In today’s environment, traditional companies are getting disrupted  as the business environment gets more competitive. The pressure to drive  productivity and cost savings has increased. It is thus critical for  management teams to remain agile and focus on streamlining business  processes as much as possible.

In line with this development, the finance function in a company has  also evolved from purely accounting into a more strategic one. Hence,  CFOs desire to streamline their manual finance processes so that more  time can be dedicated to strategic planning and analysis.

One of the critical but very manual functions in most finance  departments is the Account Payable function. This function handles all  cash outflow, both spending and investment and they provide the source  data for spend analysis. In a recent 2018 survey conducted by Canon, 76%  of CFOs interviewed believe that Accounts Payable  (AP)/Purchase-to-payment (P2P)’s will grow in influence and importance  in the next two years. Efficiency, automation, and improved accuracy are  top priorities for the finance function. With accurate and timely data,  we will be able to synthesize insights to help the management team make  better decisions.

Five Reasons to embark on Purchase-to-Payment Automation

Improve accuracy with less time spend on reconciliation

Large number of supplier invoices coupled with time pressure could  result in manual entry errors. Furthermore, as hardcopies of supplier  invoices are usually circulated, there is a lack of paper trail. Hence,  this would increase the risk of losing an invoice. At times, the same  invoice could be processed twice because proper control measures were  not put in place. Based on our experience, any invoice loss or entry  errors could result in 23% more time spent on tasks resulting in  inefficiency.

With automation, supplier invoices can be archived with an electronic  trail. In addition, an improved data entry interface could also reduce  human errors in data entry. For certain companies, they might consider  outsourcing their data entry function offshore. This will allow the  existing finance function to perform the role of a checker and increase  accuracy without incurring too much cost.

Better staff morale and increased productivity

With less time spent on manual tasks, finance staff could be  upskilled to do more meaningful tasks. Instead of being employed to do  data entry and hardcopy filing work, finance staff can spend more time  on analysis and supporting business development efforts.

It will also improve the staff morale of other functions. The  interaction between finance and other operations is crucial as these  operations usually provide the source information. Due to finance  control requirements, it could increase administrative load if the  process is too manual. In fact, this causes a high turnover rate in  certain roles for one of our clients. We helped them to plan for an  integrated system to reduce the administrative workload for both finance  and non-finance staff.

Better visibility on invoice processing and approval status

With a structured and digitalized workflow, stakeholders will have a  better visibility of each purchase requisition request. The correct  financial approval level of authorization will be applied. In addition,  companies would also have visibility over their spending and ensure that  various divisions spend within their approved budget. For certain  companies, they would also have a list of approved vendors which ensures  that they spend in-line with their internal policies. This will promote  greater transparency in spending.

Faster P2P cycle, earlier payment discounts and less late penalties

In a typical manual process, hardcopy supplier invoices are usually  shuffled between various stakeholders. As a result, the finance  department may run a risk of delays, or that the hardcopy invoice could  be lost during the transfer from person to person. Worse, late penalty  charges may be imposed for certain supplier invoices that are not  processed in time.

Also, with automation, most orders will be pre-approved, with all  invoices being PO-based. This means that th invoices can be easily  matched with the corresponding purchase order (“PO”) and delivery order  (“DO”). Hence, the AP staff will no longer be required to chase for  payment approval and the company could potentially benefit from early  payment discounts.

With a faster payment cycle, supplier relationship will improve, and  the purchaser will be better positioned to negotiate for further  discounts or other terms.

Sets the foundation for companies to scale operations

A business should not stay stagnant but should strive to remain  competitive. However, a manual process could result in over-working  certain staff when operations load increase. We spoke to a restaurant  client of ours. During the discussion, they were concerned that their  finance executive is unable to cope with their accounts. With only three  outlets, the executive is already struggling. The business owners are  worried that things will get worse when two more outlets open.

Our suggestion was that they should deploy automation to their P2P  process and outsource the data entry overseas. With this, the business  owners are more comfortable to scale operations.

Critical success factors for successful implementation

One of the pitfalls is the deployment of software without proper  consideration of the business specific workflows. There is existing  software in the market that promotes finance process automation.  However, our experience tells us that there will not be a  one-size-fit-all solution. In fact, we noticed that many companies  deploy tech solutions which later became white elephants as they are not  used.

There are three main considerations that a company should pay attention to before any technology deployment:

Firstly, the new system introduced should be integrated with other  existing systems. Otherwise, it will be counter-productive and cause an  increase in workload instead. Of course, one of the options will be to  revamp the whole company’s system which would be costly and  time-consuming. We recommend that companies first map out their current  workflows. We will then need to figure out how this new system is going  to integrate with the existing systems. Ideally, the systems should be  seamlessly integrated with each other.

Secondly, management should give assurance to AP staff. While they  might see the benefits of finance process automation, they could be  worried about their job security. Without their buy-in, the  implementation will not be successful. There must be a plan to  re-purpose existing staff to perform tasks with higher responsibility  and greater business value. Furthermore, as the learning curve could be  steep, it is vital to deploy any changes in incremental stages.

Lastly, data collected will be meaningless unless they are moulded to  suit decision-making. Different users within the organization will  require different information. Communication with various stakeholders  is crucial to design dashboards tailored to their specific needs.

Next steps

Every company has different needs. We believe that you will need to  have an intimate understanding of existing processes and systems before  deploying any new technology. Also, the budget for every company will  differ. Any technology investment should generate a ROI that justifies  it. Hence, we will need adjust and tailor the solutions specifically to  the company.

Excide has worked with various organizations ranging from MNC  subsidiaries to SMEs. We help companies to define their objectives and  budget.

Once defined, a bottom-up approach will be critical to understand the  pain-points on the ground. Without buy-in from staff, implementation  will be challenging. Hence, we will go hands-on and experience their  work. This experience will also uncover any blind-spots that management  might have.

We do not rush into implementation and will roll out changes in  phases. This ensures that staff are not overwhelmed by the steep  learning curve in migrating to a new workflow. During implementation, we  will guide company staff step-by-step for a smooth onboarding.

About Excide

Excide specializes in transforming finance functions in Singapore and  Myanmar. We work closely with various stakeholders in the company to  better understand their needs. Our hands-on approach allows us to better  tailor our solution and commit resources in the most value-added  features. This will allow our clients to achieve maximum value during  the various implementation phases. We commit resources on-site to ensure  that we understand your business, build stakeholder relationships, and  ensure smooth onboarding.