Authors: Vice President of Treasury Services Product Strategy Jason Hagan & Matt Carrico, Director, Product Management
The first step toward managing accounts payable more efficiently is gaining an understanding of what the end-to-end process entails. Every accounts payable process can be broken down to four distinct steps — invoice capture, invoice approval, payment authorization and payment execution. Manually managing these four steps increases the chances of input errors, creates drag on resource time, limits visibility into invoice payment status, and limits control over short-term cash flow.
In this article, we examine each of the four steps that define the accounts payable process, along with the challenges they create for businesses managing them manually. We will also discuss how automating the four steps enables businesses to elevate accounts payable activities to the strategic level, by helping to manage cash flow and strengthen vendor relationships.
Maximizing cash flow and maintaining strong vendor relationships are vital to long-term business success. The former is the lifeblood of company growth; the latter lays the groundwork for how well you can deliver products and services to your customers. How you perform in both areas is directly influenced by how you manage the accounts payable process.
Efficiently processing and paying invoices in a way that maximizes cash flow while also helping maintain strong vendor relationships goes beyond the receiving of invoices and cutting payments. The entire end-to-end AP process spans four distinct steps that involve interactions among multiple frontline resources and management-level personnel:
If the flow of the invoice and the payment lingers during any one of these four steps, the AP team may then have to field calls or emails from the vendor. These follow-up vendor inquiries divert the frontline AP team from their regular tasks.
Businesses can reduce costs by taking a holistic approach to accounts payable and automating the end-to-end process. AP automation produces several key capabilities that reduce the number of errors and the amount of human intervention in managing the AP process:
Every business needs control and insight into cash flow and AP automation solutions also make it easy to manage and monitor the process of invoices and identify any that need special attention.
By automating the four steps of the AP process, businesses significantly reduce the amount of time frontline personnel and management spend on manual tasks. This lowers resource costs, but more importantly eliminates the need to rekey errors that hold up invoices and require unnecessary manual intervention to fix.
Another key benefit of automating the AP process is the ability to get payments to vendors on time, which keeps them happy and will incentivize them to want to provide products and services as efficiently as possible to your company.
For the finance team, an automated AP process provides better visibility into each payment, making it easier to manage cash flow. The increased visibility also enables the business to be more thoughtful about which payment methods are the most advantageous for each vendor. For example, some vendors may accept credit cards that provide cash-back rebates.
It’s important to ensure that the solution you invest in addresses the entire end-to-end accounts payable workflow. There are many solutions available that help make each individual step more efficient.
These solutions include:
However, investing in “point solutions” like these that only address individual components of the accounts payable workflow, will restrict your return on investment and leave you with all of the pain points that the solution fails to address.
In order to maximize your ROI on accounts payable automation software, it’s critical to invest in a product that addresses the entire end-to-end process. This enables you to reap the benefits that come with transforming accounts payable into a simple and streamlined workflow, including:
By automating the four steps in the accounts payable process, you can refocus your resources on more strategic activities, including identifying other business processes that need improvement to create even more efficiency.
About the Authors
Jason Hagan leads Wholesale payments strategy and product development for First National Bank of Omaha. He joined the bank in 2013 to develop and implement the bank’s payments and partnership strategy. Jason also leads the Wholesale Bank Investment process.
Matt Carrico leads First National Bank of Omaha’s effort to help business owners improve their cash flow, as well as their accounts payable and receivable efficiency. Matt has 15 years of sales and strategy experience.