Accounts payable automation is key to inspire supplier confidence and good relations with procurement. But which part of the workflow should you automate your invoices? Partial or the full deal?
Selecting the right tools for invoice automation requires a careful look at your business processes. Say that it takes around £4 to process an invoice (and this is the lower end) and you have 50,000 invoices to process a year… if you can save 50% of your efforts you would also be saving £100 per annum without having to hire new staff. Sounds good doesn’t it? But how and where do you start?
Let’s look at the following steps and options…
Sometimes you just need one clever rpa robot
to complete a task. Other times you may be experiencing frequent bottlenecks and backlogs of activity. Where you would like to automate your accounts payable depends on whether bottlenecks are from delayed approvals or just a large workload.
Invoices that are tracked and accrued at an earlier stage keeps management information as accurate as possible. One of our local government clients, Hackney Borough Council, wanted to “improve digital functionality and introduce automated checks at the start of the process in order to reduce the burden and increase accuracy in the back office” (the full study can be found here). Below is a simple diagram on the paths you can take and where it's possible to automate:
Ideally you want to reduce the number of paper invoices, increase electronic invoices and increase the number of electronic invoices paid automatically. This stage is important. It would be worth it to ask yourselves the following questions…
- Have you, or will you be aligning your accounts payable with your procurement function?
- How many electronic vs. paper invoices are we dealing with?
- Is your workflow pain point related to working with recurring invoices or invoices without POs?
- Do you have the right number of personell to handle the manual coding?
- How many people are required in your approvals process?
- Does your solution need to scale?
Before automating your accounts payable journey, first thing’s first: how many of your invoices are electronic? Some organisations are further along than others. But if you need to start…
Software suites are available that can capture via OCR (optical character recognition) technology, then automatically classify and extract invoice data. Kofax software works through modules which can also be added or halted at any stage. These stages are exactly what you would analyse to begin with when choosing where you want your accounts payable process automated!
One way to speed up the process is to automate the importation of these electronic invoices into your SAPs.
If you have already gone through the capture stage and your invoices are all electronic, congratulations! But your automation plan does not have to begin at capturing. EDIs can be imported automatically and still retain automation processing benefits.
Automation can be placed in both functions. Integrating both roles in general would make sure that data is uniform in your ERP. This not only increases invoice transparency but also multiplies automation’s value when validating all of your invoices and payments.
You can automate Requests for Quotations(RFQ)s and Pre-Qualification Questionnaires (PQQ)s. Agile sourcing solutions can be added on to support tendering and sourcing supplier information.
Decide if you want the system available to all users and in which locations. Product catalogues can be set up where you can choose which staff have access to pre-approved contracts. This is particularly important in reducing “rogue spending” and ad hoc procurement.
If you have multi-page invoices or line item tables, automation can handle the coding much faster than manual keying. Automation can reduce data entry time by 50-75%. Rest assured that the information can still be checked and corrected at any stage of the process.
A well thought-out automated invoice procedure can extract supplier, invoice number and total amount. Automated coding can be done at either the header or line item level. Proper automation can greatly improve accuracy in the three-way matches with the ability to pull up description, quality and cost of terms with each report, order and invoice.
As long as it’s in a spreadsheet, form, or database format, you’re good to go. You can choose to flick the switch during initial data entry, or by your team’s manager when you move forward to the approvals process.
Other coding options include different coding between different staff. Automation can also be used to streamline complex approval matrices of user vs. approval limits for complicated budgets.
But you may still want partial oversight of the automation process. At least until you are positive that the automated tasks are doing what you want them to do! We showed how automation can be done if there are POs. But if there is no match or the invoice has no PO, you can still use automation to route the invoice out for human approval.
Implementing a “no purchase order – no pay” policy means that the invoices you do receive are more accurate. You can create automated validation rules and an auto-rejection process. An automated electronic document management system like Filestore EDM can be integrated into your ERP.
Afterwards, the accounts payable process can either take the usual route of manual cost-centre coding OR the cost-centre coding can also be automated before sending it off to multi-level approval.
50% of time spent on accounts payable is devoted to handling exceptions. Luckily it’s possible to automate sending approvals to supervisors without impacting the team’s workflows.
The End: Validate data within ERP database
If all goes well, the automation system would have used the PO matches to jump-start the automated coding process. It would then go through the automated approval process before being paid and transferred to the ERP database. Any automation platform worth its salt would be supplied with a pre-defined database of UK/European invoice rules. Kofax Capure’s module is one example you can look into.
It’s worth doing the ERP linkage so that any errors in the capturing process can be automatically flagged. Errors like “No match” against supplier and purchase order tables, for example.
You might also like…
Hackney Borough Council Invoice Automation & Outsourcing Case Study
The DCS Purchase-to-Pay White Paper & Brochure
The DCS Accounts Payable Solutions Page