“The enterprise that does not innovate ages and declines, and in a period of rapid change such as the present, the decline will be fast.”
— Peter Drucker, Management consultant, educator, and author
In present times, innovation = digital transformation. It involves adopting and implementing digital technologies, tools, and strategies to transform business processes, operations, and customer experiences. Digital transformation leverages the power of technology to drive innovation, increase efficiency, and create new opportunities for growth and competitiveness. This article will discuss the need and benefits of digitization in the accounts payable process.
But first, what is an accounts payable process?
It is the process whereby an organization keeps meticulous accounts of its purchases and creditors. It involves a series of steps that include — receiving invoices from suppliers, verifying their accuracy, obtaining necessary approvals, entering invoice details into the accounting system, scheduling payments based on agreed terms, authorizing payments, executing payments through chosen methods, maintaining records for auditing purposes, and communicating with vendors.
An efficient accounts payable process is the lifeblood of a business. It ensures timely and accurate payments and maintains strong vendor relationships in the long run. On the business side, it facilitates effective financial management, including working capital management.
Evolution of the accounts payable process
Traditionally, accounts payable was a manual and paper-based process. This had gaping limitations and resulted in leakages, frauds, and bad business practices. Owing to its increased potential for human error in data entry and calculations, and time-consuming processes, the overall payables process was beset with a high incidence of loss or damage to physical documents, payment delays, inaccurate payments, and limited visibility into real-time information and financial analysis. These in turn made scalability difficult.
In addition, payables teams dealt with challenges of methodical document storage and retrieval, faced collaboration and accessibility limitations that hindered overall efficient workflow and decision-making. These limitations necessitated the need for digitized and automated AP solutions.
Digitization and automation brought the promise of not only replacing manual and paper-based tasks thereby reducing errors and fastening the payables life-cycle, but also integrated applications improving overall efficiency and effectiveness.
Key components of accounts payable digital transformation
- The very first step involves electronic invoicing. With digital formats, invoices can be created, transmitted, and received electronically, eliminating the need for physical documents and manual data entry.
- The next step is document management systems. This will provide a central platform for the storage and retrieval of invoices, purchase orders, receipts, and supporting documents.
- With electronic invoicing and document management in place, an organization crosses its first hurdle. It will immediately witness streamlined workflows, reduced errors, enhanced data accuracy, and improved funds visibility. All these will further enable the company’s managers to seamlessly collaborate between departments.
- It is now time to automate. With tools such as optical character recognition (OCR) that extracts data from invoices and workflow tools that automatically route invoices for approvals, the accounts payable process can further reduce errors, accelerate processing times, improve visibility into financial data, enhance compliance, and enable better cash flow management.
- The final stage is data analytics and reporting. This leverages data analytics tools to showcase key metrics such as invoice processing times, payment accuracy, vendor performance, and cash flow trends that help managers make data-driven decisions, identify opportunities for process improvements, optimize cash flow management, and enhance vendor relationships.
Roadmap for accounts payable digital transformation
- Evaluate existing accounts payable processes, and identify pain points and areas for improvement
- Set clear goals for the digital transformation initiative highlighting key objectives, such as cost reduction, increased efficiency, and improved accuracy
- Explore different software options and solutions available for accounts payable automation
- Select the right technology partner on the basis of your requirements and budget
- Take your employees into confidence, explain the significance of the digitization and automation programs, and initiate change management to ensure successful implementation
- Lay down employee training roadmap to ensure the success of the program, and provide strategies for managing resistance and fostering a positive mindset
- Specify measures and best practices for maintaining data integrity and regulatory compliance
- Monitor processes for continuous improvement while refining the digital transformation strategy
Cogneesol, a leading provider of business process management services, offers comprehensive accounts payable digitization and automation solutions. With extensive experience in finance and accounts functions, our team of accounting experts has been serving clients across the globe for the past sixteen years and has been enabling their digital transformation.
We have been able to deliver positive business outcomes to scores of our clients. Highlighting one such success story, through the extensive re-designing of the accounts payable process of a Netherland-based CA working for 800+ clients, we increased the firm’s processing accuracy and timeliness and prevented 160k euro in frauds. Overall, we increased its invoice processing accuracy from 95% to 98% and its processing timelines from 97% to 100%.
Click here to read in detail — Extensive Re-designing of Payables Process Increase Processing Accuracy and Timeliness, and Prevent 160k Euro in Frauds
Get in touch with us at email@example.com / +1 833-313-3143 (Toll-Free) for a similar digital transformation of your accounts payable function. Our sales team will give you a thorough walkthrough of how our solutions can bring value to your business and help it scale.
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