To pay or not to pay — why it shouldn’t be a question

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Invoicing is a simple concept: A document is sent detailing the amount of money owed for services rendered or goods sold, and payment is expected in response. However, for businesses, especially of small sizes, unpredictable cash flow and non-ideal organizational structure can cause myriad roadblocks in completing payments in a timely and compliant manner. Accountants and finance professionals should be helping their clients or employers make proper payment practices a top priority, because this ultimately leads to long-term supply chain stability.

Timely payment of suppliers is an essential element of ethical business practice. While many big businesses are in compliance, many more of all sizes are challenged by invoice processing complexity as they work to pay bills on time. With growing invoice volumes and higher supplier turnover come a larger number of exceptions – and when addressed through inefficient manual processing, businesses are plagued with errors and missed opportunities for prompt payment.

Lacking the right technology, many companies cannot meet timely payment obligations; this potentially impacts supplier relationships and early payment discounts offered by suppliers who hope to incentivize companies to pay faster. Financial process automation (FPA) is making a difference here, helping align accounts payable best practices with the realities and scope of maintaining on-time payments.

Gaining a competitive edge with AP automation

Benefits of FPA include dramatic reduction of invoice costs, optimized cash management and enhanced supplier interactions. Organizations also gain increased visibility and insight for strengthening internal controls, along with improved ability to maintain regulatory compliance.

This value extends to suppliers on the receiving end of the AP process. Timely payments enable them to meet critical business commitments, particularly in busy periods, when taxes, salaries, bonuses and more must be paid – sometimes all at once. In contrast, late payments cause a cascade of issues, for example pushing them into funding working capital through overdrafts or loan facilities. These alternatives are not only expensive, but can cripple the operations of a small business or one that’s trying to expand and grow. Companies also face pressure to pay many different entities, including those in a wide range of tax jurisdictions, where lack of compliance can result in substantial monetary and legal penalties.

Ethical, automated payment processes

The U.K. government recently backed an effort by the Chartered Institute of Credit Management to encourage timely payment practices. Government entities have been recognizing the need for ethical payment practices in an unstable business environment, and shining a light on the fact that SMBs are the backbone of state economies. Supporting measures to encourage more ethical payments is certainly a first step in a giving visibility to this widespread crisis. But real change will come from organizations that believe in the potential of technology to begin a transformation that encourages both profit and ethical practices.

The role of FPA cannot be underestimated here, driving tangible benefits resulting from streamlined AP operations. The potential for impact is global, flowing out from accounts payable to purchase-to-pay to end-to-end financial operations, affecting the company as a whole as well as its entire supply chain.

Robotic process automation rounds out the discussion

It’s important to acknowledge that while FPA solutions address an organization’s needs for standard financial processing, every organization has elements within business operations where a number of process steps are performed manually. It is these manual steps that introduce gaps, preventing an organization from achieving true end-to-end automation. Given the immense pressure on finance teams to digitize AP operations, this turns the conversation toward robotic process automation (RPA) as a means of rounding out the automation solution. RPA is an ideal complement to automated financial processes, increasing the number and scope of areas where automation can be applied.

Where should organizations use RPA in finance and accounting? Wherever there is a productivity gap that involves manual rule-based and repetitive tasks such as keying or extracting data and validating information. These tasks often require a human worker to act as a conduit between several systems, moving back and forth between applications – call it “swivel chair automation.” Picture a worker rotating back and forth in their chair re-keying or copying information from supplier portals, Excel spreadsheets or enterprise resource planning systems. Among swivel chair processes in finance and accounts payable, RPA is a particularly logical fit for closing common automation gaps in semi-automated processes for invoice portal queries, sales orders, financial close, AP integration and master data management.

AP automation: a key enabler

For companies that “run the gamut of AP performance in 2017,” it takes an average of 10.3 days to process a single invoice, according to a new report from Ardent Partners. However, the best-in-class organizations that make up the top 20 percent of these AP departments have a cycle time that averages just 3.5 days. A large number of these top AP performers — as many as 88 percent — have standardized their processes across their organizations.

“Adoption of technology is another area where the best-in-class clearly differentiate themselves from the rest of the market,” explains the report. Advanced automation technologies that integrate with ERP systems, including capture, workflow and RPA solutions, don’t just help companies achieve shorter cycle times and major cost savings — they allow companies to make continuous performance improvements as part of an overall business strategy.

By choosing to embrace the sea change underway in payment practices, companies of all sizes will find new competitive advantages — capitalizing on trust, better relationships, and the certainty of order delivery and fulfilment as long-term sustaining forces.

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