How Accounts Payable can deliver a competitive advantage

How Accounts Payable can deliver a competitive advantage

It seems almost as exciting as mud.  Accounts Payable (AP), that is.  But by changing your approach to AP, it can go from being nothing more than a chore to delivering a competitive advantage.  We’re going to meet three companies which have done just that by using eDocs, the automated document processing solution built into MYOB Greentree.  See how they benefit from substantial cost and time savings, reduction in error rates and far greater visibility.

So. AP is one of those business processes which has been there since the very beginning.  It is just something your company does to make sure suppliers get paid. Right?

Well, yes, right. But while AP is as old as business itself, that doesn’t mean it is being done well.  In fact, many business processes with historical roots can end up being so ‘good’ that leaving them alone is considered the best possible course of action.

History might stand still, but the technology industry doesn’t.  Seeking out and destroying inefficiency is exactly what applications companies have done since day dot, but sometimes inefficiency hides in plain sight.  Sometimes it hides behind a simple ‘this is how we have always done it, so this is how we will always do it’.  AP is a bit sneaky like that and this is how it has gone undetected for so long for too many companies.

But not for Ryman Healthcare, Dynes Transport and Milk New Zealand.  These companies recognised the inefficiency of paper-based AP processes.  They even recognised that all-too-common fallacy, that partial digitisation of a deficient process doesn’t make it as good as it can be.

Before we get to these companies, and how they revolutionised their AP for competitive advantage, let’s consider

The (likely) situation today

Chances are your AP is already partially digitised.  Email is likely to be used instead of snail mail for invoices, statements, purchase orders and remittance advice.  You’re probably batch uploading directly to your online banking software.  And you’re probably used to calling up a report directly from your software to monitor progress, rather than printing and filing it.

These introductions of technology to the process are a good start.  They demonstrate an innate awareness that where AP is concerned, it probably isn’t being done the best way possible.  But as in other areas of the business, bringing some automation and digitisation to a badly-run process just means that process is executed a bit faster.  It is still a badly-run process and there is a lot more which could be done.

Consider, for a start, automating the conversion of inbound documents.  That means setting up your business management system to poll an inbox and automatically create a document in your system when a PDF is received from your supplier.  All that without any manual intervention.

Data is scraped electronically, then mapped to your system requirements, without you having to lift a finger.

In a similar fashion, all your financial management processes can be paperless – including tracking, exception reporting, designated authorisations. and so much more.  Let’s delve into the many, many benefits that AP automation provides.

No more paper

Topping the list is the elimination of paper.

Wherever paperwork is to be found in any business, inefficiency is not far behind.  More accurately, perhaps, the paper-trail is in fact the evidence of inefficiency.  Paper costs money.  It moves slowly.  It gets lost.  It clutters desks.  It clutters landfills.  It causes errors.  It can’t be searched.  It even catches on fire.

The AP process has traditionally featured a figurative, if not literal, ton of paper.  Take that out of the equation, not just by introducing email but with complete AP automation, and the process becomes more visible, auditable and improvable.  It means suppliers go from submitting invoices into a black hole, to being able to self-service, see where they are at, immediately identify any errors or information which may be required, and get it sorted.  Suppliers paid to terms are happy and content.  They supply better that way.

Improved visibility

Automated AP makes invoices visible always.  Compare that to ‘traditional’ the end of accounting periods, where there’s a risk of not recognising all liabilities.  Incomplete accruals may understate expenses and thus overstate income.  That’s called “cut-off fraud.”  Cut that out with centralised receipt, immediate capture, extraction, validation and entry of data for all types of invoices to recognise all liabilities.  With a complete audit trail of every step and participant, of course, while eliminating inquiries, as employees, finance, and suppliers have self-service access to invoice and payment status.

Take things a step further and integrate AP processes with the ERP system, and benefit from automation including data capture and workflow for complete and clear visibility.  Not only does this deliver ongoing benefits for ‘business as usual’, it also means period end closes can be approached with calm and confidence – rather than the usual fear and panic.  When invoices and all backup information are automatically entered into the ERP, and workflows leverages the ERP’s account codes and approval framework, a permanent record of every transaction exists.  Every step of the close simplifies.

The view from the field

That’s all well and good, but evidence from the field is what really matters.  And there isn’t any shortage of it.  Let’s look at Ryman Healthcare, which used eDocs for several years and where Rebecca Payne heads up Accounts Payable: “We process on average 15,000 invoices every month.  eDocs is saving us hours of work each week and since the company is continuing its rapid growth, we’re confident that the system will comfortably handle the extra workload.  eDocs has improved our workflow from the moment the invoice is received, to the time the supplier is approved, to paid. It’s definitely been a change for the better.”

At Dynes Transport IT Manager Peter Chamberlain explains how automated AP has changed the company for the better: “In our first year of using eDocs’ scraping function we got through some 20,000 invoices – that’s paper we no longer have to deal with.  Now, all the invoices come to one email address, they are scraped, loaded into Greentree and sent to the right person to for authorisation.”

That means only those invoices which must be approved by the CEO are sent to him, while the boss has the confidence that all others are appropriately dealt with.  “Without a doubt, eDocs has been a very good system for us – saving time and energy and giving us better quality control.”

It’s AP automation has gone a step further, as Verde developed a solution which simplifies the delivery of supporting documents for invoices.  For instance, the Dynes Group includes a wholly-owned workshop company that services trucks for other companies in the group, which are billed for that work.  When a truck is serviced, a simple tick box in Greentree Job Costing attaches all the related cost invoices for that service, which are then delivered via eDocs to the appropriate recipients.

“Previously we’d have to scan all the invoices, collect all the PDFs, then attach them to an email before sending it out,” Chamberlain explains.  “Because we send out hundreds of invoices every week, a lot of time was spent photocopying and scanning, and the chance of an error was higher with all that manual processing.  Now a customer gets all the detail in a transparent and seamless fashion.”

And, at Milk New Zealand, AP automation has delivered significant benefit.  The company operates 29 farms, managing hundreds of millions of dollars worth of assets, with an annual turnover in the tens of millions and over 100 containers of products shipped every month.  It decided that Greentree was the most cost-effective option for updating its business systems and when they saw eDocs, it was sold.  Specifically, the company says eDocs handles more than 15,000 invoices a year, creating a virtually paperless audit trail that’s accessible anywhere in a secure, controlled environment.

Get ready to streamline YOUR AP process

Automated AP doesn’t just promise benefits, it delivers them.  But in the quest to free yourself from paper and badly-digitised paper processes, there are steps to follow.  We’ve acknowledged that AP is as old as the hills themselves, and that can in of itself present a challenge.  People are so used to the process that interfering with it, even for improvement, can cause ructions.

When setting out to automate, don’t underestimate the AP process.  It is a little trickier than it may seem at first.  Some of the curveballs that you may encounter, and which should be catered for by the AP solutions, include multiple PO numbers on a single invoice; ‘standing’ PO numbers which are to be used many times for an indefinite final amount; partial deliveries where the PO number may, or may not, be received again from that vendor; and invoices to be paid without PO numbers such as consignment stock invoices.

These exceptions (and plenty more of them) shouldn’t upset the AP automation apple cart.  Everything can and should be managed by the AP solution, thereby ensuring integrity and speed within the AP process even where there are deviations from standard.

Above all, don’t underestimate change management and the culture of the organisation.  ‘The way we do things around here’ is not easily changed, and yet, with AP (and other) automation initiatives, the human factor is often ignored.  Do so at your peril; those who find security in paper – and let’s face it, we were all that person at one time or another - are not easily convinced to give it up.  You need to take your people with on a journey to AP automation.

And bear in mind that while AP automation is the topic for today, automation of other processes within your business can deliver just as much advantage.  With the introduction of best practice workflows, you can ensure simple, standardised processes where documents are brought online at the outset, fully integrate with the ERP, and are automatically routed to all participants in each business process including non-ERP users.

Intra-company or extra-company, any documentation can be handled – approvals, site information, timesheet data, requests for credit - with full visibility and accountability built in.  You can automate and manage everything from bank statement reconciliations to field sales, from warehouse automation to Health and Safety, payroll, HR, and even managing expenses (let’s be honest, expenses are a pain in the neck).

Through Greentree eDocs, you can benefit from substantial cost and time savings, reduction in error rates and far greater visibility.  Look for those old processes which are hiding in plain sight.  On closer examination, they are probably not nearly as efficient or effective as they could be.

Louisa Mort

Louisa Mort

Passionate about process improvement and business efficiency, Louisa has helped numerous clients save time and money by reducing manual input. Before joining Verde in 2012, Louisa worked as a Finance Manager and identifying potential issues and implementing processes to combat security concerns comes naturally.

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