Hundreds and thousands of enterprises – big and small – are improving the speed, efficiency, control and visibility of their accounts payable (AP) processes with the help of automated solutions. In any organization, it is the accounts department’s lookout to make sure that all invoices from their vendors are paid in time. Invoice processing involves capturing important data and loading them into the company’s financial systems. After this, the invoices undergo various business processes to get approved. Apparently, it’s a quite straightforward process, but it can quickly become cumbersome if the company has to process a large number of invoices, paper invoices in particular. The traditional paper invoices are not only prone to human errors, but also have higher fraud risks. Lost and duplicate invoices further add to the company’s costs. AP automation is aimed at overcoming the drawbacks of a paper-based process. These solutions typically include automatic image and data capture capabilities and a suit of workflow solutions to streamline the entire process. By enabling automatic extraction of information from invoices and validating them against respective invoices, these automated systems provide better visibility into outstanding liabilities, subsequently speeding up the decision-making process.
Process Maturity Model in AP Automation
Companies should remember that investing in an AP automation system is not an end in itself – they must have a maturity model in place to achieve sustained benefits from the system. A maturity model allows companies to methodically evolve by combining new technologies in each phase. For fast-growing companies, a process maturity model is a must-have, as it helps to identify the ‘hows’ and ‘whys’ behind every problem and enables them to better respond to the emerging company-supplier relationship patterns.
Stages of Process Maturity Model
Implementing a process maturity model for AP management can be challenging. There are several questions that are to be answered – what is the best time to switch to the next stage of the maturity model, what should be the constituting elements of the maturity model, how do you know your organization is fit for receiving a more matured model?
As far as AP management is concerned, the companies typically go through the following four stages in their journey toward a sophisticated payment system:
Traditional: At the bottom tier of the payment processing hierarchy lies the manual invoicing processes. This paper-based system is not only time-consuming, but also highly error-prone, and therefore inefficient.
Electronic: The second stage of maturity model involves a shift to electronic invoicing system, where invoices are received through emails. The data in these invoices are then scanned, ultimately finding their way to the company’s financial systems. This, no doubt, is faster than manual invoicing, but they still considerably lack one vital element – the transparency.
Automation: Backed by workflows and notifications, this stage makes payment processing significantly faster than the previous modes. This system makes it easy to sort out exceptions, but the problem is, a lot of time is wasted on handling exceptions.
Optimization: This stage is completely technology-driven. At this stage, the main focus is on improving not just the speed but also the quality and effectiveness. The AP automation at this stage includes features such as mobile approvals, self-service portals and the likes. The idea is to increase stakeholders’ reach to the information. Embedded workflow systems ensure minimal manual intervention. Even when intervention is needed, the system makes it easier for the person concerned to identify the problem and take necessary actions.
Efficient AP management is one of the most crucial parts of maintaining good relations with vendors and suppliers. A gradual improvement in their payment management system not only enables a company to achieve cost savings in the long-run, but also helps them establish a positive brand image in a competitive market. With a process maturity model at their disposal, companies can make a planned transition to more sophisticated technologies. Along with electronic data capture and digitization of invoices, embedded workflow solutions can help them achieve measurable improvements with their AP management process. Want to take a step-by-step journey toward AP process optimization? Keep innovating when you put the process maturity model into action.