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Businesses have traditionally focused more on collections and Accounts Receivable. However, an equally important function of an Accounts administrator is to keep track of the companies Accounts Payables. An Account payable unit oversees a range of tasks which may include authorizing purchase orders, bank withdrawals, keeping track of the general ledger and much more. Earlier the Accounts Payable function was largely confined to a transaction recording and book keeping role; not as a vital cog of a company’s business. But with the increasing pressures on operating margins, the streamlining of the accounts payable process is now seen as an equally critical measure to improve a company’s profitability to improve the company’s credit ratings and ultimately the business relationships. The efficiency of the Accounts Payable process has a bearing on a company’s cash flow, credit rating and operational costs. Thus any improvement in the Accounts Payable process can have an immediate and significant impact on a company’s overall profitability. Most Business Process Management (BPM) and Workflow Automation Solutions enable enterprises to initially gain better control over their accounts payable processes with varying degrees of success. Yet, for the gains to sustain, the BPM automation solution must not only reduce transaction times, it must also enable companies to leverage create processes that automatically optimize use of the company’s cash, people and system resources.

What your Accounts Payable Solution should be focusing on

 

The responsibility areas of the Accounts Payable Solution can be categorized into 5 broad areas:

 

1.            Invoice recording

2.            Invoice payments and reconciliations

3.            Document management

4.            Compliance (with internal policies and external regulation)

5.            Reporting and Analytics

 

Typical Deterrents that the Accounts Payable managers often encounter may be one or more of the following issues:

 

High Transaction volumes – Organizations struggle to cope with large volumes of transactions that increase geometrically with business growth.

 

Traceability and accountability – Maintaining a clear audit trail of all activities on an invoice from sending for approval, approver comments, queries, clarifications, final approval and payment is difficult especially when communication on an invoice is through multiple channels – email, phone, et cetera.

 

Multiple delivery channels for invoices – Unlike purely paper based invoices in the past, invoices may be delivered through email, fax, EDI, or just appear as entries in credit card statements. Processing invoices that are received through non-traditional channels is a challenge.

 

Vendor Management – The lack of visibility into current status of an invoice makes responding to vendor queries a difficult task. The challenges are compounded by long lead times for release of payments, inability to define and maintain standard processing times, and inability to estimate expected payment dates.

 

Document Management – Since vendor invoices could potentially be received at any location, obtaining approvals require the transmission of invoice copies either through email, fax or by mail. There is always a risk of loss of paper documents. Retrieval of supporting documents and approvals during audits puts a huge strain on accounting resources.

 

Accounting and compliance – Invoices need to be accounted under appropriate heads in the appropriate accounting periods. This is especially necessary for compliance with corporate and tax laws. The absence of a clearly defined, verifiable process makes compliance and certification of compliance difficult.

 

Protracted invoice processing times – Long invoice payment cycles are a result of movement in paper documents to approvers and back. Further, approvals go into pending status when approvers are not available or are travelling.

 

Increased possibilities of fraud – Manual processes and lack of traceability of prior approvals increase possibilities of frauds perpetrated through collusion between approver and vendor and circumvention of process controls.

 

Application Integration – Vendor payment processes require the validation and verification of invoices against Purchase Orders with the purchase order value in the ERP. Integration of payment processes with ERP is necessary for elimination of errors. Yet, application integration in the presence of multiple systems is a significant challenge.

 

Inability to balance conflicting needs – Companies often face the daunting task of balancing the demands of each of the above processes – efficiency measures in one could adversely impact another. For example, any measure to reduce clerical errors during invoice recording such as a second review of all transactions, may reduce clerical errors but will increase the time taken to process a payment and may not allow the company to benefit from payment discounts. Similarly, measures to reduce costs of storage of physical documents may compromise with statutory compliance for record maintenance.