Accounts Payable (AP) is a facet of financial management which is focused on managing payments to suppliers. It involves a broad range of processes from onboarding suppliers; and raising and approving purchase orders; to receiving; coding; and reconciling suppliers’ invoices, before scheduling; approving; and making payments.
While financial management, on the whole, has been subject to significant digitalisation, AP remains an area which commands the greatest proportion of manual, and often painful, processes. But why is this the case?
The volume of processes, combined with a need for rigour, represents the predominant reason for a continued reliance on manual processes. Take invoices for example. Invoices land in many forms, from physical documents, e-mails or links via portals. Once received they must be approved, checked, filed and paid. This involves reconciling every invoice against its purchase order and order details to ensure that it contains the relevant information, and is for the correct amount. Getting this right is crucial, as even one missed, or incorrect invoice, can cause mismanaged VAT, overpayments and impede cashflow.
Recent research undertaken amongst CFOs and FDs in the UK and US highlights that exposure to risk and fraud are amongst the top concerns when it comes to AP’s challenges. Add to this the global supply chain complexity which is forcing organisations to consider diversification of supply, reshoring and nearshoring in their quest to reduce risk and maximise performance from their suppliers, according to Make UK, and it’s no wonder many are reticent about change.
Automation in AP can help tackle this process complexity, and deliver substantial levels of efficiency and return on investment (ROI). However, it is important to take a broad approach and ensure that the right processes are automated. For example, many organisations have adopted invoice capture via optical character recognition (OCR) to automate the scanning and processing of invoices. While this is hugely valuable, without automating the other facets of AP, the benefits to AP overall are limited.
Through prioritising those areas which can deliver most value, and leveraging the benefits of modern, cloud-led solutions, many hours can be freed up and the risk of human error mitigated.
Streamlining AP provides much greater control, and mitigates the risk of errors, while faster processing of invoices and quicker payments helps to create better relationships with suppliers, which is particularly important now in light of the supplier restructuring at play, as outlined in the Make UK report. A reduction in paper-based processes reduces the need for physical storage and expedites audits, while the ability to undertake AP processes from any location removes potential delays or bottlenecks and streamlines approvals. More collaborative working supports greater productivity, and the manual labour saved can be deployed in other areas, adding value to the wider goals of the department.
And of course, with a fully automated process, reporting can be taken to another level. The real-time insights generated boost visibility, contextualise information and ultimately facilitate better decisions. Monthly expenditure can be monitored more tightly, cashflow can be monitored more closely, and annual trends can be mapped and acted upon appropriately.
Pegasus can help through its AP automation for Opera 3 SQL SE which will be available soon. If you would like to learn more or register your interest in this exciting new feature, then please contact us today to be one of the first to see it in action.
Posted On: April 13, 2023
