Unlocking Productivity with Accounts Payable Automation

Efficient Accounts Payable (AP) or invoice processing practices reflect how a company handles its obligations to pay off short-term debts. They have apparent implications for its working capital positions, balance sheet performance, and, of course, credibility with suppliers. Nevertheless, the current industry imperatives to do more with less and align processes seamlessly with the speed of business have posed unprecedented challenges for the AP teams.

Accounts Payable has conventionally fared low in the long list of competing organizational priorities as a typical back-office function. Consequently, organizations still rely on manual interventions and paper invoices to drive payment approvals. In fact, a recent PYMNTS.com survey revealed that 80% of the firms still use paper checks. Further, IDC confirmed that at least 64% of businesses currently rely on overly complex spreadsheet-based payment workflows, with merely 19% of decision-makers considering AP processes valuable enough to transform. Understandably, Ardent Partners, in their 2020 AP Metrics that Matter Survey, found that only 55% of the companies are planning to elevate their AP journeys.

What are some common Industry pain points?

It takes approximately 16 workdays to manually push an invoice from receipt to payment, consuming 76% of the AP team’s available bandwidth in the process. However, retaining labor-intensive AP functions within the procure-to-pay cycle of a company can give rise to bottlenecks much beyond just prolonged turnaround times, undermining the overall process outcomes and some of the core business interests.

While delayed payments have unmistakable connotations, resulting in late fees, missed savings opportunities through early payment discounts, and strained vendor relationships, inaccurate and duplicate payments due to data discrepancies can be much more insidious, culminating into considerable financial pitfalls. Aberdeen Group’s research found that up to 20% of invoices regularly contain incorrect or incomplete information. Further, Capgemini estimated that up to 0.5% of the total business payments are processed twice, and 70% of the duplicate payments cannot be traced by conventional means. It adds up to a loss of €5 million for a company with transaction volume worth €1 billion.

In their APQC research, CFO established in 2015 that 62% of the AP costs are attached to labor-intensive workflows that are often vulnerable to inconsistencies, unaccountability, poor visibility, and reworks. But while these are classic operational drawbacks, deliberate frauds on the financial interests of an organization have tremendous downsides for the reputation and profitability of a company. Lack of qualified human resources or an exponential rise in invoice volume often undercuts granular risk insights, with the Association of Certified Fraud Examiners (ACFE) estimating fraud instances lasting 14 months before detection, causing losses of over $8,300 a month, on average. It costs organizations a whopping 5% of the revenue to fraud every year. Data suggests that a lack of intuitive controls on critical areas like procure-to-pay contributes to nearly 33% of the intrusions.

Why is RPA important?

The importance of impeccable Accounts Payable administration, posing direct implications for the institutional cash flow, can hardly be overemphasized. In an age where CFO perceptions are increasingly influenced by a pressing need to automate processes and emancipate human capital for more strategic roles, the transformation of essential yet iterative tasks like invoice management holds many prospects. Plugging AP functions with Robotic Process Automation (RPA) allows them to extract seamlessly, handle, and process vendor invoice data across multiple formats, including spreadsheets, word documents, and PDF files. A smart AP platform can automate the entire journey, from data capture, loading into ERP landscapes, reconciliation with the purchase orders (PO) and goods receipt, and finally approving payments, limiting human interventions only to supervisory roles. Such systems can be configured to be proactive, intuitively triggering purchase requisitions for approval by the competent authorities, minimizing turnaround times.

Although replacing human labor with machine intelligence will unleash unprecedented precision and standardization of the outcomes, automating repetitive AP tasks also augurs exceptional time and cost benefits. Aberdeen Group found that companies can shrink the average timeframe between invoice receipt and payment approval into just four days from 16 days with intelligent automation. Also, while manually processing invoices costs as much as $23/unit, it can be reduced to $4 via automation. But that’s not all! Companies looking to automate their AP journeys can expect much more from their RPA investments, putting them at definite competitive advantages against their peers running legacy invoice processing systems.

What are the benefits of RPA?

Cost savings: KPMG found that the deployment of RPA in financial accounting processes holds the key to trim operational overheads by more than 75%. With AP automation, businesses can simplify invoice data entry and other repetitive, time-consuming, and low-value tasks that were previously outsourced and save up to 60% of the baseline FTE costs. By automating back-office functions like invoice processing, a company can optimize its workforce deployments and avail improved return on its human capital investments. Also, by reducing the invoice lifecycle, businesses can take the benefits of early payment discounts offered by the vendors and avoid late payment penalties due to manual errors. In fact, PayStream Advisors observed that some organizations with end-to-end AP automation could actually process invoices in less than five days at the cost of $2.36/unit and manage to capture at least 75% of the available discounts.

Smooth account reconciliation & reporting: Account reconciliation & closing is a laborious yet business-critical function involving the matching and reporting of financial inputs from multiple sources. But surprisingly, 28% of CFOs don’t trust their reported numbers. Also, according to EY, 59% of the financial department’s resources are focused on transaction-intensive roles and 95% of the efforts are wasted on already matched transactions rather than investigating anomalies. AP automation with RPA can streamline the process with automated data transfer, intuitive decision-making, and proactive troubleshooting. Eliminating the chances of human errors from the process improves the reliability of the outcomes. Also, with RPA, AP teams can automatically pull reconciliation data into various financial reporting and analysis tools, saving time and effort. It led Gartner to estimate that for a company with 40 full-time accounting employees, RPA can save up to 25,000 hours and $878,000 annually.

Improved supplier relations: The importance of maintaining improved supplier relations can hardly be overstated for business interests. However, industry research revealed that in a week, organizations spend 55 hours handling manual paper-based documentation processes, 39 hours managing invoice exceptions, and 23 hours responding to supplier queries, on average. It equates to the loss of over 6,500 hours annually. But unlike manual drivers, the speed, accuracy, and standardization that RPA implementation brings into invoice approval workflows dramatically minimize the chances of exceptions, discrepancies, and errors. Further, it can achieve up to a 10X reduction in invoice processing times and assures greater transparency bringing the procurement department, the AP teams, and the suppliers on the same platform with real-time visibility into the status of the invoice. Also, with automated AP resources available 24X7, companies can seamlessly deliver a more fabulous end-user experience and satisfaction for the service consumers.

Better compliance: The procure-to-pay journey of businesses are fraught with complex compliance challenges, including tax/VAT compliance, ensuring content integrity and legibility of invoices, abiding by archiving rules, and protecting sensitive data. In fact, in this whitepaper, Comarch reports that 64% of businesses intend to optimize their compliance position at present. These compliance requirements often put massive pressure on the PO administrators and AP teams in manual AP processing, consuming their bandwidths wastefully. However, with RPA, such compliance requirements can be automated, and alerts can be configured for exceptions, reducing human intervention only to process oversight.

RPA Adoption by Process

While the benefits of AP automation are apparent, its creative application can gainfully alleviate several persisting grey areas, undermining the outcomes of Financial Accounting operations across industries. A few such use cases can be:

Invoice Data Entry: CLSA, the Hong Kong-based capital markets and investment group, observes that we are fast approaching a world where “humans and AI are bound together in a constant exchange of information and goals.” Perhaps this human-machine synergy is best observed in the invoice data entry phase of a procure-to-pay journey. Institute of Finance and Management (IOFM) comments that 1/3rd of the AP practitioners are working longer hours, and at least 8% of them work additional 2 hours per day, owing to an exponential rise in workloads. Indeed, invoice processing challenges are multi-faceted, including managing vendor information in disparate formats ranging from a paper copy, email, fax, PDF, MS Word Doc, etc. It complicates data entry, making it time-consuming and error-prone. However, RPA can intuitively process invoices upon receipt, using OCR for physical documents. It can automate data capture, reconciliation, and rule-based decision-making, minimizing human interventions.

Fraud Detection: AP frauds are a persistent threat for organizations of all sizes and costs institutions millions in dollars and stakeholder trust every year. Organizations without robust oversight on verifying invoices against POs and actual purchases are most vulnerable to them. They can be mitigated through the Three-way Matching technique that triangulates invoices, POs and receiving documentation to authenticate a claim. However, considering the diverse documentation formats and the sheer volume of workloads, manually extracting and feeding information into analytical platforms can be highly laborious and error-prone. Instead, an end-to-end AP automation platform can use AI to extract consistently and standardize invoice data, regardless of their formats, and continuously feed them into a Three-way matching engine. Once the invoices are verified, AP professionals can check and approve them for automated payments or flag the exceptions for further scrutiny.

Payment Execution:  The payments department needs to have clear visibility into various parameters like due dates and early-payoff discount deadlines. Keeping track of such variables can be extremely challenging, considering that an AP professional manually processes about five invoices per hour, as per the industry average. However, in the wholesale payment space, 30% of the transactions are still paper-based. Here SunTrust estimates that digital pay using RPA can simplify much of the complexities, bringing a 62% improvement in liquidity and a 52% boost in processing speed. Their faith is not unfounded, as AP automation brings unmatched benefits for business, including high speed, auditability, and a facility to schedule payments for specific dates. Also, It provides a single source of truth for all business transactions, simplifying the digital payment of invoices and eliminating or minimizing associated costs and risks.

Expense Reimbursement: The employees may incur various expenses as part of their corporate travel and onsite activities. Expense reimbursements processes give businesses oversight and control on employee spending. However, it is a time-consuming and iterative job for the accounting resources where various receipts and invoices must be gathered, and all the transaction data must be compiled and reflected into the company’s expense reports. Before the actual reimbursement can be processed, the claims must be approved by competent authorities within the finance department. The complexities and time-to-payment are further increased in case of missing receipts, out-of-policy-spends, late submissions, and other issues. Research suggests that at least 2 in 5 employees have experienced liquidity issues due to the slow reimbursement pace.

Moreover, it’s a repetitive, low-value task that often consumes the quality bandwidth of the AP teams. With RPA, the expense reimbursement cycle can be accelerated by comparing expenses with company policies, tracking receipts in near real-time, and directly populating expense reports with the transactions data. Within an automated environment, it is possible to send reminders through push messages or emails to employees, preempting breaches in the company’s reimbursement policy and limits.

How can Percipere bring in the value?

AP automation technology is exceptionally agile and adaptive. It can be easily layered over legacy systems and plugged into the available data to drive the transformation of the procure-to-pay journey with minimum disruption. However, since businesses have different AP processes, embracing RPA require the interventions of a subject matter expert and process integrator, competent enough to drive a scoping of the business requirements, validate the opportunities identified, estimate the baseline operating costs to ensure affordability, standardize the workflow and procedure, implement and deliver hyper care as required.

To ensure this, we at Percipere have partnered with UiPath, a global leader in RPA platforms, to deliver on the exceptional promise of AP automation. We are a full-cycle RPA innovator, trusted industry-wide for infusing efficiency, speed, and precision into legacy accounting system landscapes with minimum intrusion. As an end-to-end RPA innovator, Percipere’s interventions range from Advisory, Consulting, Implementation to Incident Response, backed by well-laid plans and an efficient change management culture to help you unlock productivity with your AP automation investments.

Author: Akshay Farde, Lead Manager (RPA)