This year and next, corporations will begin adopting technologies to automate their invoicing and procure-to-pay processes. That’s according to researchers at Ardent Partners and B2B Software-as-a-Service firm docSTAR.
Last month, the latter published a blog post highlighting how this shift will take shape in 2016.
“As Big Data, mobile solutions and the cloud converge, CFOs and their accounting teams have a lot to gain as they move towards a more integrated and comprehensive view of their financial picture,” wrote docSTAR Executive Vice President and Principal Jeff Frankel for Business.com. “When it comes to making and accepting payments, things are changing at a very rapid rate.”
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But before businesses examine what docSTAR predicts for this year, it’s valuable to explore where the AP community stands today.
Baseline AP Performance
In a paper exploring Ardent Partners’ research, docSTAR highlighted the average performance rates of AP processes and compared that against so-called “best-in-class” processes.
Manual processing of paper invoicing is a well-known culprit of inefficiencies in the AP unit. But researchers broke it down further, identifying four key characteristics that can impact the efficiency and effectiveness of AP professionals: average cost per invoice, average invoice per FTE (hours worked by one full-time employee), average invoice cycle time and average invoice exception rate.
On average, paper invoices cost $14.21 each to process. The average full-time employee processes 2,308 invoices a month, and it takes an average of 12.4 days to process those documents through its entire cycle. Lastly, average exception rate is 13.1 percent, analysis concluded.
According to AP professionals, these numbers aren’t good enough.
Researchers found that, for 2015, the top concern in this department is the time it takes to match and verify invoice information. A similar number of AP professionals said that the approval times for invoicing and payment are also not up to speed.
Meanwhile, analysts found that best-in-class players only spend an average of $2.42 to process an invoice, for instance, with invoice processing times taking just 3.7 days.
Overall, however, docSTAR pointed to four factors that allow a company to achieve this “best-in-class” label: standardized processes throughout the procure-to-pay process, visibility into high-quality metrics, high levels of automation and strong process capabilities.
This, docSTAR argues, means there is a gap to fill. “Automation offers significant opportunity to directly address the challenges of accounts payable across all of the industry’s verticals,” the firm’s whitepaper noted. Automation shortens invoice approval and processing time. And this, the company added, leads to benefits that AP departments can’t otherwise recognize.
For instance, invoice automation leads to a greater rate of early payment discount capture — the faster an invoice is processed, the faster it can be settled, and that’s good news for both the buyer and the supplier.
The data capture from AP automation, docSTAR continued, can also yield insight into business operations inaccessible via manual processing. “Greater insight into business operations allow business leaders to see, at a glance, how many invoices are received, how long each takes to process, which suppliers are easiest to work with and even how much spend is conducted against each contract,” the paper concluded.
What 2016 Will Bring
As companies work to improve those averages of invoice processing time and efficiency, docSTAR said that, in 2016 and 2017, corporations will be initiating invoice automation solutions into their AP departments.
A survey by Ardent Partners found that one-fifth of AP professionals plan to implement document imaging technology, while greater numbers will adopt automated routing and approval processes, as well as automated data capture.
In his blog post, docSTAR’s Frankel identified three trends that will help professionals approach best-in-class performance.
The first, he said, is mobile. “Look for Accounts Payable automation software and services that allow AP teams to workflow-enable smartphones, tablets and notebooks to extend access to key information and extend collaboration to users on the go,” he wrote.
A rising adoption of enterprise mobility, coupled with incoming Wi-Fi standards, means companies will have the resources and infrastructure they need to make this a reality.
Frankel’s second prediction is all about data. With digital tools and the Internet of Things linking corporations to greater volumes of data, the ability to analyze that information will yield a new vision of business processes.
“With added transparency, businesses can use accurate data to make decisions on financial forecasting, customer relationship management and overall process improvement,” the executive wrote. “Understanding what information AP departments need to collect and then using that data helps to reduce bottlenecks, accelerate procure-to-pay cycles, improve vendor relations and increase early payment discounts.”
Finally, Frankel named cloud technology as the third driver of change for AP in 2016. Minimal costs to the technology and the demand for more robust data management mean the cloud will become an integral part of AP department workflow.
And as the technology evolves, more solutions providers can offer cloud solutions that integrate direction into businesses’ accounting and ERP platforms.
Whether these three factors pan out to be the strongest drivers behind changes in AP processes, the docSTAR executive noted that achieving best-in-class performance will all come down to technology.
“Technology is swiftly shifting the way businesses perform from the back office to the boardroom,” Frankel said. “By utilizing mobile technologies, comprehensive analytics and the flexibility of the cloud, AP departments from the smallest companies to the Fortune 500s can increase efficiency and predictability — starting today.”