Prior to 2020, we heard discussions about the importance of automation to the finance function. Rather than stalling transformation efforts as it has done with most other operations of many businesses, the COVID-19 pandemic accelerated company-wide digital transformation initiatives.
Within the finance function, departments like accounts payables got a renewed sense of urgency to transform following recognition that the pandemic crisis we are experiencing may not be a one-off occurrence and that there is a need, indeed an opportunity, to introduce reforms to the way things are done to ensure that future crises will not have as disruptive an impact on overall operations like the one we have today.
FutureCFO spoke to Marcus Rex, managing director for Asia-Pacific, xSuite, for his perspective on how finance automation in general, and accounts payable in particularly, can help transform finance into a profit centre.
Why finance automation is important
Even before the pandemic, automating finance was seen as important. Those that have yet to automate finance function acknowledge a lack of transparency in their financial organization.
Automation will give finance leaders deep insight into all their financial transactions which they currently cannot achieve especially where paper-based or email-based invoices as those invoices usually sit in email inboxes or on someone's desks. They are unable to see the liability they have presenting a big problem in their financial and liquidity forecasting.
Additionally, documents that are sitting inside emails or at desks may be exposing companies to compliance issues if they are not properly archived or stored.
One other benefit of automation is the streamlining of finance processes allowing staff to focus on higher-value activities and not manual tasks like document entry.
Myths around accounts payable (AP) automation
Some think that once you introduce AP automation, they will no longer need to do anything, leading to staff being made redundant.
According to Rex, the goal is to see staff directed to higher-value work within their organization. AP automation will not eliminate human interaction. Even with technologies like optical character recognition (OCR) doing the reading of invoices, accuracy is not 100%. There is still manual work involved to check OCR results and follow up on certain approval processes.
The automation just makes it much easier, helping reduce manual input by as much as 95% but it is never going to be 100%. Even if people use complete e-invoicing, meaning not even processing one document whether that is a paper document or a document attached to an email, even in e-invoicing, you still need to do check-ups and need to match it up between purchase orders for example and the master data.
Recurring pain points in accounts payables
The last eight months during the pandemic has seen a lot of these payables processes go electronic. However, the tools that finance uses that they have available for example using Outlook to route an invoice from one person to another for approval.
While this is a form of electronic process, it remains non-compliant as finance leaders don’t have any visibility in those 2020 electronic invoice processes. You can automate and digitise your processes in this way but it is only halfway done.
It bears more risk than having a manual process. Outlook is not going to replace a properly thought through AP automation process.
Benefits of automating accounts payables
The main benefit that everybody always talks about is dramatically reducing manpower in keying in invoice data to your ERP system. The other benefit is reducing approval times particularly when invoices are sitting in someone’s email or desk.
So you have on one hand cost reductions that automation brings, and on the other, having the visibility for the finance leaders into liabilities that they have towards their vendors.
Friction points in the move to AP automation
For any properly thought through AP automation solution, you need to make sure you have correct master data. Introducing such solutions sometimes reveal inaccuracies in the master data. In our experience, we have seen instances where there is duplication of a record in the master data with the duplicates entered. It is possible to manually discover the redundancies through careful checks. However, with AP automation, duplicates and or errors can be more readily spotted.
Best practices and hurdles in automating AP
We have best-practice templates in our approach when we meet with finance leaders to introduce AP automation, including things like approval or signoff process.
A challenge for finance in transforming finance from a cost centre to a profit centre is the perceived threat to employment that automation brings to the function. This often comes from a lack of proper communication of why leadership want to introduce automation in the first place.
Finance leaders need to communicate the importance of the automation process, bring everybody behind them and build one common goal for the entire organization.
xSuite’s value proposition
The AP function in a multi-million dollar SAP solution is still a very manual process. By adding our xSuite technology into the finance process, and we help automate these.
Even the 2020 version of SAP still has some missing functionalities. In the AP function, an invoice is received and manually keyed-in, and from there the process would start. They might have some individually configured approval processes within SAP. With xSuite, we have templates that automate the approval process in SAP. The template does not require additional programming, and once entered it is available for all users that are involved in the AP process regardless of where the invoice is in the workflow.
Click on the PodChat player to listen to Rex discuss in detail the benefits of automating the accounts payable process.