Visibility: The Not-So-Obvious Real Value of AP Automation
Posted on Tue, Jan 17, 2012 @ 12:10 PM
There is certainly enough empirical evidence to show that AP automation delivers real benefits to organizations, such as, the elimination of paper, quicker turnaround, better vendor relationships, vendor discounts and lower operating costs. However, “visibility” is often overlooked as a critical piece in cash management. Visibility can help eliminate simple errors, reduce reporting errors and decrease costs. Visibility can also help any CFO achieve the following:
- Maintain margins
- Increase the ability to forecast results
- Maintain morale and productivity
- Manage working capital
- Reduce bottlenecks that add unnecessary operating costs
Rise above poor visibility into your company.
True Visibility Requires Process Change & Automation
True visibility in any AP system requires process change and an automation solution. The best results come from:
- Using PO’s or contracts for all purchases. This allows the AP department to create contingent liability for the amount to be paid, helping build budgets and forecasts.
- Consolidating AP into a shared services center. This greatly increases efficiency and lowers costs.
- Sending invoices directly to AP for entry. This decreases processing and approval times, eradicates “lost” invoices and more importantly, reduces the chance of duplicate payments.
Through an automated AP process, vendors would be able to remit invoices through paper, EDI or a web portal. Once entered, AP would have complete visibility into the system. All invoices would be immediately converted to an electronic format for review. With a properly configured AP workflow tool, the newly automated AP system would communicate with all required parties, based on business rules established by the AP department. Once the proper automation is in place, vendors could be enabled to interact via a portal to receive PO’s and check payment status. AP can get a complete view of its financial management through inquiries, reports and customized dashboards.
“Improving cash collection and automating accounts payable is a
great way to drive cash generation.”
-Robert Daleo (CFO of Thomson Reuter) CFO Magazine, June 2010
Visibility is the Greatest Benefit
Visibility into the whole process gives the greatest return. Full visibility allows for a detailed spend analysis by product or vendor. This eliminates dispersed purchasing from different suppliers at different prices. It also ensures that a vendor’s terms are being met, no matter where the transaction happens. Automating the process and gathering this information in real time would allow the company to negotiate better volume pricing, formulate better contract terms and increase discounts, all while reducing the number of vendors.
Conclusion
A well developed AP automation and workflow solution from Tallega Software would have invoices entered directly into the AP system. Eliminating the manual paper-based process is the key to improved visibility and productivity. The greatest benefits come from the ability to see and effectively use the information contained in the AP system from anywhere in the world. Automating an AP department with an electronic document management and workflow solution from Tallega Software could be the #1 way that any CFO can generate cash.