How C-suite executives go wrong with AP Automation
- 23 Oct 2018
- AP Automation
When earning executive stakeholder support for implementation projects, often the toughest questions come directly from the CFO or CEO – and for a good reason. Executives in the C-suite must thoroughly vet potential projects to ensure future success as well as minimizing the financial risk to the organization’s bottom line of investing in a failed project. With AP automation becoming one of the most critical areas for digital transformation in the financial process of a company, many C-suite executives will likely find themselves at the forefront of a project to modernize their company’s AP process. It’s essential that these executives avoid common pitfalls and misconceptions when embarking on such an important journey of change.
Mistake #1: Failure to understand what true AP automation is and can do
Often, business leaders have varied definitions of what AP automation means, and it’s no wonder why. There are hundreds of vendors out there, offering dozens of different services and they all label themselves as “AP Automation.” For example, some companies may consider the fact that they use a scanning service and email pdf invoices between departments for approval means they have an automated process. But that’s only scratching the surface. Similarly, many organizations that only employ the invoice management in their ERP as a means they have paperless accounts payable, but there’s room for far more improvement.
The key to AP automation is touchless processing. Invoices moving from receipt to being ready to pay in the ERP without any human intervention. This process could save your AP staff countless hours of manual labor. Plus, it can unlock significant savings through discounts and early payment terms, as well as improve supplier relationships. AP automation removes manual tasks from your AP process and gives you visibility into the cash flow and budgeting. The result of that visibility is enhanced control over your company’s financials, helping management curb traditionally treacherous areas such as errant spending and T&E. It unlocks valuable data that would otherwise be lost in the paper-shuffle, supporting the financial dashboard. The lesser levels of automation described in the first two scenarios don’t even come close to the benefits that can be achieved with true automation.
Mistake #2: AP Automation is only about cutting headcount
In the initial ROI calculations, it can be tempting to reduce as much headcount as possible from the AP staff to make way for investing in the automation project, but this is a big mistake. The AP staff is much more valuable when refocused on value-added work that drives the overall financial strategy of the company, rather than the superficial savings from eliminating their positions. This is a one-time saving that pales in comparison to savings that can be obtained through the other less obvious benefits of automation, such as:
- Discount Management
- Budget Control
- Scalability with existing headcount
The spend visibility that comes with AP automation significantly improves the ability of management to enhance not only the benefits mentioned above (particularly discount management) but also to view the entire working capital process, allowing them to choose the most advantageous payment terms or select appropriate timing in which to pay vendors.
Mistake #3: Inability to understand AP’s performance in terms of KPIs and metrics
A typical driver of AP automation projects is the understanding that AP could become more efficient than it is prior to the automation project. However, many organizations struggle to define key performance metrics that they can regularly measure and monitor for optimization opportunities. One of the critical steps for success in an automation project happens before ever implementing a new solution. Organizations need to take account of the various metrics and measure the baseline of their AP process so that they can accurately report on efficiency gains once the new solution is in place.
Furthermore, once you establish KPIs and begin monitoring them, it’s important to understand benchmarking and choose relevant peer measurements to measure against in comparison with yourself. Make sure you’re using benchmarks that are data-driven and updated with real-time statistics, unlike some of the survey reports that have unclear origins and fall out of date within weeks of their initial reporting.
Mistake #4: Making AP automation a stand alone island system
It’s essential that you select an AP automation solution that enforces application interoperability to that data can flow between all relevant systems and minimize the need for human intervention or multiple step iterations between different tools, which is error-prone and inefficient.
First and foremost as a priority, your AP automation tool needs to connect seamlessly with your organization’s Enterprise Resource Planning (ERP) system. Executives need to be aware of and upfront with vendors about any plans to upgrade or replace the current systems. An ERP upgrade or implementation is often not a project killer for AP automation, but the vendor needs to be aware of the plans to schedule the implementation for an optimal go-live plan.
While the ERP is the most crucial system dependency for an AP automation project, C-suite executives need to take into consideration all solutions that involve data from the AP process, including the data-capture tool, document management tool, and payment systems. Look for a tool that supports open APIs and connectivity with other platforms. An excellent place to start is determining whether the solution is a true-cloud based tool, and what standard integration packages they own. A cloud-based tool makes for an easier integration with existing systems and lessens the workload for your IT team. Plus, it translates to frequent and automatic system upgrades and software fixes that can be delivered from the vendor’s cloud system, so you’ll always have the latest and greatest solution functionality.
It’s becoming increasingly clear to leading C-suite executives that embracing automation is a necessity if companies want to remain competitive. Executives and management must take it upon themselves to banish these misconceptions and approach AP automation strategically and with an open mind if they want their AP department to be genuinely efficient and modern.