Keywords: AP, accounts payable, Vishal Patel, Ardent Partners, Institute of Financial Operations, late payments, purchase to pay

AP departments 'must make a business case' for automation

Ivan Ujvari | News | 17 May 2012

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If accounts payable (AP) departments are to become an automated function, a business case must be put to an organisation to convince them on the investment.

However, a successful business case requires thorough research on a number of aspects, including processes and costs, financial analysis and communication with relevant stakeholders, explained Vishal Patel, Research Director at supply management advisory firm Ardent Partners.

Writing for the Institute of Financial Operations, he set out the key areas of research for departments to put forward a logical argument for an e-payables solution for AP.

Cost is, perhaps, the most important area of concern and Mr Patel stressed the importance of fully understanding the current cost of processing AP and what the cost per invoice would be with automation such as purchase to pay.

"This is a key metric to monitor as an AP organisation moves toward more automated processes," he noted.

Other areas of analysis should surround technology requirements, the impact of the project on the wider business including management, project risks and financial analysis such as return on investment.

Understanding the processes currently in practice is also important. Departments must be able to explain whether or not AP is fully paper-based, how long it takes to process and pay an invoice and how validation and matching is done.

Identifying the challenges faced with current processes should be highlighted at the same time, Mr Patel wrote, such as high processing costs, late payments and poor supplier relations. These issues can then be seen as opportunities for improvement.

There are, however, challenges faced with switching to e-payables solutions, but Mr Patel stressed the benefits of automating the AP function.

He wrote: "With manual, paper-based methods, the AP staff may be trapped at the transaction level, leaving a wealth of information that has never been captured or leveraged to its greatest value."

Among the benefits of automation, businesses can find increased visibility of processes, as well as greater efficiency and accuracy. Electronic processes can also improve collaboration between AP and procurement functions.