As a finance professional, you may believe your company needs to invest in AP automation processes. But you may not be sure how to make this happen smoothly and effectively.
Here are five smart steps to help you achieve this goal:
Step One: Identify your objective
Before you do anything else, you want to identify your specific objectives in making the digital transition.
For instance, your objective could be to improve customer and supplier relationships. Or it might be to reduce your late payments and errors while delivering payments to customers, vendors and suppliers faster.
Or perhaps your objective is to free up your employees from manual tasks so they can focus on more strategic, higher value projects such as business advisors, financial analysts or internal controls specialists.
Or you want to achieve all of these.
Whatever your objectives are, estimate cost savings to make them more concrete and powerful. For instance, specify that your aim with automation is to cut annual payment and invoice processing costs by 50 percent. Or indicate your objective to shave your supplier payments costs by 25 percent and check reissue invoices by 25 percent.
These figures will make the objectives more powerful and give you more clarity as you move ahead in this process.
Step Two: Align your stakeholders
Once you’ve identified your objectives, gather your internal stakeholders including department leads, top executives and other employees.
Expect some resistance. People are often reluctant to change. They’ll probably be concerned about costs, how their workdays will be reconfigured and how the shift may affect their responsibilities and careers.
Be sensitive to this. Set expectations and be specific. For instance, share the potential savings expected from automating AP and your mathematical assumptions to achieve the savings.
Share the new work process. Highlight the new work that employees will be able to start doing more of such as financial analysis of corporate cash flows or engaging in internal controls risk management projects. Make sure to incorporate employees’ concerns about the transition. It’s likely they will have valuable insights and need to feel comfortable with the change.
“Change management is often an afterthought when organizations decide to automate,” according to a report by Sage Intacct, an accounting system provider, titled Seven Pitfalls to Avoid When Implementing AP Automation. “But front-line staff can provide valuable insights into the current challenges with paper-based processes and are key to a smooth transition. If business leaders do not properly manage the technology’s impact on staff, it can cause low morale, delays in rolling out the system, low investments returns and loss of trust with senior management.”
Focus on the big picture and human impact
Focus on employees’ needs and desires. Avoid getting too deep in technology integration and AP automation software details. That can come later.
Get your team to resonate with the big picture benefits that automation will deliver, saving time and giving them more time to develop new and engaging skills and explore more exciting career paths.
Step Three: Choose the AP automation system
Once your team gets onboard, look for a system that will work seamlessly with your accounting software and legacy financial systems.
Confirm that the AP software tools are easy to use and can be expanded to handle higher numbers of payments and invoices. Find out if the vendor will offer you professional services, training and onboarding support to minimize your internal setup costs.
Make sure the system has the capabilities for intelligent data capture using optical character recognition (OCR) and smart data extraction, so data on paper docs can be converted to digital format.
During this selection phase, get a clear understanding of how invoices arrive at your company. You want to buy an automaton AP software product that processes all invoices regardless of how they arrive.
If you don’t, you may have to buy multiple systems to handle all types of invoices. That could get expensive.
Seek experts in process improvement
As your search for the right AP automation system, align with a solutions provider with a professional services team with expertise in process improvement.
This advice is explained in an article by Sage Intacct titled Seven Pitfalls to Avoid When Implementing AP Automation.
“Be leery of solutions providers who do not analyze your current AP workflows and take the time to understand your desired end-state before the implementation begins. And they should offer insightful best practices for continuous improvement.”
Focus on software that solves your AP problem
In selecting the AP automation system, make sure the AP software and accounting software will integrate easily with your company’s accounting software and Enterprise Resource Planning (ERP) system, the heart of your online, computer-based financial operation.
During this selection process, prioritize your needs in advance of demos, so you don’t become distracted by showy unnecessary software. Glitzy features improve the sales pitch, but don’t always add value.
Stay focused on what exactly your company needs and why. Outcome-driven comparisons will help you sort through the offerings that solve your company’s problems most effectively and economically.
Step Four: Integrate AP automation software with accounting systems
After selecting the AP software system, review the integration to make sure the systems are compatible – meaning communicate and interoperate with each other.
And consider the advice in an article in Finance Digest, titled 5 Common Mistakes Around Accounts Payable Automation, which is to avoid integrating a solution that “does not communicate natively with your accounting software or Enterprise Resourcing Planning. A collection of application programming interfaces (APIs), connectors, interfaces, micro-services and configurable modules may indicate the integration is too complex. Make sure you have the right tools set up and that they all talk to each other before you make a decision.”
The Sage Intacct report echoes these sentiments:
“No matter how good an automated accounts payable solution is, if it doesn’t integrate with your legacy finance systems (ERP)—the financial nerve center of an organization—you will still experience the same pain points that led you to automating in the first place like enormous amounts of time spent manually re-keying information, retrieving invoices, and error-prone audit processes.”
Avoid paying vendors to write customized code
Another important word of caution in this integration stage: Avoid software vendors who want to develop customized code to change workflows. Custom work probably means their technologies are inflexible and not easily integrated.
Step Five: Set up payment controls and paperless payments
After integrating the AP and accounting software, plan how you will improve your payment approval process and migrate to electronic supplier payments.
In this process, your invoices are indexed and classified in your accounting system. Then financial pros go to a payments dashboard to approve the payment and click either “accept” or “reject.”
This quick ability to view invoices and make payment decisions saves time. The CFO and controller no longer need to look at the invoice or retrieve backup from file cabinets in offices. All the order and invoice data exists right there in front of the person who needs to approve the payment.
But that’s not all. There are fewer errors than manual processes, which helps cut costs and processing delays. Paperless payments are also more secure because payment and invoice data is more difficult for cybercriminals to steal compared with paper checks.
From a technology perspective, your paperless process captures data on digital formats, classifies, matches and verifies invoices, approves invoices and sends electronic payments.
But these steps need to be preceded by less technical yet equally important steps. These come down to figuring out why you want to automate in the first place and explaining that to other people in a way that makes strategic, business and common sense.
You will be more persuasive by starting with reasons why before launching into what needs to be done and how. People want to know first and foremost why you believe what you believe.
Then you can move on to the process of getting your team to understand what the financial benefits will be of doing so and how the process and their workdays will change.
Next, you start investigating what technology suits your company’s needs the best and integrates the easiest.
If you follow this sequence of steps, you will be well on your way to a successful AP automation project and start benefitting from this paperless process.