way is by taking advantage of available discounts. According to APQC’s Open Standards Benchmarking Accounts Payable and Expense Reimbursement research, the best performing AP operations seize 85 percent of available discounts, compared to just 53 percent grabbed by subpar performers. In addition, the Hackett Group reports that the cost to process an invoice among top performers $US2.23 while it costs $US4.84 for lower performers to do the same thing.

Increased use of automation technologies – particularly as part of a comprehensive and end-to-end AP process – also enhances visibility into the stages invoices take from submission to payment. This makes it faster, easier and less expensive to prove compliance and respond to auditor requests and concerns.

Taken together, these advances in the sophistication of AP departments are also poised to give them a more strategic role within companies. For instance, the improved visibility that comes from standardized and automated processes translates into the ability to better manage working capital. With automation and visibility, AP staffers can quickly ascertain which large invoices remain unpaid, whether action is required to take advantage of early payment discounts, and get a clear view into upcoming cash requirements.

This is the sort of information that can help companies be more nimble and make better real-time decisions, but only when AP departments have easy access to important data. They also need relief from the burden of repetitive manual tasks in order to have time to examine the data. When these changes come to accounts payable, it’s pretty safe to say that their reputation will be entirely different than it is today. 

Steve Smith U.S. chief operating officer at Esker, a worldwide leader in cloud-based document process software to automate order processing, accounts receivable, accounts payable, purchasing and more.