Success can be tricky to define, especially in financial functions including accounts payable (AP) departments.
Accounts payable success is largely tied to hard numbers — invoices processed per month, cost per invoice, outstanding payments, turnover ratio, etc.
But true success goes beyond the metrics. AP department success has a particular look … a particular feel. You know it when you see empowered, effective employees within a well-run department. You know it when you feel the confident, stress-free vibe from a function that’s far too often underwater.
If you haven’t felt that feeling within your AP department, let us describe in more detail what makes a successful AP department.
Successful AP departments emphasize efficiency
The best descriptor an AP department can hope for is “efficient.”
Efficient AP doesn’t just process invoices and make payments quickly, it often knocks that stuff automatically with AP automation software and solutions. Invoice data is electronically into a digital format so people don’t have to spend the time and money doing so. Invoice approvals are quick, easy and accurate. So are payments.
The numbers tell us efficiency is exactly what finance pros want most in AP processes.
In a 2021 survey of AvidXchange customers, 95 percent said their AP automation solution’s ability to drive efficiency ranked as either important or extremely important.
Respondents also selected their top reasons for considering an AP automation solution. The three leading results centered on driving efficiency:
- 83 percent to create operational efficiency
- 72 percent to reduce processing operational costs and
- 64 percent to improve timing of approval process.
The survey findings send a clear message: efficiency reigns supreme across the financial landscape to transform businesses to new heights of success – not just save a few dollars here and there.
Chip Vaughan, the chief financial officer of The Wilton Companies and a user of AvidXchange’s AP automation solutions, elaborated on this point:
“You can’t even assign a value to the efficiency, but it’s worth a lot more than our monetary savings of $72,000 a year. Now that I have all the information I need right at my fingertips, I can focus on cash forecasting and scheduling payments for ideal cash management.”
Successful AP departments leverage technology
Speaking of AP automation software, maximum AP efficiency is nearly impossible to achieve without leveraging technology.
A Brainyard survey of CFOs finds that more than half (54 percent) substantially or completely changed their use of technology due to the pandemic. Among eight changes they were asked about, use of technology topped the list.
How much has each of the following changed for your company due to the pandemic?
Technology like AP automation software allowed AP departments to continue operations in a hybrid or fully remote work environment.
“Quite frankly without AvidXchange (AP automation software) I don’t see how we would have managed accounts payable during the Covid-19 pandemic, as our 18-person team was working remotely,” said Dan Cardella, Vice President of Terra Holdings. “The AvidXchange software has been a tremendous asset for us. Working with AvidXchange is going better than I expected.”
Greg Zammit, Executive Vice President at Terra Holdings, had a similar sentiment about AP automation solutions.
“There’s no doubt in my mind we could not have pulled that off without AvidXchange,” he said. “It would have been impossible to get the approvals done with approvers working from home. We exceeded expectations.”
Of course, to leverage new technology you have to train your AP staff. Ensure your adoption rates and buy-in levels steadily increase by offering frequent refresher courses.
If you meet resistance or concerns about automation replacing staffers, remind them the time they’ll save by not hammering out manual, repetitive tasks will be spent doing more meaningful, strategic work that will have greater impacts on the business and set them up for faster career advancement.
If you’re actively shopping for tech that will increase the efficiency of your AP department, team up with a software provider who’s genuinely interested in the goals of your business and how you’re strategizing to achieve them.
Don’t get caught with a company that just wants to sell a standalone software product and move on. An ideal strategic partner will align its software to help your business execute its mission and reach its goal.
Successful AP departments leverage technology
If you want your AP process to foster success, eliminate as much paper as possible.
Not only is paper highly susceptible to fraud and mistakes, but it’s also disorganized, inefficient and expensive.
Handling paper invoices and paying bills by paper checks can add up. As noted in this AvidXchange blog, Bank of America estimates that the costs of processing a single business check can cost up to $20.
Paying by checks piles up wads of paper: check stock, envelopes and stamps. Labor intensive, slow-moving and mistake-heavy, paper checks increase corporate expenses and reduce profits. Automated, digital processes and payments are typically far less expensive.
AP automation solutions are also notorious for helping prevent duplicate payments and exceptions that riddle manual, paper-dependent AP departments.
When a vendor sends in two invoices for the same work and an AP manager doesn’t notice, your company might overpay the vendor and loss money for their company.
Then there are exceptions. For one reason or another – the invoice looks odd or seems to have incorrect figures – it has to be looked at by a person to solve the problem. That’s time and money your business doesn’t need spend.
The problem of exceptions is only growing as CFO Daily News reported about one-fourth of invoices were flagged for exceptions in 2020.
Effective AP departments help themselves by implementing processes that cut down on the paper piles chase and eliminate the need to chase invoice and payment approvals. That’s what the software is for.
Breaking Down the Time-Saving Benefits of Accounts Payable Automation
Successful AP departments promote strong relationships
Though much of any function in finance is driven by numbers, relationships with both your employees and customers are vital to an AP department’s success.
Teams that cut paper, eliminate mundane tasks and promote career advancement foster happier, more productive employees who embrace more strategic work. And with more fulfilled employees comes better work, which leads to a healthier bottom line for your business.
While your business and work environment experience the benefits of streamlined operations, you and your employees will enjoy a professional life with reduced stress and greater time making an impact both at work and home.
As for your vendors and suppliers, those relationships will strengthen as your automated, digital processes lead to quicker, more secure payments. This will naturally lead to a strong reputation with current and potential vendors.
Efficiency, less paper, balancing payments, ending exceptions – it’s all part of making your AP operations more successful.
But does any of this really matter?
Well, it turns out there’s a whole lot of AP being done that’s not automated and therefore not really achieving the results that it could.
Business Insider shares these numbers:
- 49 percent of companies pay by check
- 47 percent rely on manual processes for approval.
- 40 percent are looking to add automation to their payables processes to gain efficiencies and cut costs and fraud
These numbers tell us now is the time to invest in AP automation software that is smart, reliable, accurate and easily integrates with accounting and enterprise resource planning software.
From a strategic, operational and ROI standpoint, successful AP will fuel future growth and competitive differentiation. Your AP team will work faster, make fewer mistakes, be more stimulated and enjoy their workdays more.
This change in how to do business comes down to a new way of thinking and a new mindset about how to run your financial operations.
We’re talking about a fresh and completely new look and feel to your AP operations that’s bound to pay off big-time for your business.
This report guides you on how to speak the CFO’s lingo strategically. Learn powerful techniques to think through how automating AP syncs with your CFO’s strategic goals and find out how to come best prepared with answers to tough questions.