Chris Doxey, Author, Internal Controls and Risk Management, Consultant and President of Doxey Inc.
The corporate impact of the spend management process is significant and is evolving from isolated functions to a single process in which purchasing and accounts payable are becoming automated, with analytical functions adding further value. This evolution aligns with the needs and goals of organisations in these economic times to reduce costs and realise productivity increases.
Spend management is no longer viewed as a “back-office” function but one of tremendous value as it provides opportunities for strategic sourcing, improved controls and automation, and business partnerships which can greatly reduce risk and improve working capital.
For example, in the case of financial close, when the process is automated there is a good chance that transactions will be more accurate and will meet any required cut-off dates. Why? Because all activities that comprise the close period are driven by set cut-off dates to ensure results are accurately reported.
Examples of automation solutions
There are several types of spend management automation solutions
Electronic invoices (eInvoices) significantly compress receipt-to-payment processing cycles by eliminating “mail latency” and “desk float”. Additionally, with faster approval times, Finance Managers have a greater ability, not only to take existing discounts, but the opportunity to create new ones. This has sharply increased interest in solutions that streamline and optimise functions such as those that deliver eInvoicing, electronic payment and discount management capabilities.
enable organisations to electronically exchange purchase orders and invoices, use sophisticated workflow tools for approval processing, and make electronic settlement against approved invoices – while integrating with enterprise and other legacy business applications. Key benefits of eInvoicing include:
- Reduced accounts payable costs by minimising paper conversion.
- More accurate matching and reporting through electronic line-item invoice data.
- Reduced ‘Days Payable Outstanding (DPO)’.
- Vast reduction in paper meaning a more environmentally-friendly process.
- Reduced inbound calls related to invoice status.
- Improved processes due to the elimination of issues with paper-based processes, such as misplacing or losing paper, duplicating or overpaying invoices, or making late payments.
- Improved audit review process as AP departments can quickly provide access to invoices based on internal and external audit requests.
Better integration with your ERP, financial and other supply chain systems
can improve spend management automation by eliminating wasteful steps between buyers and suppliers. Important information such as supplier address, PO data, receiving data, and GL chart of account data are in-sync between their software and the organisation’s ERP or accounts payable financial system before approved invoices are interfaced back to the system of record.
Supplier portals, or marketplaces
, are interactive, web-based environments that suppliers can access 24x7x365. These portals enable organisations to have constantly up-to-date information available to customers and suppliers. Some give self-service functionality to improve supplier relationships, providing better service, more efficiently. What once was a manual, time-consuming process can now be automated, reducing risk and cost. For example, AP staff no longer need to answer supplier or invoice questions – all information can be found on the system.
Robotic Process Automation (RPA)
Manual AP processes are repetitive, time-consuming and typically require high levels of involvement from employees. As such, robotic process automation (RPA) is an excellent fit for the automation of AP processes
Like other automation solutions, RPA isn’t a one-size-fits-all solution, but the technology has the ability to help companies streamline their financial tasks in order create enhanced efficiency and operational control. Here are some of the challenges to consider if you are looking into an RPA solution.
- Non-standard invoicing: Invoices that companies receive from their suppliers sometimes still arrive in multiple different formats: as a paper copy, a Word document, a PDF email attachment, or a fax. Because invoice formats are not always standardised, it is often a challenge for companies without automation software to handle them in the same way each time.
- Unstructured data: A company’s Finance team is responsible for transferring the data from various invoice formats into the company’s database. AP staff are also responsible for manually dealing with any discrepancies between the bill of lading, purchase order, and invoice as well as approving payments.
- Automated reconciliation of matching errors: A large, time-consuming burden for a company’s AP team is error reconciliation. This can include discrepancies in purchase amount or supplier contact information between various essential documents, such as invoices and purchase orders. By automating most of this manual matching, you can reduce the amount of oversight and exception handling required by employees, meaning they can focus on more critical finance responsibilities.
- High scalability: Accounts payable workflows designed with RPA can be replicated or reused across different business departments and between locations, meaning that quick scalability can be easily achieved. The number of active robots can be scaled up or down with little to no additional cost.
Forward-thinking companies recognise the impact that spend management has on the organisation. Alleviation of manual processes can speed up the processes highlighted. Automation also helps to reduce accruals and ensure the accuracy of liabilities. There are solutions available to make it happen.
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