In the current climate, no part of a business is immune from the pressure to control costs and increase productivity and efficiency, particularly accounts payable (A/P) and accounts receivable (A/R) departments, which have come under increased scrutiny for their heavy reliance on paper and manpower. The management of the A/P and A/R function affects more areas of the business process than ever before, not simply in terms of improving cash flow, but also in maintaining positive relationships with clients and suppliers.
Over recent years finance departments have made considerable strides towards automating the traditionally paper-based and labour-intensive processes that have characterised many A/P and A/R operations, as well as leveraging the numerous benefits offered by the various technology solutions that are now available.
In recent years the spotlight has been firmly on the automation of A/P and A/R processes and the efficiencies they can bring in a bid to achieve effective control and acceleration of the cash conversion cycle. Not only does automation of the A/P and A/R function offer significant potential for generating bottom-line improvements, such as cost control and productivity enhancement, it can also deliver other strategic benefits thanks to its ability to monitor and manage spend, and maintain stronger customer and supplier relationships. The smart companies have recognised this and are looking for further improvements in business process and to maximise the retun-on-investment (ROI) in enterprise software.
Enterprise resource planning (ERP) solutions have centralised and standardised many key business processes, but in the past A/P and A/R have remained swamped with paper, creating a barrier to business process improvement and return on investment (ROI) in enterprise software for many companies.
Many businesses running leading-edge ERP solutions have continued to employ conventional paper driven A/P and A/R processes, leaving them 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 have suffered as a result.
Historically, cost and the reluctance to embrace change were the main barriers to the implementation of A/P and A/R solutions. However, the economic downturn appears to have focused financial directors’ minds on the many benefits of implementing an electronic system.
Automating A/P and A/R Processes
Automated business process solutions speed up the revenue cycle, improve visibility and increase profitability. And 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.
The speed of the advancement of technology has made A/P and A/R automation a much more feasible and cost effective option than ever before, and no longer just the domain of the large multinationals. Now it is possible to automate the document process from capturing the data from the receipt of the original vendor invoice through to the resulting validation and authorisation workflow, 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 help companies comply with regulations such as the Sarbanes-Oxley (SOX) Act. An automated process offers numerous advantages, with electronic copies of invoices readily available to any authorised person within the organisation. As you would expect, electronic invoicing (e-invoicing) is faster, less expensive and more reliable than manual invoicing and removes the inefficiency of paper. And crucially, automation of the A/R process requires no change on the part of the customer.
Automation of the A/R process is straightforward and can be integrated with an organisation’s existing ERP system. It also applies best practice to customer billing processes by optimising the delivery of invoices directly from ERP applications. This means every invoice can be sent, archived and tracked electronically. Regardless of the customers’ delivery preferences, whether email, fax or even mail, archiving, accessing and sending invoices can be done directly in the ERP application.
Automated A/R processing simplifies the billing operation and resource management at minimal expense, effectively removing direct costs and the process inefficiencies associated with handling paper invoices. And by increasing the speed and accuracy of invoicing through document process automation, invoices can be delivered sooner and cash collected faster.
Traditionally, the adoption of automated businesses processes has remained skewed in favour of large corporations. However, the advent of new technologies, such as software-as-a-service (SaaS) and cloud technology, is enabling more mid-sized companies to move towards a paperless environment. The ‘cloud’ offers tangible benefits to smaller businesses, which can use cloud software to level the playing field between themselves and larger firms.
Based on a pay-as-you-use model, there are no upfront costs. With no initial outlay to install expensive hardware and software, or the costs of hiring experts to install and configure it, the ‘cloud’ can have a positive impact on businesses in a very short time. Scalable, secure, reliable and affordable, cloud computing offers the simplicity and immediacy companies need to grow their business.
There are, of course, on-going fees but the cloud puts everything in one place and provides a faster and more responsive service across every channel. Applications run on a shared data centre based on multi-tenant architecture and are flexible enough to be customised to meet an organisation’s specific needs.
The three basic areas of the cloud that businesses should be aware of are:
- Infrastructure-as-a-service (IaaS).
- Platform-as-a-service (PaaS).
These three areas are flagged as ‘a service’ because they are subscription-based, which allows businesses to pay for what need as they go, providing the flexibility that many businesses need in the current economic climate.
PaaS are the tools available for developers to create cloud applications. Many larger companies are creating their own cloud platforms, such as Google’s App Engine and Microsoft’s Azure, which allow companies to create their own cloud software that integrates with their own systems.
Cloud computing includes platforms for building and running custom on-demand applications. PaaS provides the infrastructure to run applications over the internet. It offers a faster, more cost-effective model for application development and facilitates the deployment of applications without the cost and complexity of buying and managing hardware, software and hosting capabilities. Customers simply use what they need without worrying about the complexity behind the scenes.
IaaS is the infrastructure or hardware that developers use to build, access and store a company’s cloud. This enables businesses to store their information in professionally managed data centres and access the most powerful, continually serviced servers by sharing them with other companies. These servers are automatically backed up and you can upgrade or downgrade according to your requirements.
IaaS delivers computer infrastructure as a service. Equipment, including storage, hardware, servers, fax servers, fax boards, printing material and network components, is contracted out and customers buy the resources as a fully outsourced service and pay on a ‘per use’ basis.
SaaS is the most important development. It takes the form of software, which is delivered over the internet and subscribed to on a ‘pay-as-you-go’ basis. Instead of installing and managing software, it can be accessed via the Internet. SaaS customers gain valuable automation efficiencies without the need to buy, build, and maintain IT infrastructure to support the technology.
It is low cost and low risk and with no up-front cost, no investment, SaaS customers avoid the high cost of implementing in-house applications and, as it is delivered over the web, it offers fast deployment and flexibility, eliminating installation. And because SaaS services operate on set fees per user per month, the costs can be easily predicted. It enables rapid adoption and high ROI value, while upgrades are automatic and free for all customers.
While many businesses have tended to go down the on-premise route and hosted their solution in-house, over the past 18 months there has been a definite shift towards cloud computing with on-demand solutions such as SaaS and A/P and A/R on-demand (with mail on-demand).
By going for a complete A/P and A/R automated solution as an on-demand service, there is no upfront investment or lengthy deployment and the service can be used on a pay-as-you-go basis. Users simply log-in through a secure web interface, similar to web-based applications such as Salesforce.com. Users can access invoice details at their convenience. Invoices can be listed by status, which results in improved levels of communication and frees up A/P and A/R staff time. Designated administrators can create and manage users, accounts and departments. They can also configure the options and resources shared by all the users of their account, including security, transport set-up and resource management.
This enables companies to save costs by automating A/P and A/R processing without the need for additional IT infrastructure. IT also eliminates the need for software, hardware and maintenance. The same solution used to automate A/P and A/R processing can be leveraged to automate for other business processes too, including sales order processing, procurement and sales order processing.
Smaller organisations have also been able to leverage benefits through mail on-demand, a business document delivery service that integrates within existing processes such as A/R invoicing. You pay as you send documents directly from enterprise applications without your organisation having to deal with this non-value added function in-house. Plus, gain additional cost benefits from lower postal charges.
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 in today’s global business age, it can guarantee compliance with regulatory bodies. 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.
The average end-to-end costs of processing one invoice can range from £4 to £50. Migrating to automated invoice processing can help businesses make significant savings, with immediate operational efficiencies, cost savings and measurable ROI in as little as three to six months. As an example, a business processing 50,000 invoices per year at an average cost of £4 per invoice could realistically save up to £100,000 every year.1 Whether it’s used on-premise or in the cloud, these solutions can automate the flow of data and documents in an ERP system into one high-tech, high-access platform.
In some cases automation can reduce the P2P cycle time from weeks to just days and accelerate the O2C cycle time by half delivering a rapid return on investment. This enables organisations to cut operational and administrative costs by between 40% and 60%.
As for the future, automating processes for A/P and A/R continue to evolve as the internet speeds up collaboration between companies over the web. The introduction of SaaS and cloud computing will continue to reduce the investment required to benefit from these solutions and will enable businesses to handle all processes with a single solution as part of their strategies to achieve a paperless office.
Tim de Knegt, treasurer for the Port of Rotterdam, discusses how he is looking to bring more value to the Port's clients using blockchain.
Regulation technology is fast gaining currency by transforming how financial institutions can tackle compliance in a swift, comprehensive and less expensive manner.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.
The implementation date of Europe's revised Markets in Financial Instruments Directive, aka MiFID II, is fast approaching. Yet evidence suggests that awareness about the impact of Brexit on MiFID II is, at best, only patchy and there are some alarming misconceptions.