In the current FinTech landscape, an increasing number of organizations seek solutions that can help them avoid the type of error-prone, manual work they utilized in the past. After all, things like pen-and-paper tracking of transactions and manually updated spreadsheets have been on their way out for years now, in favor of faster, more efficient and more accurate software solutions.
This includes processes like accounts payable. Ensuring that invoices are paid and that partners and vendors receive payments on a timely schedule is critical – and integrating software to automate this process can be a considerable boon for nearly any organization.
However, organizations cannot simply purchase AP automation software and think that this will solve all of their problems. Herein lies the first misstep with AP automation initiatives: where companies purchase a solution and assume it will be the silver bullet to solve all of their accounts payable inefficiencies.
Although automated AP software certainly has the capacity to support key advantages like improved efficiency, reduced manual work and fewer errors – while contributing to significant time and money savings in the process – decision-makers can’t just hand over the software and expect their job to be done.
Transitioning from manual, paper-based processes to an advanced system dependent on digital channels takes time. The AP and finance team will need to rework their processes and migrate key data, including customer information and payment schedules from existing databases to the new automated platform.
As the Institute of Finance Management noted in a series for PaymentsJournal, putting new, automated working processes in place provides the accounting team with the ideal opportunity to take a look inward and improve their initiatives.
“If automation is implemented without taking a cold, hard look at the existing way of doing things and cleaning that up beforehand, you’ll essentially be ‘lifting and shifting’ the problems of a manual system and trying to impose them onto a software-driven system, one which is far less flexible than the humans now doing the work – human beings who have learned to work around the issues in the interest of just getting stuff done,” the Institute of Finance Management stated.
In this way, it’s imperative that accounts payable stakeholders and decision-makers take a look at current AP activity and address any key problems before transitioning to the new software. Taking the time to properly plan the change will make the migration much smoother and support a better ROI for management.
Ensure visibility and alignment across teams
Another issue might emerge when it comes to the accounting team’s visibility and its alignment with other departments within the organization, including and especially the purchasing team.
As the Institute of Finance Management noted, transactions that are not related to inventory, and thus may not come with a purchase order, can gum up the works in accounts payable. Without visibility into these purchases, vendor and partner relationships can suffer.
“These non-inventory purchases can drag an organization down with uncontrolled spending and event OFAC violations, and get AP intro trouble for non-payment of invoices – even though they weren’t aware of them in the first place,” the Institute of Finance Management stated.
About 80 percent of a typical business’s budget goes toward non-inventory purchases, according to PaymentsJournal. Not having visibility into these transactions and a lack of alignment between the accounting and purchasing teams can result in late payments and lots of headaches for internal accountants.
In addition to cleaning up and improving existing working processing ahead of putting AP automation in place, it’s also vital that the accounting team support collaboration and alignment between their department and purchases made within other departments.
Experts recommend educating the purchasing and other teams about the negative effects of careless spending and how late payments can impact the business. When teams work together to enable visibility and ensure everyone is on the same page, invoices can be paid on time and accounts payable can avoid payments from falling through the cracks.