The CFO at one of your key suppliers is on the phone. She wants to know why your payments have slowed, with some invoices going unpaid for long periods. Your accounts payable (AP) team previously managed invoices efficiently to capture early payment discounts—what’s going on?
Automated AP systems are designed to prevent invoice management problems like this and reduce risk by increasing compliance with a company’s fraud-prevention guidelines and rules. It’s a booming market, with investment in AP technology expected to increase from $1.9 billion in 2019 to more than $3 billion by 2024, according to PYMNTS.com.
Different systems take different approaches to achieve beneficial ends, but they operate on the common idea that the more the process is automated, the fewer opportunities for human error and the better the company’s compliance performance, say specialists in the sector.
From a high-level perspective, a state-of-the-art AP solution allows an organization to receive and process invoices in all formats from suppliers around the world, automatically and in a compliant manner, says Martti Nurminen, CFO of Basware, an AP automation developer.
“With 100% invoice data available, in good quality, a company has a great foundation for an automated AP process. Ideally, the entire process, from receiving invoices to processing them, is automated,” he said. “That means less human intervention, more accuracy and, ultimately, more compliance. Indeed, one can call this process automated compliance in AP.”
Rajeev Subramanyam, senior vice-president and general manager at Emburse Pay, cites the increased use of machine learning and artificial intelligence within the compliance process for improving compliance.
These capabilities include predicting key fields within an invoice to minimize the number of touches required from receipt to payments. “The lower the amount of human interactions needed to process an invoice, the less chance there is of compliance issues being introduced,” he said.
Another trend that Subramanyam cites is the establishment of deeper levels of connectivity and collaboration between suppliers and buyers within the AP system. “Of course, this means more interactivity between the two parties,” he said. “But it can also increase the level of automation, and provides checks to ensure that transaction data and supplier information is up-to-date and accurate, improving compliance.”
Ideally, increasing the level of AP automation shouldn’t create new problems, Subramanyam said. Compliance issues generally stem from problems in approval routing and compliance rules being incorrectly applied to an invoice. “Given that these rules are created by the finance department when the AP solution is being set up, if they’re done correctly, there should be no ongoing issues,” he said. “If any compliance issues are detected, it should be a relatively straightforward process to adjust the rules within the system.”
To the extent the introduction of automation creates problems, it could stem from what Sanjay Champaneri, director analyst with Gartner, calls dashboard fatigue — employees not learning or making mistakes using new workflows or new dashboards.
Should that fatigue set in, it “slows the entire work queue down,” he said. Consequently, it’s important that AP tools be “built to still interact with the humans in a user-friendly way, with things like approvals being an example,” he said.
CFOs can select from a range of AP automation solutions in what Champaneri calls an extremely fragmented market.
In just the API (application programming interface) accounts payable market, for example, vendors can offer three functional areas: invoice capture, processing and payment with compliance and analytic features.
Given this fragmentation, CFOs can start the selection process by determining which capabilities and features are most important to their organization’s requirements and make a shortlist of vendors meeting those needs. “Features could include the ability to handle complex routing rules, making vendor payments directly within the solution and the type of integrations offered with the corporate ERP (enterprise resource planning system),” said Subramanyam.
Jason Boyles, director of product management for GEP’s AP solution, believes that having a data-driven AP system is critical, particularly one that makes use of metadata. Paper invoices provide basic billing information. Those documents can be scanned but working with digital invoices offers multiple advantages from a data collection and management perspective because they can include additional metadata. For example, a digital invoice’s metadata can help route invoices, add accounting codes or provide other information to aid processing.
“Most of it is printed on the invoice, but there could be additional things that could be passed along from the supplier.” Boyles said. “That will help transition from just the electronic version to a digital version, which is truly the automation of the metadata.”