When a company is looking to reduce costs and increase efficiency, outsourcing the time-consuming, resource-intense area of Accounts Payable (AP) is an increasingly common way to address the issue – and for good reason.
According to a 2014 Finance Executive Survey conducted by IOFM, more than one quarter (28.79 percent) of respondents planned to achieve process improvement by Accounts Payable automation. (In the list of six categories, that category was topped only by payroll, which was at 42.2 percent.)
The focus on improving processes by outsourcing AP processing comes as no surprise, considering that in that same IOFM survey, respondents ranked AP first among a list of functions requiring time and effort within their departments. In fact, “Accounts Payable” received almost twice as many votes as the next highest-ranked function, “Accounts Receivable.” In another section of the survey, AP tops the list of “finance functions, based on the level of manual/paper processes.” Most organizations responding to the survey said their level of automation was low to moderate.
Manual invoice processing is a paper-intensive function that involves high volumes of manual data entry, costly and time-consuming exceptions processes and slow turnarounds. But there is a solution: Outsourcing and automating AP eliminates paper-driven processes, which reduces costs and increases turnaround speed. It can also enhance access to information and improve compliance and control.
Respondents to the IOFM survey agreed. The majority of them ranked AP as the finance function that would benefit the most from automating workflow. With errors (47.1 percent) and lack of visibility into invoices and payables (45.5 percent) listed as the biggest challenges to AP departments, automation is seen as a comprehensive solution.
The process is a simple one:
- Invoices are received, prepared and digitized.
- Data is extracted, and business rules are applied to drive the workflow.
- The streamlined workflow allows for approval, denial, partial pay or pending.
Integration is made with existing enterprise resource planning (ERP) applications. The manual strain is eliminated, a paper-intensive process becomes largely digital and errors – and costs – are greatly reduced. That’s why 60.19 percent of the companies responding to the IOFM survey named AP as the function that they anticipated would receive additional investment for process improvement in the coming year.