Your Complete Guide to AP Automation in 2021!

Today, our Guest Contributor is ivi’s Service Desk Manager, Ms. Karissa Castelo, with her series on everything you need to know about by AP Automation in 2021!

Prior to 2020, even though various business process automation technologies were available on the market, for many companies there was limited appetite or urgency for adoption. Especially in regards to finance operations, most companies continued to implement manual or only partially automated payment processes where there was reluctance from senior management to invest in functions that they believe do not generate direct revenue. While there exist numerous strategies to optimize working capital, in this series, I’m going to focus on the core strategy of Accounts Payable (AP) Automation.

When it comes to businesses looking to build their competitive advantages, rarely will back-office functions such as accounts payable take centre-stage in these growth related discussions. Instead, the extremely important yet time, cost, and manually-intensive accounts payable function, will take a back-seat to management’s competing priorities. However, at the beginning of 2020, the Covid-19 crisis arrived, upended everything and resulting in management to view accounts payable in a very different light. Where important financial functions were previously neglected, companies under lockdown, implementing enforced work from home, and dealing with unstable supplier ecosystems, quickly had to adapt and embrace new technologies and practices to protect themselves and ensure survival.

Whether you’re brand-new to the importance of accounts payable or an industry veteran, this complete and ultimate guide to AP Automation contains insights to help you achieve best-in-class levels of productivity and cost-savings that will transform your AP department from a cost centre into a profit centre.

What is Accounts Payable?

In the simplest sense, it is the executives of a finance department responsible for processing payments to suppliers, vendors, and business partners for the ordered and received goods and services. When a business purchases goods or services from a supplier on credit, payment isn’t processed immediately, but instead is usually made between 30 to even 90 days depending on the market and the size of the buying company. In the first instance, the buying company will send the supplier a purchase order (PO), after which the supplier will provide the goods or services purchased together with an invoice requesting payment by a certain date. From a cash flow standpoint, this obviously benefits the buying company, as they basically receive an interest free loan from the supplier where the goods or services are delivered, yet payment is made much later. However, AP Departments waste a huge amount of time and energy on tedious manual data entry; data validation and verification where invoices are manually matched to multiple supporting documents such as PO’s; and exception handling where constant enquiries from suppliers and inaccurate data issues have to be investigated and resolved. This ultimately results in low morale and motivation, high employee turnover, and high costs per invoice processed.

In our next chapter, we will dive deeper into these manual AP process pain points!