By Avinash Godkhindi

Businesses embracing automation to optimize financial and operational workflows demonstrate greater resilience and adaptability. Within these workflows, the Accounts Payable (AP) process plays a crucial role in cash flow management and planning, underscoring the need for streamlining and optimization. Digitalizing AP workflows bring substantial cost reductions, operational streamlining, and increased efficiency.  Moreover, it empowers finance teams to become strategic drivers of value, enabling the implementation of initiatives that fuel business growth.

The Reality – Efficiency Killers in Today’s AP Process

Outdated and semi-automated AP processes are, however, all too common, even among enterprise-level companies. Conventional processes come with a host of challenges that drain resources, impose high costs and increase the risks of fraud and compliance issues. These challenges include:

Invisible costs

The AP process involves multiple stages, including generating and issuing purchase orders (POs), validating supplier details, keying invoice data, matching invoices to POs, obtaining payment authorizations, and reconciling invoices and payments. Unfortunately, the entire cycle time can range between 30 and 90 days. Lengthy processing times strain relationships between vendors and buyers, potentially damaging the business’ reputation and limiting future business opportunities.

Lack of visibility

Fragmented and scattered data along with a lack of visibility hampers AP analysis and deriving valuable insights a cumbersome task.  Without a clear overview of the AP workflow, businesses may struggle to identify bottlenecks and optimize operations. For instance, if invoice processing data is not readily available or easily searchable, finance teams may have difficulty tracking the status of invoices, identifying overdue payments, or evaluating vendor performance. This lack of visibility can result in delays, errors, and missed opportunities for early payment discounts or negotiating better terms with suppliers.

High risk of fraud

Accounts Payable involve numerous transactions with multiple vendors, which escalate exponentially with organizational size. Fraudulent activities in AP processes can take various forms, such as fictitious vendors, inflated invoices, duplicate payments, or collusion between employees and vendors. These fraudulent transactions can go undetected without proper monitoring and controls, resulting in significant revenue leakage over time.

The Promise of Intelligent Automation

As businesses grow, the limitations of semi-automation become increasingly burdensome.  Intelligent automation offers a transformative solution to enterprises, leveraging a set of next-generation technology levers such as cloud-based solutions, cognitive/AI capabilities, and mobility. These advancements rapidly transform AP workflows, starting from purchase order (PO) requisition and invoice processing to supplier payments and invoice reconciliation.

By embracing intelligent automation, businesses can reap a multitude of benefits, including:

Boosting process efficiencies

Businesses can re-engineer AP processes and implement touchless invoice-to-pay workflows leveraging intelligent automation. Purchase orders are digitally sent to suppliers. Supplier information is collected electronically and automatically validated. Invoice data is captured leveraging Optical Character Recognition (OCR), without human intervention. Invoices that match POs are posted directly to an accounting system or enterprise resource planning (ERP) application. Electronic payment interfaces embedded in the AP platform simplify payments to suppliers. And real-time supplier reconciliation puts an end to the hassles of manual reconciliation. These advancements significantly reduce processing time and error rates.

Optimizing costs

Implementing an efficient AP process enables businesses to achieve rationalised costs along multiple dimensions. Businesses can optimize sourcing efficiencies by identifying and streamlining redundancies in their procurement processes. Strengthening relationships with suppliers enables them to negotiate optimum commercial terms, including extended payment terms or early payment discounts that align with their specific cash flow requirements. Timely payments also improve credibility with suppliers, leading to long-term savings through higher discounts and favourable payment terms.

Enhancing spend visibility

AP practitioners can derive meaningful insights from invoice data to improve cash flow, identify exceptions, and drive continuous process improvement. Advanced analysis helps identify overpayments, fraudulent transactions and vendors, and opportunities for optimizing payment and contract terms with suppliers.

Providing intelligent digital interfaces

Integrating mobile solutions and AI-based conversational interfaces enhances efficiency and user experience. These interfaces, like chatbots or virtual assistants, provide a user-friendly way to interact with the AP system. Using voice commands business users can access information on invoice processing, approvals, payments, and payment dates, staying informed about their financial transactions. Vendors can use self-service options to check invoice status, update contact information, or request payment details without contacting the AP team directly.

API-first cloud-native architecture

Software-as-a-Service (SaaS)-based, API-driven platforms eliminate the need for extensive infrastructure investments and ongoing maintenance. With SaaS-based solutions businesses also have the benefit of regular updates, enabling them to stay up to date with the latest functionalities and industry best practices. An API-driven approach enables seamless integration and smooth data exchange between multiple systems including accounting, procurement and enterprise resource planning systems, banking systems and payment gateways involved in the invoice-to-pay process, enhancing process efficiency, reducing errors, and improving data accuracy.

Final Thoughts

To undertake a successful AP transformation journey, businesses must follow crucial steps. First, they need to identify and diagnose current issues in the AP process by conducting a thorough assessment. Second, documenting the existing AP workflow and systems involved sets a baseline for measuring progress. Third, defining the desired future state process sets clear objectives for streamlining workflows and enhancing efficiency. Businesses also need the right technology partner to achieve these outcomes.

(The author is Mr. Avinash Godkhindi, MD & CEO, Zaggle, and the views expressed in this article are his own)