Accounts payable (AP) automation technology presents an obvious benefit to companies of all sizes and industries to boost efficiency and strategize vendor payments.
In practice, however, understanding which organizations can benefit most, and how to take the first steps in a seemingly monumental task of shifting from manual to automated AP workflows, can overwhelm any organization.
There is a lot to consider, said Manish Vrishaketu, chief operating officer at supplier payments automation firm Tipalti, from vendor onboarding processes to tax compliance across borders.
In a recent conversation with PYMNTS, Vrishaketu was joined by Mark Lewis, chief financial officer at advertising platform and Tipalti client LockerDome, to present a real-world example of LockerDome’s path from spreadsheets to AP automation and offer guidance to other businesses exploring how to map out their own journeys to secure the greatest returns on their AP automation investments.
A Payments Balancing Act
For LockerDome, Lewis explained that one of the most glaring areas of inefficiencies in AP processes is the supplier payment itself.
“We started out with spreadsheets just like everybody else,” he said. “We quickly realized we had real challenges and real bottlenecks in our payments side of the business. It had everything to do with actually processing the payments.”
One of the biggest sources of friction is the need to support a variety of payment methods, with LockerDome manually processing payments via PayPal, wire, ACH and more to fulfill vendor needs, which took up significant amounts of valuable time.
According to Vrishaketu, this is a common occurrence for organizations struggling to automate. Not only do businesses struggle to manually process payments, but reconciliation across payment rails is also a headache as each banking and payment provider presents information in different ways.
“Each bank has a different way of presenting information back to you,” he explained. “There are the payments you sent, the ones that went through, the ones that failed — and now it’s up to the company to figure out what happened and to be able to reconcile that.”
From Onboarding to Compliance
While payment processing friction might be a telltale sign that an organization should consider adopting AP automation technology, both Vrishaketu and Lewis pointed to processes before and after the transaction itself that also threaten efficiencies and business partner relationships.
Vendor onboarding is a particularly large opportunity to not only save time on manual data entry, but to promote a strengthened buyer-supplier relationship from the very start.
Lewis noted that one of the most profound benefits since adopting AP automation technology has been in this onboarding process, which had previously taken weeks of manual data entry to collect and input supplier payment information, tax data and beyond. Automation, he said, led the company to “dramatically increase the velocity of bringing new publishers and new inventory onto our platform.”
“Onboarding itself is a very complex process,” added Vrishaketu, noting that the ability for platforms to interface with suppliers directly via self-service portals vastly accelerates the process.
The efficiency acts as a catalyst to streamline invoice processing, too, he noted, particularly for larger companies ingesting a high volume of invoices with multiple layers and personnel along the invoice approval chain.
Post-payment processes like reconciliation, tax management and regulatory compliance come into play as other significant opportunities to boost efficiency through AP automation technology. AP professionals face a lot of inefficiencies and challenges when attempting to manually track tax regulations, collect the appropriate tax forms or even ensure that the financial institutions through which they make payments are not on any sanctions lists.
High-Growth, High Complexity
According to Vrishaketu, “there is definitely a tipping point” between when a company can simply benefit from the efficiencies of AP automation and when it is “critical” for an organization of a certain size or growth trajectory to adopt this technology to support expansion, particularly across borders.
Globalization “brings a whole different level of complexity as it pertains to vendor onboarding, automation and everything else,” he said.
This is where AP automation can push the envelope and introduce additional value to an enterprise. For example, technology can not only automate data capture to identify and remedy which payments failed and why, but it can automatically adjust payment processes to ensure future payments to a certain vendor don’t fail again, based on the supplier’s transaction data or payment rail needs. It’s a valuable function for companies like LockerDome, with a high volume of international suppliers that are considered strategic partners to the business.
Manually managing transactions across payment rails can also create cash management challenges for organizations, particularly when some payment methods occur instantly, while others take several days to clear. Vrishaketu highlighted the ability of AP automation to enhance organizations’ cash flow strategies by ensuring AP data is correctly aligned with information within the ERP in real time. Combatting the expanded threats of fraud and non-compliance as organizations grow globally is yet another area he pointed to as a critical value proposition of AP automation.
Overall, enterprises must take into consideration not only how AP automation technology can promote efficiency, but also support their organizations’ broader strategic initiatives. According to Lewis, for a company like LockerDome to embrace AP automation is a “no-brainer.”
“We really have freed up staff time to do more heavy-lifting, higher-priority work than we could focus on previously,” he said. “AP automation enables so much time-saving. It is so much more effective, efficient and productive.”