Skip to content

Top considerations in Accounts Payable automation

Why Accounts Payable transformation is top of mind for CFOs

Accounts Payable (AP) is often part of larger transformation initiatives within an organization. According to Gartner, 85% of CFOs are either implementing or planning to implement major Finance transformation initiatives.

Additionally, a recent survey conducted by Workday found that cost containment is a top priority for 59% of CFOs. But how do they execute these high-visibility projects for their organization?

Finding value in Accounts Payable automation

The purpose of Accounts Payable is to pay supplier invoices according to legal settlement agreements entered into by company purchasing agents. Without an Accounts Payable function, a company’s suppliers would not get paid accurately and timely. Consequently, suppliers could stop providing necessary goods and reliable services to the company. In addition to paying suppliers on time, AP is the last line of defense around spend control and must ensure the company is not paying for goods or services in error, while also verifying price accuracy for valid purchases.

Accounts Payable is often the largest department within the Finance organization, though its efficiency varies greatly from organization to organization. In other words, the least efficient AP teams are five times larger than the most efficient, according to APQC.

 

 

Bottom

Medium

Top

Total cost to process a Supplier Invoice

Source: APQC

$10.00

$5.83

$2.07

 

Therefore, the best way for an Accounts Payable team to add value to the organization is to improve efficiency without compromising quality and spend controls.
 

The universal challenge — addressing Accounts Payable issues

Accounts Payable is at the end of the line within the purchase-to-pay process where problems collect. AP teams must fix all upstream issues to process invoices. The stakeholders involved are generally not part of the Finance team. The typical Accounts Payable professional spends much of their time gathering data and obtaining clarifications and approvals from upstream professionals that have their own priorities, which often don’t include helping AP teams perform their jobs. This follow-up work leaves less time to process invoices. AP teams that have offshored or outsourced work to lower labor costs are often frustrated when their costs don’t decrease as planned. They quickly learn that the key to efficiency is a clean end-to-end process.

For Accounts Payable to become more efficient and effective, they often must lead the charge and drive continuous improvement throughout the purchase-to-pay (P2P) end-to-end process.
 

Common pain points in Accounts Payable automation

A logical first step in fixing and optimizing the P2P process is to identify and prioritize pain points. They can often be highlighted by identifying the main inhibitors to processing invoices quickly without interruptions. The below illustration highlights the most common pain points:

Processing exceptions

  • Suppliers
  • Requisitioners
  • Buyers
  • Receivers

Manual effort

  • Data input
  • Follow-up management

Interruptions

  • Supplier inquiries
  • Buyer, Requisitioner, Receiver interactions

Spend control

  • Poor PO compliance
  • Lack of analytical tools

Month-end and projects

  • Closing bottleneck
  • No time for projects (e.g., DPO)

Workforce management

  • Work-sharing challenges
  • Difficulty evaluating individual performance

 

Leading practices in Accounts Payable transformation

A useful next step in optimizing P2P is to identify and prioritize leading P2P practices that make sense to implement in your organization. Take a holistic approach and consider improvement beyond “process” to include organization and technology. The graphic below provides the most common leading practices across several improvement dimensions. Highlighted are those we believe drive the most impactful and lasting improvements.

Technology and date

  • Maximum systems integration
  • ERP business rules and workflow to manage exceptions
  • Intelligent OCR, RPA, ML & AI
  • Invoice processing automation
  • Semi-automated master supplier data management and exceptions management
  • Spend control analytics
  • Implemented supplier portals

Process, control, performance

  • Laser-focus on straight-through-processing and exceptions improvement
  • Strict policy controls — Standardization, PO compliance, return-to-sender
  • Focus on total cost per invoice first
  • Start measuring spend control
  • Measure against self and benchmarks
  • Deploy daily dashboards for team performance

Organization and talent

  • Continuous improvement team & formal methodology
  • Cross-organizational alignment — global process owner

Workday configuration

  • Unify P2P approval process — All business units should follow the same approval process
  • Simplify approval process — 3 approvals, or less, per transaction is ideal as it maintains speedy transaction processing
  • Minimize number of "touches" per transaction — An approved requisition shouldn't need to re-route for approvals when its downstream PO is created unless there's been a change outside of tolerance
  • Include match tolerance rules to support invoice exception process

 

For Accounts Payable to become more efficient and effective, they often must lead the charge and drive continuous improvement throughout the purchase-to-pay (P2P) end-to-end process.

 

Common pain points in Accounts Payable automation

A logical first step in fixing and optimizing the P2P process is to identify and prioritize pain points. They can often be highlighted by identifying the main inhibitors to processing invoices quickly without interruptions. The below illustration highlights the most common pain points:

Processing exceptions

  • Suppliers
  • Requisitioners
  • Buyers
  • Receivers

Manual effort

  • Data input
  • Follow-up management

Interruptions

  • Supplier inquiries
  • Buyer, Requisitioner, Receiver interactions

Spend control

  • Poor PO compliance
  • Lack of analytical tools

Month-end and projects

  • Closing bottleneck
  • No time for projects (e.g., DPO)

Workforce management

  • Work-sharing challenges
  • Difficulty evaluating individual performance

 

Leading practices in Accounts Payable transformation

A useful next step in optimizing P2P is to identify and prioritize leading P2P practices that make sense to implement in your organization. Take a holistic approach and consider improvement beyond “process” to include organization and technology. The graphic below provides the most common leading practices across several improvement dimensions. Highlighted are those we believe drive the most impactful and lasting improvements.

Technology and date

  • Maximum systems integration
  • ERP business rules and workflow to manage exceptions
  • Intelligent OCR, RPA, ML & AI
  • Invoice processing automation
  • Semi-automated master supplier data management and exceptions management
  • Spend control analytics
  • Implemented supplier portals

Process, control, performance

  • Laser-focus on straight-through-processing and exceptions improvement
  • Strict policy controls — Standardization, PO compliance, return-to-sender
  • Focus on total cost per invoice first
  • Start measuring spend control
  • Measure against self and benchmarks
  • Deploy daily dashboards for team performance

Organization and talent

  • Continuous improvement team & formal methodology
  • Cross-organizational alignment — global process owner

Workday configuration

  • Unify P2P approval process — All business units should follow the same approval process
  • Simplify approval process — 3 approvals, or less, per transaction is ideal as it maintains speedy transaction processing
  • Minimize number of "touches" per transaction — An approved requisition shouldn't need to re-route for approvals when its downstream PO is created unless there's been a change outside of tolerance
  • Include match tolerance rules to support invoice exception process

 

Optimizing and automating your Accounts Payable isn’t a one-size-fits-all task, but it doesn’t have to be overly complicated either.

Related Insights


Top 10 automation partner requirements for finance and HR

Alight has outlined the top 10 automation partner requirements your organization should look for to guarantee a successful deployment.

Workforce planning trends: A strategic partnership for Finance and HR

Because the workforce is typically the largest driver of cost, and in many cases, revenue, it’s critically important that Finance and HR teams actively manage workforce plans that set the stage for future success.