Buy-side organizations may be inadvertently giving themselves a bad name with their business partners, contributing to the stereotype that procurement remains plagued by outdated, sluggish, paper-based processes and that procurement officials are unwilling to upgrade.
But in a new whitepaper published by document automation firm Esker, the firm acknowledges that executives facing friction in accounts payable departments very well could be championing the adoption of sophisticated solutions; it may just take a bit of effort to convince the rest of the team to get the ball rolling.
While automated accounts payable and invoicing processes can yield benefits that apply to more than just the AP department, every team has different priorities, which can make it difficult to recognize the value in investing in such tools, Esker noted.
“While AP and finance managers are more inclined to care about AP-specific factors, such as process efficiency and error reduction, the C-suite has a broader vantage point that puts a premium on strategy and oversight on an organization-wide level,” the report notes.
“Another common obstacle in building a case for AP automation,” Esker continues, “is getting the C-suite to reshape their perspective on AP.”
C-level executives often view procurement as a necessity, not a strategic function of the overall corporation, Esker explained. Indeed, AP professionals often cite upper management as the biggest obstacle to adopting automated, digital accounts payable technologies.
Building A Case
The purpose of Esker’s whitepaper is to guide AP professionals with building that case for their managers.
First, it’s key for C-level executives to understand the current state of the average, manual AP process. Esker pointed to the costs associated with manual payments and invoice processing, including the cost of sorting and handling invoices, transporting and archiving documents, data capture, limited analytics capabilities, the disconnect between accounting and procurement and the inability to take advantage of early payment discounts.
With this context in mind, AP professionals should then define their objectives and goals that can only be achieved through upgraded AP automation tools.
“For example,” Esker explains, “do you plan on automating all phases of the AP process or just particular aspects, like data capture of vendor invoices or electronic archival of documents?”
Once these objectives are identified, professionals must support their goals with research and a measurable argument in favor of automated accounts payable. This might include calculating ROI, Esker said, by measuring manual invoice processing costs against projected costs following the implementation of automation solutions.
Finally, AP professionals must discuss this plan with other stakeholders. That means consulting with other financial managers, as well as other departments within the organization. “This can include everything from business divisions and IT to procurement and outside suppliers,” the report said.
The IT division, in particular, can be a challenge to convince of the benefits of overhauling AP processes and implementing a cloud-based solution. According to Esker, IT professionals generally identify challenges, like not having adequate time and resources to adopt new infrastructure or feeling uncertain about how AP automation tools will shake up the IT department. There are also fears of security and data sensitivity.
“Like the C-suite, it’s common for IT management to fall back on the ‘our current process, for all its flaws, still works well’ argument,” Esker explained. The company suggested a side-by-side comparison of in-house versus cloud-based AP solutions to identify what solution is best for the corporation and which would lead to the lowest amount of friction within the onboarding process.
Esker argues that, despite differing priorities among executives across a company, there are two areas that serve as common concerns for upper management and AP professionals: the bottom line and cash flow management.
The paper cited recent Institute of Finance and Management (IOFM) research that found 45 percent of finance executives cited “lowering invoice processing costs” as their greatest AP-related pressure. C-level executives are likely to resonate with the case that AP automation eliminates wasteful spending and leads to greater employee productivity, operational efficiency and strengthened buyer/supplier relationships.
Additional IOFM findings found that financial executives chose improving visibility into their cash flow and developing ways to increase visibility of overall finance and accounting performance as the top priorities for 2015.
Similarly, this concern can also lay the groundwork for adopting automated AP processing, with automated data capture, aggregation and analytics becoming a key aspect of automated payables solutions.
Finally, just as a side-by-side comparison was done for the IT department, Esker suggests a similar strategy to lay out how current AP processes are negatively impacting the AP team and the C-suite team to demonstrate how automated tools can make life easier for both sides.
For instance, manual data entry means time wasted for the AP team and means possible data entry errors that could yield a negative impact on cash flow for the C-suite. Likewise, manual invoice processing means friction in verification and payment approval for the AP team and means potential late payment penalties and damaged supplier relationships for the C-suite.
“Upper management tends to understand the benefits of AP automation in a general sense but may lack insight on how those benefits can translate beyond AP to the business as a whole,” Esker concluded. “Creating a clear and comprehensive business case is the key to convincing key stakeholders and propelling your AP automation project to the top of their to-do list.