Accounts payable (AP) is one of the many systems that businesses have come to realize is outdated. From understanding the scope of fraud to issues related to COVID-19 and the rise in remote working, organizations are seeking out new ways to optimize their accounts. For many, automation is the answer.
This has been a possibility for a while, but it has only recently begun growing in popularity. A recent study found that just 38% of companies have begun the process of automating their AP systems, up from 24% last year. However, there are clear benefits that are often being overlooked; the same study found that manual AP costs businesses an average of $20 per invoice, but respondents thought this cost was just $2.
Organizations that embrace AP automation can get that cost down to just $2.07, and reduce the average time it takes to process an invoice from 12-17 days to just 1-2 days. It’s clear there are many benefits to using technology to improve AP efficiency, but that doesn’t mean there aren’t also hurdles to avoid. Here are three of the most common obstacles businesses face when setting up AP automation.
1. Resistance to change
This is an obstacle that will need to be overcome any time a business alters its processes, but with AP automation it's especially important. Errors in how the process is set up can lead to financial and efficiency losses down the line, so employees need to be bought into the idea from the start. If they aren’t, those errors become a lot more likely.
Tracy Brower, a sociologist with 30 years’ experience studying work-life and fulfillment, believes system-related resistance to change comes from a worry that employees’ competence will be challenged.
They have likely achieved success in the current system and may worry their ability to perform will be negatively impacted in the new system.
One way to get around this is to make clear the challenges that make AP automation necessary. Another cause of resistance to change is that only 35% of organizations frequently or always share the challenges they face with their employees. Explaining the inefficiencies of manual AP along with reassurance that staff will be supported in learning how to use the new system will go a long way towards achieving buy-in on AP automation.
2. Integrating mixed systems
As much as many businesses would like to process all their payments digitally, this is far from being the norm. It’s estimated that US businesses process $12.5 trillion in paper check payments each year, and spend $9 billion processing paper invoices. In comparison, digital payments are expected to account for around $4.4 trillion in 2020.
When a business relies on a range of different systems for data storage, integrating them with AP automation can be a challenge. The data required for the automation system to function might be stored across a range of databases, and might exist in a mix of physical and digital files.
AP automation can work with paper invoices, but businesses must be aware of the systems that are currently in use and choose an appropriate solution that matches their needs. It is also highly recommended to use an automation solution that works with CSP or ERP systems in place, so no records get misplaced.
3. Plan for errors
It’s easy to set up a new system like AP automation and assume it will fix any problems itself. However, failure to properly plan out implementation can lead to even more issues down the line.
A key part of this is understanding what errors are likely to occur and setting up an AP automation system in anticipation of them. For example, invoice exceptions are the number one barrier identified by AP professionals, according to a study from Ardent Partners. A new system must prepare to deal with these problems when they inevitably occur.
To do this, it’s necessary to identify the cause of errors, even if that means completely redesigning a business’ workflow. For example, the Ardent Partners study found that 82% of invoice exceptions were due to a discrepancy between the invoice and the purchase order. An effective automation system therefore should be set up to check these two documents for discrepancies automatically, so exceptions can be caught early.