Pains in the Accounts Payable Process

In today’s volatile economy with cost constraints and regulatory compliance pressures, accounts payable departments are striving to improve and extend the services they provide for their own organization, increase efficiency, and enhance business relationships.

Changing Role of Accounts Payables
The role of an accounts payable (AP) department has changed dramatically over the last few years. Typically, an AP department was viewed as a cost center charged with the responsibility of processing and reviewing transactions, coordinating with other departments, responding to inquiries, reconciling accounts and performing paperwork. More recently, however, this department is playing a larger support role helping to control, coordinate, and analyze key business processes.

The role of AP professionals has also changed – with such responsibilities as quality assurance, contract and policy compliance, reporting, and analysis. This change has come at a cost of increased workload and added responsibilities. Therefore, AP departments need to re-deploy their skilled knowledge workers from doing back-office administrative tasks, such as invoices processing, to more business critical management activities. To achieve this, AP departments are looking to automate as much of the business process as they can.

Being Compliant
Being financial documents, invoices are subject to compliance regulations such as Sarbanes-Oxley and Basel II. Therefore, it’s important that these documents are captured and archived using a well documented and consistent process. Scanning documents early in the process and delivering them to electronic repositories guarantees that important data is recorded, efficiently validated, and can be easily audited, saving wasted time and effort.

Cost of Processing Invoices
Processing an invoice involves capturing key data, entering it into the proper financial systems, and kicking off the related business processes. Although straightforward, this task needs to scale to handle the large numbers of invoices your business will receive each day. Accuracy and efficiency, therefore, are major concerns.

Costs associated with managing this volume of data, including the human labor required to catch and fix errors along the way, can grow quickly. According to an Aberdeen report from 2006, the actual cost of processing each invoice, from receipt to payment, can balloon to $80 per invoice.

Discounts for Early Payment
Most vendors charge penalties for late payments on outstanding invoices. Not only does this increase costs, it can also harm vendor relationships. On the other hand, most vendors offer discounts when invoices are paid early. Without efficient processes in place, the risks of paying late fees are increased but also missed opportunities on early payment discounts.