Is your Accounts Payable Solution working for you?

Think Again…

Businesses have traditionally focused more on collections and Accounts

Key Facts
Receivable as against Accounts Payable processes. The Accounts Payable
function was largely confined to a transaction recording and book keeping role; 34% or more companies use 3 systems or
not as a vital cog of a company’s business. But with the increasing pressures on more to pay invoices
operating margins, the streamlining of the accounts payable process is now
Delays in posting expenses can add 1%-5%
seen as a critical measure to improve a company’s profitability. The efficiency of
to transaction costs
the accounts payable process has a bearing on a company’s cash flow, credit
rating and operational costs. Thus any improvement in the accounts payable The billing error rate is 12%-15% in the
process can have an immediate and significant impact on a company’s absence of a program to validate invoices
profitability in the near term.

Most Business Process Management (BPM) and Workflow Automation Solutions enable enterprises to initially gain
better control over their accounts payable processes with varying degrees of success. Yet, for the gains to sustain, the
BPM automation solution must not only reduce transaction times it must also enable companies to leverage create
processes that automatically optimize use of the company’s cash, people and system resources.

What your Accounts Payable Solution should be focusing on

The responsibility areas of the accounts payable solution can be categorized into 5 broad areas:

1. Invoice recording
2. Invoice payments and reconciliations
3. Document management
4. Compliance (with internal policies and external regulation)
5. Reporting and Analytics

Typical Deterrents that the Accounts Payable managers often encounter one or more of the following issues:

High Transaction volumes - Organizations struggle to cope with large volumes of transactions that increase geometrically
with business growth.

Traceability and accountability - Maintaining a clear audit trail of all activities on an invoice from sending for approval,
approver comments, queries, clarifications, final approval and payment is difficult especially when communication on an
invoice is through multiple channels – email, phone, et cetera.

Multiple delivery channels for invoices - Unlike purely paper based invoices in the past, invoices may be delivered
through email, fax, EDI, or just appear as entries in credit card statements. Processing invoices received through non-
traditional channels is a challenge.

Vendor Management - The lack of visibility into current status of an invoice makes responding to vendor queries a
difficult task. The challenges are compounded by long lead times for release of payments, inability to define and
maintain standard processing times, and inability to estimate expected payment dates.

Document Management - Since vendor invoices could potentially be received at any location, obtaining approvals
require the transmission of invoice copies either through email, fax or by mail. There is always a risk of loss of paper
documents. Retrieval of supporting documents and approvals during audits puts a huge strain on accounting resources.
Accounting and compliance - Invoices need to be accounted under
appropriate heads in the appropriate accounting periods. This is especially
necessary for compliance with corporate and tax laws. The absence of a
clearly defined, verifiable process makes compliance and certification of Facts: Common Invoice Errors
compliance difficult.
64% of invoice prices do not match
Protracted invoice processing times - Long invoice payment cycles are a the contracted rates
result of movement in paper documents to approvers and back. Further,
21% of invoices have incomplete
approvals go into pending status when approvers are not available or are documentation
travelling.
16% of invoices are paid despite late
Increased possibilities of fraud - Manual processes and lack of traceability of deliveries, shortages, non-compliant
prior approvals increase possibilities of frauds perpetrated through quality and transportation, packing
collusion between approver and vendor and circumvention of process errors and damaged items
controls.

Application Integration - Vendor payment processes require the validation and verification of invoices against Purchase
Orders with the purchase order value in the ERP. Integration of payment processes with ERP is necessary for elimination
of errors. Yet, application integration in the presence of multiple systems is a significant challenge.

Inability to balance conflicting needs - Companies often face the daunting task of balancing the demands of each of the
above processes - efficiency measures in one could adversely impact another. For example, any measure to reduce
clerical errors during invoice recording such as a second re view of all transactions, may reduce clerical errors but will
increase the time taken to process a payment and may not allow the company to benefit from payment discounts.
Similarly, measures to reduce costs of storage of physical documents may compromise with statutory compliance for
record maintenance.