Managing your working capital in the face of economic uncertainty with accounts payable automation

The increase in economic volatility – induced by the rapid and unforeseen changes in various key factors such as interest and exchange rates, consumer demands and market trends are a constant source of concern for any business organization. In times of such high volatility, CFOs need to be extra prudent. A firmer grip on a company’s cash flow and working capital is key as it can directly affect earnings and profit margins in the way of demand fluctuations, cost variability, financial market impacts and supply chain disruptions. However, managing cash flow and working capital becomes increasingly difficult with manual accounts payable processes and poor visibility. This is where robotic process automation can help streamline the accounts payable process.

A typical, manual accounts payable (AP) employee processes about 20 invoices per day. Once the loaded cost of these workers is considered, and when ancillary costs for managing associated manual processes are added to this, each invoice costs an average of 17 USD and takes about 16 days to process! When contrasting this with the average cost of producing an invoice electronically which is only 2.36 USD, the case for AP automation becomes even more evident.

It is clear then that automation offers a way forward for CFOs looking to eliminate inefficiencies and navigate complexities in the AP process.

A manual accounts payable process involves a series of complicated steps.

• Once invoices are received, they are reviewed and verified manually.
• The invoices would then be coded and approved.
• They will then be manually entered into an accounting system.
• Invoice matching would follow.
• Payments will be scheduled, prepared and executed.
• There will be checks with vendors to confirm transactions.
• This will be followed by filing, record-keeping, reconciliation and reporting.
• The process would come to an end with an audit and compliance check.

As seen above, most of these steps can be labor-intensive and inefficient with certain steps prone to costly errors that can have financial and legal repercussions. Manual processes such as data entry and preparation of payments also carry with them the risk of fraud.

The 3-way matching process is also of significant concern as it can result in a variety of issues. Paperwork complexity, where any of the documents in the process is a physical piece of paper can complicate handling and tracking of the transactions, leading to delays and errors in the process. Data discrepancies and human error can further complicate a manual AP process. Even at the very tail-end of the process, errors can occur in regulatory compliance and auditing.

Manual AP can also result in financial close process delays in numerous ways, including but not limited to; incomplete expense recognitions, accruals and cut-off errors, and reporting delays. This in turn can affect visibility into a company’s performance through issues such as inaccurate financial statements, misrepresentation of financial metrics and delayed management reports.

As far as automation goes, every step of the process lends itself to this new technology. It can begin with invoice generation where accounting software or Enterprise Resource Planning (ERP) systems can facilitate the generation of a digital invoice. The subsequent steps in the AP process such as reverting to suppliers for invoice variances, inserting purchase order (PO) details into the system, payment approvals and fund transfers along with inventory reconciliations can easily be automated to deliver a seamless process.

As a case in point, the Ui-Path based RPA solution implemented by Fortude significantly increased the efficiency of the inventory reconciliation process for a leading Australian food and beverage manufacturer. Processing time for reconciliation was reduced from 3-4 hours to 10-20 minutes, with cycle time seeing a reduction of 90% and accuracy of the process increasing by 99%.

Automation can also be applied to the processes of 3-way matching, payment and reporting. For the latter, RPA can enhance data accuracy and consistency, lead to streamlined data collection, faster report generation and finally help in the final processes of compliance and auditing.

With the rapid advances in technology, OCR, Artificial Intelligence and Machine Learning are playing significant roles in the automated AP process. OCR enhances data extraction, the speed of the processing process and ensures consistent data extraction. AI can supplement this through augmented data validation and pattern recognition. Finally, MI can result in a seamless adoption of predictive analytics and continuous improvement in data extraction accuracy.

Fortude’s RPA solutions are application-agnostic which means that it can be integrated with any technology stack without significant infrastructure changes. Business leaders do not have to worry about upgrade or replace existing systems. RPA can work well with any ERP, whether it is Infor M3, Infor CloudSuite, SAP S/4HANA, SAP Business One or any other technology for that matter, to bring about efficiency, accuracy, scalability, and visibility with the AP workflow.

While it is clear that automating the AP system presents myriad benefits to CFOs and organizations as a whole, it is still likely that various obstacles might present themselves to the successful execution of the automation process.

The complexity of the implementation process can be the first hurdle to cross. Even for companies that have embraced digitization, data migration and process redesign may constitute challenges.

Further issues may stem from change management and data quality and cleanup. There may also be challenges with integration along with customization complexity. With regards to the latter, formulating an AP automation solution to sync with a company’s unique business processes and requirements would require efforts in development and configuration.

It is clear that a thorough, prior understanding of the systems process is essential before it is to be implemented. Before embarking on this transition, it is important to assess your organization’s readiness for RPA so you are in a better position to handle any challenges you many encounter.