Sometimes a single, quick fix is the solution: automating the purchase-to-pay process
In today’s fast-paced world, successful businesses know that the key to staying competitive is technology. Communication tools such as Slack and Zoom have become just as important to a company as ERP and finance systems, with technology offering a helping hand across all areas of the business.
This is especially true in the accounts payable (AP) department, where the way in which staff perform tasks has changed completely. Manual, repetitive activities that once tied AP teams to Excel spreadsheets all day long are being freed up and liberated through smart, automated solutions.
Indeed, the entire purchase-to-pay (P2P) process has been transformed. Organizations are saying goodbye to the inefficient ways of old as they wake up to not just a more optimized financial process, but a happier team as well.
What is purchase-to-pay process? The purchase-to-pay process starts when an order or deal is struck and an invoice is ordered and received. That invoice then needs to be matched with the order confirmation to make sure that everything is correct and accurate; a task often done manually with teams of accounts payable staff spending entire days double checking the forms.
A key part of improving this activity is the digitization of invoices. Optical Character Recognition (OCR) technology used alongside purchase-to-pay automation helps recognize the information on the invoice regardless of the format, with the data automatically scanned and linked to the initial order confirmation.
The invoice also needs to be filed into the ERP system or financial platform to be recorded for historical and auditing purposes. This is something that’s become increasingly important with the ever-changing digital finance regulations. Once the invoices are filed, checked over, and validated by the accounts payable teams and/or finance managers, the payment is processed.
The duration of this entire purchase-to-pay process can differ depending on the size of the company and the number of manual-based activities. For example, Accounts Payable departments in companies with 50+ staff spend 32 hours on average every month just managing vendor invoices. That’s almost a day and a half of their time that could be better spent elsewhere.
With purchase-to-pay software tools in active use, the entire purchase-to-pay process can be summed up in five steps:
Step 1: The software allows you to manage the entire purchasing phase from the initial purchasing request and budgetary commitment to generating the order or goods and to managing the process via one or more approval workflows. Once the purchase order has been raised, the purchase-to-pay software allows it to be matched with the invoice received.
Step 2: Using OCR technology within the purchase-to-pay process allows accounts payable teams to automatically integrate any type of document, regardless of format. These can be financial documents found within the purchase-to-pay process, but also documents such as CVs, legal forms, and anything else that need to be automatically indexed and electronically archived.
Step 3: Once scanned, each document is automatically read, secured, and archived in the software system This is particularly important for auditing purposes and financial compliance. An easy-to-use search function and automated classification make it quick and easy to find historical documents and all can be viewed from PCs, tablets, or mobile devices.
Step 4: Once captured in the system, the invoices can be automatically reconciled with their purchase order, charged to the correct entities, accounting and analytical accounts, recorded and integrated into the ERP or accounting software, and finally approved for payment. But as there are more than 200 different ERP and accounting platforms on the market right now, be sure that your purchase-to-pay software is able to integrate within your business system.
Step 5: Finally, the purchase-to-pay software allows accounts payable teams to quickly define the validation rules for invoices, combining criteria such as the type of invoice, total amount, quantity ordered, vendor address and payment information, and more. It is able to set up a decision validation workflow that can adapt precisely to the nature and content of every single invoice.
If you’re a large enterprise, you might be receiving thousands of invoices every month. Most of these might be coming in and/or processed from different department, and, with many employees wanting to work from home or remote locations, visibility and control is now a much bigger hurdle for businesses to overcome. This is especially true with manual purchase-to-pay processes.
Currently, around half of companies we surveyed said they have trouble achieving efficient supplier accounting processes when working from home while 40% said that they are unable to meet payment deadlines. Many of these companies will be using manual-based processes, ignoring the benefits of cloud-based technologies that can provide better control and visibility over finances.
But even small businesses have trouble manually processing invoices. Mistakes can easily be made in line items such as price, quantity ordered, or billing address, but that doesn’t make them easy to spot. Sometimes it’s often too late, with payments made despite invoices not matching the purchase order or the initial order agreement.
By manually processing invoices - from data entry and validation to payment slip and classification - the length of the process is far greater than without the use of automation. Slow validation processes have seen 31% of supplier payments being paid late, which can also lead to penalties and fines for the business. Others, around 70%, have also seen actions of fraud while operating with manual invoice processing.
Then there’s the additional expenses such as having accounts payable teams manually enter and register data. These costs can range anywhere between £7 and £17 per invoice, while storage and archiving can add around £3 in separate costs.
Invoices also come in plenty of different document formats, such as PDFs, word documents or spreadsheets, which makes the matching process even more difficult and time-consuming.
As human beings, we’re not perfect and sometimes we make mistakes and miss things that can have serious knock-on effects to the wider business and even to our relationships with important suppliers. It’s also for this reason that we need a helping hand through automated technology in the purchase-to-pay process.
Automating the purchase-to-pay process is one of the best decisions an organization can make as it’s relatively quick and easy to get up and running.
Thanks to the power of technologies such as automation, AI and machine learning, businesses can automate the entire purchase-to-pay process regardless of the supplier, item ordered, or type of document. This multi-channel system allows businesses to capture 100% of invoices received - from paper, email, or other digitized documents - and ensures that a secure and accurate workflow that matches business needs is put into place.
Once captured the supplier invoices are automatically matched to the initial orders and receipts. If there is any information missing on the invoice or if a line item doesn’t match up, the system will automatically flag it for the accounts payable team to investigate. If there are no issues, the order is sent for validation to the responsible party who can typically sign off on the payment with a single click.
In addition, with machine learning working alongside automation, the software only gets better over time with increasingly better and more accurate results. It becomes an almost touchless purchase-to-pay process.
In summation, AP automation is a virtuous process where each order placed and each invoice received creates more actionable information and insight while boosting productivity. Every bit of extracted data helps train the platform to become smarter and more efficient.
Implemented correctly, purchase-to-pay process automation can provide significant benefits for accounts payable departments and to a business’ bottom line.
The obvious advantage for businesses and accounts payable staff is the freeing up of time and resources. With manual processes, too much time is taken to do data extraction tasks that can quickly be done through automation and free up staff to focus more on strategy and reporting.
Automation in the purchase-to-pay process can shorten the invoice validation and approval times from weeks to days, or even to a few hours. The time taken to validate invoices can be rapidly shortened, with accounts payable teams having to use just one-click. Staff also benefit from a complete and detailed status report on each document, with each step of the process tracked and traced to provide real-time visibility.
Then there are the subsequent cost benefits. From day one, companies can reduce accounting management costs by around 80%. What’s more, the technology provides a multi-channel way of capturing documents which works with all suppliers and with any type of invoice document. There is no need for configuration or special training and 100% of invoice workflows are captured.
Besides costs, accuracy and security are two of the biggest advantages in implementing automation in the purchase-to-pay process. We know that mistakes can happen anywhere within the business, from a typo in a document to sending an email to the wrong person, but mistakes made in the accounts payable process can be much more costly and damaging overall.
With automation, accounts payable staff can feel comfortable with the fact that they are being helped by technology that is optimizing their day-to-day tasks, such as invoice scanning and validation. On the other hand, businesses feel more secure as mistakes are far less likely to occur as well as being better protected against accounts payable fraud.
Plus, with a cloud-based solution, any steps that require human intervention - such as invoice validation or signing off on payment - can be done at home, remotely, or on the move while still providing financial visibility and control to senior management.
The benefits of automation in the purchase-to-pay process are clear. Are you ready to see the results for yourself?