Accounts Payable (AP) management as a regular finance function can turn into a value-adding asset in business when automated, especially if transformed into a "SMART technology".
Current AP management process in many organizations, specifically paper-based ones remains a noncore business process involving low-value functions like from purchase order (PO) entry to invoice receiving and processing, to getting approvals and delivery confirmations, and to processing payments. Yet automating AP is a viable option to start one's digital transformation journey and realize immediate benefits. How come?
Slow and error-prone manual financial management processes will hold back the performance of small businesses, hampering their full potential in achieving profit. However, by having a smart payables processing, businesses large and small won't only remove processing bottlenecks, have an audit trail for compliance, and boost visibility throughout AP management process, but would also allow finance teams to focus more on complex and valuable tasks or work on creative new ways that can give value to their organizations.
Research and advisory company Gartner, in its recent study on Accounts Payable Invoice Automation, concluded: "Solutions that can improve the workflow of and standardize accounts payable financial management processes should be candidates for IT investment."
Featured below are things that make up a smart accounts payable processing and the benefits they bring to the business.
Making AP Smart
In an article published by Accounting Today, it cited that many of today’s AP automation solutions leverage smart technologies like OCR (optical character recognition), machine learning, and RPA (robotics process automation) powered by AI (Artificial Intelligence). There is also cloud-based AP automation technology. All of them make a significant positive impact on accounting departments.
For instance, AI-driven AP automation solutions are able to learn as fast and as accurately as an experienced human to: "Identify and interact with suppliers; Automatically intake, code, process and route invoices, using OCR; and Denote payment deadlines, approval workflows, and the approvers."
As for cloud-based AP automation technology, the cloud provides many advantages for small- to mid-sized firms automating their invoice processing and payment workflow. It addresses issues on security, accessibility, and transparency.
Kathleen Walch, a co-host of the AI Today Podcast, explained that AI-powered invoice management systems can handle much of the invoice processing steps, fixing issues with incorrect or incomplete data or other issues that can slow down invoice processing.
Machine learning algorithms, she added, can identify relevant data in invoices, such as the date, payment terms or amount due, and apply the appropriate internal codes as needed to move along or flag documents for further investigation.
Meanwhile, advances in OCR technology, as observed by Computerworld, have spurred its increasing use by enterprises. OCR is the technology long used by libraries and government agencies to make lengthy documents quickly available electronically.
In dealing with many document-input tasks, Computerworld tagged OCR as the most cost-effective and speedy method available. And each year, the technology frees acres of storage space once given over to file cabinets and boxes full of paper documents.
Before OCR can be used, the source material must be scanned using an optical scanner (and sometimes a specialized circuit board in the PC) to read in the page as a bitmap (a pattern of dots). Software to recognize the images is also required.
The OCR software then processes these scans to differentiate between images and text and determine what letters are represented in the light and dark areas.
As for RPA, it is a software designed to remember and interpret the actions of applications. Once it has understood and mapped out each process, it can automatically carry out transactions for you, use data to generate responses, and connect with other systems to complete tasks.
Benefits of Smart AP
A smart payables processing can enable finance teams to increase efficiency as they would be able to manage accounts payables with greater accessibility, speed, and reliability, including security.
1. Accessibility: Compared to printed invoices that need to be sorted out manually in desks and filing cabinets when you need them, accessing invoices organized in a cloud-based platform would only require a few keyboard entries and taps or clicks. This clearly helps elevate a finance team’s productivity since they can now focus on higher-value work rather than on mundane tasks.
2. Security: Although accessing documents in the cloud is as easy as using Google, sensitive data remains more safe and secure since only authorized persons can access them via their username and password.
3. Insight: Visual management dashboards are one of the interesting and valuable attributes of a smart payables processing since it gives a full view of all accounts payable activities in real time and generates insights for management decisions.
4. Accuracy: To avoid costly human errors and fraud, a smart AP streamlines and automates invoice, vendor, and purchase order digitization, verification, and matching. It also enables one to have a single, digital repository of purchase orders that can be sent to suppliers so they can be matched with invoices later.
Besides being able to automatically get information using smart Optical Character Recognition (OCR) from invoices coming from email, snail mail, or through a supplier mobile app, a smart payables processing is also able to apply an automatic multi-way of matching of invoices with purchase orders and receipts, with a second-level manual verification and exception handling. And one effective way of eliminating time-consuming and error-prone manual data encoding is through the integration of an automated AP platform with any ERP or accounting system.