Achieving ROI in the A/P and A/R Function

How a company manages its accounts payable (A/P) and accounts receivable (A/R) processing affects several crucial areas of business, namely cash flow and supplier and customer relationships. Companies that apply best practice manage A/P and A/R so that both processes contribute positively to cash flow and support mutually beneficial relationships with suppliers and clients.

In the current economic climate, the pressure on organisations to improve efficiency and make cost savings is becoming more intense. And to achieve this, businesses are looking for better control of the cash conversion cycle.

Yet almost 80% of all sales and purchase invoice activity is still paper-based. And while enterprise resource planning (ERP) solutions such as SAP have centralised and standardised many key business processes, A/P remains deluged with paper – and a barrier to business process improvement and return on investment (ROI) in enterprise software for many companies.

Staff working in A/P and A/R departments know the problems of manual invoice processing all too well – and simply recruiting more staff will not solve the inherent problem. Manual processes are not only expensive, inefficient and error-prone – they also expose organisations to serious risks that can affect their credit rating and regulatory compliance standing.

In recent years, the spotlight has been very much on the automation of A/P and A/R processes and the efficiencies that this can bring in a bid to achieve effective cash forecasting and reduce errors.

Automated A/P and A/R Processes – Accessible to All

The process of automating the A/P and A/R function isn’t new, but the speed of the technological advancement has made it a much more feasible and cost-effective option than ever before – and no longer simply the domain of the large multinationals.

Businesses are increasingly recognising the value of A/P and A/R automation – and the efficiencies that it can bring. It is a proven fact that top-performing companies process a higher percentage of sales and purchase invoices electronically compared with their competitors.

The major drivers for the implementation of automated A/P and A/R are large transaction volumes, coupled with the pressure to reduce costs and the ultimate impact on cash flow. However, many businesses running leading-edge ERP solutions still employ conventional paper-driven A/P and A/R processes. As a result, they are limited in their ability to minimise per invoice costs and improve productivity. Financial planning, supplier invoicing, customer billing, employee productivity, internal communication and even regulatory compliance may also suffer from the lack of automation in A/P and A/R.

Few companies are aware of the true costs of invoice processing. Research shows that the average end-to-end costs of processing one invoice can range from £4 to £50. By moving over to automated invoice processing, businesses can make large savings. A business processing 50,000 invoices per year at an average cost of £4 per invoice could save up to £100,000 every year.

The core challenges facing A/P and A/R operations include:

  • Time to process manual sales invoices and other payables.
  • Errors and delays affecting the accuracy of financial statements.
  • Visibility.
  • Cost control and avoidance.
  • Security and regulatory compliance.

Barriers to Implementation

Where a business continues to be based on the circulation of paper, there is no visibility whatsoever; a simple delay can contribute towards much greater and most costly problems. Implementing an electronic system, however, enables the progress of any piece of paper to be tracked in real time by any number of authorised staff.

Historically, cost and the reluctance to embrace change were the main barriers to implementing A/P and A/R solutions. And even when an organisation had taken steps to automate its procedures, it would be faced with changing habits and behaviour that may have developed over many years. Coupled with this is the threat of user rejection and the fear of job losses.

And while A/P is a critical function for any enterprise, it is not one that some organisations are prepared to change – certainly not to save their suppliers time and money. The reality is very different, however, and the implementation of automated processes is likely to increase productivity significantly, optimise your workforce and enhance job satisfaction. Automated business process solutions speed up the revenue cycle and increase profitability. For organisations running ERP applications or other bespoke systems, comprehensive solutions have now been developed which span multiple business processes in the cash conversion cycle.

Document Processing Through the A/P Cycle

As a solution for optimising document processes throughout the A/P cycles, it is possible to automate the sales invoice process from the receipt of the original document to the resulting creation of a corresponding business document. The workflow includes automatic validation of the data, as well as document archiving. A/P departments also have the ability to track and closely monitor each step of the vendor invoice process. These capabilities also help companies comply with regulations, such as Sarbanes-Oxley (SOX).

Whether technology is employed to eliminate some or all of the human intervention from vendor invoice processing, an automated process offers numerous advantages, with electronic copies of invoices readily available to any authorised person within the company.

As an alternative to hosting a solution in-house, organisations can now use a web-based platform where users log in through a secure web interface. This enables companies to save costs by automating A/P processing without the need for additional IT infrastructure – and eliminates the need for software, hardware and maintenance.The same solution used to automate A/P processing can be leveraged to automate for other business processes too, including A/R, procurement, customer billing and sales order processing.

A/R Invoice Processing

The advantages of electronic invoicing are clear – it’s faster, less expensive and more reliable than manual invoicing and removes the inefficiency of paper. And significantly, automating the A/R process requires no change on the part of the customer.

Electronic A/R invoicing addresses a broad range of issues, including operational cost control, limitations of built-in ERP capabilities for process automation, mailroom difficulties and billing dispute management. Automated A/R processes apply best practice to customer billing processes by optimising the invoice delivery directly from ERP applications. This means that every invoice can be sent, archived and tracked automatically and electronically. Automated A/R invoicing simplifies the billing operation and resource management at minimal expense, effectively removing direct costs and the process inefficiencies associated with handling of paper invoices. And by increasing the speed and accuracy of invoicing through document process automation, organisations can collect cash faster as invoices are delivered sooner.

Business document delivery services that integrate with existing processes such as A/R invoicing are available, whereby an organisation can send documents directly from enterprise applications having to deal with this non-value adding function in-house.

Achieving Goals

Implementing best practice in the field of A/P and A/R will help a company achieve multiple goals; the best automated document process solutions will provide organisations with a unified platform to automate virtually any business process that runs on documents, including automated sales order processing as well as automated delivery of outbound purchasing documents and customer.

Any organisation with a smooth-running, streamlined A/P operation will save money by processing invoices with a minimum of staff and low material costs, as well as increasing visibility. An automated A/P function can make a significant difference both in minimising late-payment costs, such as late-payment penalties, interest charges, and lost prompt-payment discounts, and in creating efficient operations.

With A/R, an automated process can speed up any resolution – it improves visibility and financial control and more importantly, it can guarantee compliance with global regulatory bodies (e.g. SOX).

What makes automated A/P and A/R a practical reality for many organisations is the added value that comes from the integration of its features and benefits as part of a broad solution for automating any number of processes throughout the procure to pay (P2P) and order to cash (O2C) cycles. Customers can gain immediate operational efficiencies, cost savings and measurable ROI in as little as three to six months.


Automation processes for A/P and A/R continue to evolve as the internet speeds up collaboration between companies over the web. The introduction of software-as-a-service (SaaS) and cloud computing will continue to reduce the investment required to benefit from these solutions.


Related reading