Have you ever asked how one automates a finance department? Or why, having decided to move forward, you would specifically focus on accounting automation software? The argument for doing so is straightforward. Simply put, smart technologies in finance makes a difference by empowering your team to increase their workload both better and more accurately, lifting overall efficiency and productivity to new levels.
Finance automation software - specifically Accounts Payable (AP) automation - takes a drawn-out, error-prone, repetitive manual accounting process and replaces it with a faster, highly efficient, transparent digital workflow. Deliver this capability using Software as a Service (SaaS) through the cloud and the savings in terms of time and money grow exponentially.
As a result of the change, you will transform an essential back-office function from a cost center into an ongoing strategic asset that provides management with measurable data for the entire organization. Assuming that the saying "you can manage only what you can measure" is true, this means that accounting and technology are the perfect pairing.
Indeed, the embrace of cutting-edge tools and data-driven processes (also known as digital transformation) and the information that it provides has taken on a new urgency as the recent pandemic pulled back the curtain to reveal several shortcomings in how a business handles invoices.
So why do businesses still focus on work system run by human labor and mounds of documents?
How Finance Automation Software Does Away with Paper
Too many companies still rely on paper-based workflows and use a patchwork of software solutions (if any) to address the needs of the finance function, from issuing purchase orders and processing invoices to initiating payments. What’s more, using human labor to handle mundane and repetitive tasks such as opening envelopes, entering data, cutting checks, and archiving invoices once paid costs time and money - a lot of time and money.
When market researcher Levvel polled more than 300 finance professionals for its “Payables Insight Report 2021,” they discovered that more than one-third of invoices still arrive on paper and via fax. That number is only slightly lower than the percentage of invoices that come in by email at 40%. Using outdated methods has several drawbacks, Levvel warns.
“Invoice receipt method has a large impact on the overall performance of AP departments: it influences invoice cycle time, exception rate, cost per invoice, and discount capture.” At least, paper is on the way out from small shops to big enterprises: “No revenue segment receives the majority of their invoices in paper.”
From Capture to Export: The 5 Steps of Financial Process Automation
Digitizing the invoice process and using electronic invoicing (e-invoicing) or receiving invoices via email is a good first step. However, this is still part of the "patchwork" idea of software solutions and a far cry from having a complete, end-to-end AP automation solution in place. An email attachment is still generated by a human, may contain errors, and relevant information will need to be extracted and converted into a structured format to make the data machine-readable for speedy processing.
That’s why a smart, fast, and secure process for finance automation should address multiple challenges to make it an end-to-end process. These can be addressed in just 5 main steps from capture to export.
The first two steps involve optimizing invoice capture regardless of the document format (email, scan, pdf, fax, etc.) and extracting or gathering all the important data points from the invoice.
The third step involves reviewing and routing the invoice for approval. This can be done using pre-specified parameters and rules to ensure that invoices are flagged (as necessary) or channeled to the right team members.
Fourth is the payment stage, ideally using an intuitive tool that can schedule and initiate payments with just a few clicks and using a virtual card. By keeping everything within the same flow businesses can cut down further on opportunities for fraudulent activity and errors. It also provides additional control and gives vendors instant payment and confirmation. Yooz includes this payment method using the YoozPay module, a feature that can onboard companies of any size directly within the Yooz platform, pay them, and generate valuable cash-back as a recurring revenue stream.
Fifth and the final step in finance automation is exporting the data and reconciling a paid invoice with the corresponding PO in a company’s existing financial software package or ERP. This closes the automated invoice workflow loop.
A top-notch platform like Yooz completes all those steps in record time, at the lowest possible cost and with phenomenally low rates of exceptions and errors. When you compare manual processing costs for a single invoice with end-to-end AP automation, there’s an 80% delta, taking costs per invoice from more than $12 to around $2.
Slash Costs and Cycle Times with Finance Automation Software
One of the most prevalent and known benefits to implementing finance automation is the reduction in cycle time. Instead of weeks or months, the timing drops to a few days or even hours, allowing organizations to lock in early-pay discounts, avoid late payment fines, and an important but often overlooked benefit: stay on good terms with vendors.
The positive impact on customer relationship is particularly important when we're faced with workplace disruptions such as unpredictable supply chain issues and fluctuating economic conditions. Those suppliers who are confident that they will be paid on schedule or even early will be more inclined to be supportive.
The cost savings add up when you combine faster cycle times with accuracy, create the opportunity to benefit from early pay discounts and avoid late payment penalties, and eliminate all the miscellaneous costs associated with paper (from labor to transport, storage, and more).
Although these are probably the most referenced benefits, software for intelligent finance automation certainly lets companies score on several more fronts. In the words of Levvel's experts:
“The top benefits to using AP software are quicker approval of invoices; reduced processing time, errors, and paper volume; and improved employee productivity. AP software reduces time, errors, and paper by moving the process into a centralized, online platform that is accessible by employees at different locations and seniority levels. The ability to manage AP in a singular location reduces confusion about where an invoice is in the approval process. Reducing the time wasted on typical tactical AP tasks makes employees more productive and allows them to focus on more strategic efforts. Additionally, one in five organizations noted that the ability to manage AP remotely was one of the top benefits to using AP software.”
How Machine-Learning Speeds Up Finance Automation
Often companies are so focused on the benefits - especially when they multiply at a rapid rate - that they often forget to look at what actually makes end-to-end AP automation an intelligent and secure solution. Why does this matter?
Technology is constantly evolving and understanding it creates the possibility of additional, future applications and benefits. In the case of AP automation, an advanced or modern system is comprised of a powerful combination of robotic process automation (RPA) and a subset of Artificial Intelligence (AI) called Machine learning (ML). While RPA is a workhorse type of software that runs fairly simple routines without tiring, machine learning algorithms are more powerful. As their name implies, they’re eager to learn and get better with every single invoice they see and read.
This is important because while AI may by some accounts be overhyped, businesses large and small across nearly all industries have realized it's value to augment human intelligence. AI gives us the ability to process vast amounts of invoices, extract all relevant data points, and within split seconds both find and flag anomalies such as incorrect amounts, duplicate invoice numbers, bank accounts missing a digit, incorrectly configured tax rates, etc. In such cases the AI algorithms will automatically escalate the exception to a designated AP team member for review.
The algorithms at the core of the Yooz platform, for instance, have read more than 100 million invoices from thousands of different vendors in the US and almost three dozen other countries, so there are hardly any anomalies or unusual invoice formats that will trip them up. At its best, RPA plus ML means straight-through processing where humans only step in when a red flag goes up. That’s why exceptions drop by more than 60% with AP automation, according to market research firm Ardent Partners’ “The State of ePayables 2021” report.
AI and the Cloud: A Powerful Combo for Financial Process Automation
Just from the numbers alone it is little wonder then that companies across all sectors are stepping up their investment in cloud software and services powered by AI. IT forecasting powerhouse Gartner sees breakneck growth in the segment for this year and next, expecting global enterprise software sales totaling 72 billion (plus 11%) in 2022 and 52 billion (plus 11.9%) in 2023.
In Gartner’s opinion, “2022 is the year that the future returns for the CIO… Cloud is responsible for nearly all of the 11% spending growth within the enterprise software segment in 2022 as organizations focus on upgrading their software stack to software-as-a-service (SaaS) to support continued flexibility and agility.”
The combination of machine learning, cloud, and pay-as-you-use Software as a Service (SaaS) makes sure that companies of any size, regardless of their location and budget, always have access to the latest and most powerful tools and technologies to streamline their AP automation from purchase to payment. Upgrades to more capable finance automation software is a no-brainer.
Companies Are Investing in AI-Powered Finance Automation
In fact, according to the Worldwide Artificial Intelligence Spending Guide from International Data Corporation (IDC), spending on AI in the United States will grow to 20 billion by 2025, which is a compound annual growth rate (CAGR) of 26.0% between 2021-2025.
"The greatest potential benefit for the use of AI remains its use in developing new business, and building new business models," says Mike Glennon, senior research manager at IDC. "The future for business is AI and those companies that can seize this opportunity could easily become the new giants."
The benefits of cloud-based finance automation software go beyond speed, savings, security, and scalability. Audits and other queries are suddenly as easy as performing a web search. This new dimension of transparency and visibility also helps to better engage with vendors and other business partners.
Getting Vendors on Board with Finance Automation Software
With an end-to-end AP automation platform, everybody stays informed. Suppliers are onboarded with a single email, can receive instant payments, and can get updates and rapid responses when it comes to the status of their invoices. Teams have real-time data at their fingertips can get a clearer picture of their organization’s cash position and other metrics. Financial intelligence provide is a competitive advantage that keeps growing one invoice at a time, automatically and almost magically.
The bottom line is almost instant savings, full visibility for all parties involved, and the ability to grow. When heaps of paper are a thing of the past and repetitive tasks are handled by software, the AP staff finally has their hands and heads free to focus on strategic tasks. Automation done right saves money and boosts job satisfaction at the same time.