8/14/2019 Is Your Accounts Payable Solution Working for You? Think Again ..

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Is your Accounts Payable Solution working for you? Think Again

Businesses have traditionally focused more on collections and Accounts

Receivable as against Accounts Payable processes. The Accounts Payable

function was largely confined to a transaction recording and book keeping role;

not as a vital cog of a companys business. But with the increasing pressures on

operating margins, the streamlining of the accounts payable process is now

seen as a critical measure to improve a companys profitability. The efficiency of

the accounts payable process has a bearing on a companys cash flow, credit

rating and operational costs. Thus any improvement in the accounts payable

process can have an immediate and significant impact on a companys

profitability in the near term.

Most Business Process Management (BPM) and Workflow Automation Solutions enable enterprises to initially gain

better control over theiraccounts payable processeswith 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 companys cash, people and system resources.

What your Accounts Payable Solution should be focusing on

The responsibility areas of theaccounts payable solutioncan be categorized into 5 broad areas:

1. Invoice recording2. Invoice payments and reconciliations3. Document management4. Compliance (with internal policies and external regulation)5. Reporting and Analytics

Typical Deterrentsthat theAccounts Payablemanagers 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.

Key Facts

34% or more companies use 3 systems

more to pay i nvoices

Delays in posting expenses can add 1%

to transaction costs

The billing error rate is 12%-15% in the

absence of a program to vali date invoic

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8/14/2019 Is Your Accounts Payable Solution Working for You? Think Again ..

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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

compliance difficult.

Protracted invoice processing times - Long invoice payment cycles are a

result of movement in paper documents to approvers and back. Further,

approvals go into pending status when approvers are not available or aretravelling.

Increased possibilities of fraud- Manual processes and lack of traceability of

prior approvals increase possibilities of frauds perpetrated through

collusion between approver and vendor and circumvention of process

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 review of all transactions, may reduce clerical errors but wil

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 fo

record maintenance.

Facts: Common Invoice Errors

64% of invoice prices do not match

the contracted rates

21% of invoices have incomplete

documentation

16% of invoices are paid despite late

deliveries, shortages, non-compliant

quality and transportation, packing