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Chapter 3

How AP Solutions Integrate Into Your Existing Business Processes

In order to reach maximum efficiency, the best option is to install an enterprise-wide ERP, which includes a module for accounts payable. In this case, all of your management tools will fall under one umbrella and will have built-in integrations with other relevant solutions.

While a fully functioning ERP can handle your accounts payable, it can also manage a lot more. Below you’ll find an abridged list of popular functions for an ERP:

  • Accounting
  • Human Resources
  • Accounts Payable
  • Accounts Receivable
  • Inventory Management
  • Customer Order Management
  • Financial Planning & Analysis Budgeting
  • Treasury & Cash Management
  • Product Management
  • Manufacturing
  • Shipping & Delivery
  • Customer Relationship Management

ERP systems tie all of the daily activity of a company together to make tracking and management reporting simple and centralized. The best ERPs allow any authorized employee, from accountant to CFO, to run self-service reports relevant to all aspects of the company’s finances and operations.

If your company already has an ERP or has various systems cobbled together to handle many of the above functions, an AP solution can integrate into your existing systems.

High-quality AP software, whether it lives in the cloud as a SaaS solution or on a server at your company’s brick and mortar location, offers connections to

existing ERP modules and components. In some cases, it is a simple plug-and-play integration. In other cases, custom development is required to meet your specific business needs.

When everything is plugged in together and working optimally, your business gains huge opportunities for synergy and cost-savings.

For example, a human resources module can track employee salaries, hours, and benefits, and then add this information to an automatic batch process that creates all employee payroll, which is then processed in your AP system and entered into your accounting general ledger.

This entire payroll process, which takes some companies many hours and requires a full-time staff, can happen on a timer inside the computer system without any manual interference. Every other Friday—or whatever payroll schedule your company chooses—the process kicks off and runs while you and your employees are at home in bed. When you wake up in the morning, everything is complete.

It seems like magic, but it is just a well-designed AP solutions and ERP system hard at work.

The more your AP and ERP systems handle, the better it is for you. Because the more they handle, the less manual labor and hours focused on repetitive tasks you and your team have.

Challenges Accounts Payable Departments Face

These are more-often organizational issues, not people issues.

When you started out, you may have had just a few invoices per month. Over time, as the business grew, it swelled to hundreds of invoices. Then it ballooned to over one thousand per month. As invoice volume increases, which is a natural part of a growing business, leaders like you have to decide how to handle the increased volume of payments.

Some companies hire more staff, which gets the job done but brings a massive cost increase along with it. If you want to handle increased volume with your existing team to avoid those costs, then your company needs systems in place to handle everything efficiently.

Ultimately, many companies choose a combination of staffing increases and process improvements as the solution to massive volume increases. In the meantime, you still need to come up with some methods to handle the workflow, or you will end up with late payments, missed payments, fees, and lost invoices.

These are just a few ways the process can be tangled up without automation.

Now, we’ll take you through a few of the headaches AP professionals might deal with on a daily basis.

Information Management and Security
While some with less experience with technology may think networked computers are not secure, think about this scenario:

You receive a paper invoice via postal mail, where dozens of people had access to the envelope containing the invoice. Next it goes to your mailroom, where more hands are involved. It sits there, relatively unguarded, for a period of time before getting dropped into an office mailbox or on someone’s desk, again unguarded. Keep in mind, this is just the invoice delivery process.

Managing the influx of paper invoices can be a

headache to deal with. Mailroom staff, intra-office delivery, opening envelopes, and scanning takes a ton of time and work.

More and more vendors are sending invoices by email. But, unlike the paper invoice, they are sending redundant copies and CCs because the cost to send is so low. This can result in an email showing up in one, two, or three inboxes at your office, sometimes in addition to a paper one. That is a lot of entry and duplicate work.

Information mismanagement and fragmented processes might lead to duplicate invoice payments that leave your company with lower profits and nothing in return. Even worse, this type of system is highly susceptible to internal fraud.

Most of us think of the “bad guy” on the internet as an international hacker sitting behind a computer trying to get into your company’s electronic data, but internal breaches and loss are often much bigger problems for data security and fraud.

Without strong controls, employees can order anything your business requires for daily operations and ship it right to their front door, or pick it up at the office and take it home. We are talking about bigger issues than employees raiding the supply closet for sticky notes and pens to use at home. Employees can steal computer equipment and other valuable assets through AP fraud.

AP automation includes solutions designed to prevent duplicate payments, incorrect payments, internal fraud, and external fraud. Some of this is achieved through internal controls and approval processes that require multiple staff members to approve transactions and payments.

As systems improve, the methods used for fraud evolve as well. By keeping your AP systems up-to-date with industry standards and the latest patches, you can put a stop to the bad guys no matter where they come from. Internal, external, and online threats can be easily neutralized with the appropriate controls and systems in place.

Information mismanagement and fragmented processes might lead to duplicate invoice payments that leave your company with lower profits and nothing in return.

Inefficiency and Human Error

In the event of a duplicate payment, your staff and vendors probably did not have any malicious intent. Vendors just want to get paid as quickly as possible and your staff is juggling multiple responsibilities. Sometimes things slip through the cracks. Oftentimes, however, issues come from human error and inefficiencies that can be instantly fixed with the right software.

In a manual system, all processes require a human, and humans are far from infallible. People make key errors, type data into the wrong fields, or choose the wrong drop-down box regularly. Even if mistakes are relatively rare considering the volume of payments being processed, you may find that mistakes are not an obvious problem. But if you dig deep enough, you are sure to find something as simple as transposed account numbers or dollar amounts.

Human-based processes are also bad for timely approvals. While there may be a physical paper trail, tracking paper approvals is a hassle and a poor use of time. Skipping the paper trail and approvals, however, opens your organization up to fraud.

When working with vendors, manual processes are horribly inefficient. If vendors are not going to be paid right away, they want more information on the payment timing for forecasting. How does your AP team react when a vendor calls to check in on the status of an invoice?

For companies with manual AP, that means someone has to stop working to look for the invoice and its status, and find the relevant information. This time-consuming situation is all too common in AP departments around the world.

As time goes on, businesses also have regulatory issues

to deal with. Compliance when handling everything manually is incredibly difficult. Solving manual compliance issues is not a profitable venture. It does not increase cash flow or productivity. But someone has to do it, and if you ignore compliance, you could find yourself on the wrong side of a fine or penalty.

What does your team do when an invoice is disputed? Ignoring the problem only compounds the issue, as you could end up with a supplier unwilling to send off the next shipment. If you don’t have systems in place, AP clerks could make the easy default decision to just pay more, or send a duplicate payment. But that just eats away at the bottom line and doesn’t actually solve the problem.

Eventually, your team finds itself juggling too many tasks and one falls to the wayside.

This could be an infrequent, but important project, such as a system cleanup, maintenance tasks, or compliance reviews. It could even mean cutting corners on regular work, or ignoring the problem and hoping it will go away, but it never does.

So, where do you find more time in the day to handle all of this?

Well, you can’t invent more time and hiring additional staff is expensive, so let’s look at the alternative. What if your company did not need to spend so much time working with paper? What if invoice processing could be handled automatically via e-invoices?

What if there were a better way?