Susie’s Top Ten Tips to Accounts Payable Automation

_{By Susie West}

Paris – December 2009. I don’t know about you, but I sense we are on the cusp of a huge surge. The topic of AP automation, if you look at the attendance of The AP Automation Summit this month, is at the mind’s forefront of many shared services directors. In the last 18 months companies have become forced to appreciate that, in order to have a better view of cash flow, inflate cash ownership, protect profit margins by reducing operational costs, then financial processes need to be standardised, compliant and… wait for it… automated.

So what were the top ten tips that emerged as a result of December's Summit? Being the chair of the conference I felt compelled to crystalise the plethora of learnings that cascaded over the two days into 10 neatly presented tips. We will start at number 10.

No. 10 Don’t Overlook the P Card
I hadn’t realised that the P Card was such a ‘persona non grata’ in AP. Most companies rule out P Card for 2 reasons: 1) it can sometimes be hard to get a VAT receipt from your merchant, and you therefore lose out on your reclaim. And 2) the level of information provided by P Card providers can be level 1 or 2, and this is fairly poor for reporting purposes. There are solutions to both these objections! If you have a strong communications effort around your P Card programme and educate the merchant/supplier on the importance of sending a VAT receipt (and the consequence to them if they fail to send one post payment transaction), then NOT receiving a VAT receipt should be an exception. And seeing that P Card is for the low value/low volume transactions, you would suppose that the monies lost in missed VAT reclaim would be eclipsed by operational savings gained through automating the ‘tail’. Regarding poor data, companies like BizAps are helping customers extract meaningful, and reportable information from their P Card spend.

No. 9 Standardise and Consolidate
Many would argue that there is very little point automating processes that are largely broken. If you have a low first time match rate, this arguably needs to be addressed first before the process is ripe for automation. Similarly, if you have a supplier base of 50,000 vendors, then automation will help you consolidate this base to a more manageable size. In addition to this, AP automation often involves communication to the supplier base, so having a contained group of companies to communicate with, and follow up with, makes an AP automation project much more digestible. It’s much easier to have effective communication with 1000 suppliers than 10,000.

No. 8 Choose the Right Technology Provider
Some of us go through RFPs when rolling our workflow or electronic invoicing. RFP or not, being sure of your process, business and technical requirements is key. If you are rolling out e-invoicing and you are looking for a solution which can accommodate your Portuguese market then make sure that your service provider’s supplier enrolment capabilities can support Portugal, and that the solution is signed off by the Portuguese VAT authorities. A lot of your AP automation success lies in the hands of your provider, so when you select the perfect partner, meet with the Project Manager and if you like them, lock them in as part of the contractual arrangements.

No. 7 It’s Not About What You Say…
It’s about what is heard that is key. Communication is a delicate and powerful thing, and it can be the single point of failure in an AP automation project. When communications are being sent to suppliers about change, be it P Card, e-invoicing, sending invoices to a new PO Box, a No PO No Pay programme, it helps it the letter is signed off by Finance and Procurement, and it helps if the date for compliance is clearly announce. It also helps if there is a clear consequence for non compliance, and that it is generally understood that if a supplier ‘breaks the rules’, the consequences will be enforced rather than forgotten about. Finally, it pays to have an internal communications effort to ensure that, at no point, the message that is being conveyed externally will be undermined. This means educating everyone in the company who is supplier-facing on what change is taking place, why it is happening, and what the key message to enquiring suppliers must be.

No. 6 The Project Team Must Be Empowered
The project Team is the engine that drives change throughout the organisation. It needs to move with credibility, visibility, and momentum. Therefore it needs to have the power to get things done and drive through change. A project team that is not empowered is ineffective and will not deliver impressive results. Trust is therefore required, and needs to be given. A trusted team is a confident team and often 9 out of 10 actions realised by the project team will serve the project’s aims 100%.

No. 5 Have A Single ERP if the Business Allows It
At the Summit there was much talk about the importance of having a single ERP. It certainly aids AP automation if you have one system and a standardised process. But it is not a prerequisite. In a recent Hackett Group Survey, when asked, 71% of world class SSOs said that their staff only have access to one system (though not necessarily one instance). If you have one accounting system, or one ERP, you are certainly looking to optimise your technology adoption, and maximise your return. Having one ERP is often seen as the ‘backbone’ to touchless AP.

No. 4 Automatching is Key to Attaining Touchless
Having a tool like BizAps, Brainware or Readsoft’s Invoice Cockpit which can read line level data and match line items on the invoice automatically against the line level information on the purchase order means that attaining touchless is very attainable. Kellogg’s is a fine example of touchless. They receive invoices electronically via OB10 and via EDI into their cockpit, where they are automatically matched against the PO, and where VAT rates are checked, and correct invoices are posted for payment. Around 74% of their invoice volumes are touchless as a result.

No. 3 Measure Base Line and Finish Line
Shared Services professionals are not as hated as they used to be. Resistance to ‘the shared services way’ is not as prevalent as it was 18 months ago, because of the senior level support that has emerged as a result of the recession which has helped back the shared services cause. So historically base line data and finish line data was often needed to be at hand to prove to the rest of the world that the SSO was ‘doing good’! Now it is still key to measure, but more to drive continuous improvement. After the initial significant savings that come from centralisation, which can be in the region of 40%, the following savings are more in the 1 to 5% bracket. So keeping an eagle eye on key metrics to see the impact of a particular AP automation project is key, and can help a certain project be rolled out into a new market. At the conference we had one company with 2 metrics and another with 642. However many you have, they need to be meaningful and monitored and easily available.

No. 2 Workflow is Key
SSOs will always have exceptions, so having an automated process in place to support these transactions is key. Workflows can be exuberant or basic. The key feature to look out for is rules, and how reminders and messages feed into the SSO. If one entity is routinely sitting on invoices, you want to have a system that reports the who, what, when and whys of these incidents so that ultimately behaviour can be adapted to help you make improvements, like pay on time etc.

No. 1 And Finally… Coming In At Number One
More and more we are seeing Finance and Procurement aligning and recognising that, if significant change is to be realised in AP, then purchase to pay needs to be treated as a single process. Historically it has been broken, and Procurement and Finance have often been facing in different directions. If AP is to become clean and controlled and touchless, Procurement and Finance have to get cosy and get on. So if you are rolling our workflow, P Card, OCR, or e-invoicing and Finance and Procurement are still strangers, find a change agent in Procurement and spend time getting them excited about what the world looks like when AP is automated and purchase to pay has minimal touchpoints.

With thanks to all the speakers from The AP Automation Summit who shared great stories and tips, the delegates who contributed so much, and to the Sponsors – Ariba, Transparent, OB10, BizAps and Brainware, for illustrating to shared services leaders that there are some exceptional solutions on the market.