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Managing the payments of liabilities is a process as old as business itself. All successful companies must pay their bills timely and efficiently in order to keep the operations going and maintain their financial well-being.
Despite this fact, Accounts Payable, in common with many other core back office business functions, has not seen any significant development in processing until recently. The accounts payable process still antiquated compared to the advances in other line of business, ERP, CRM or RPA systems.
That’s not surprising – any process where you have a diverse and widespread set of components represent a challenge.
David Kirk, Managing Director, Digital Labor/ RPA KPMG says "intelligent automation typically results in cost savings of 40% – 75%, with the payback ranging from several months to several years"
There are several significant challenges that need to be addressed:
Challenge #1 - Paper, Paper, Paper
As much as we would like it to disappear, paper is not going away as fast as one would think. Yes, it’s true, while we don’t send as much snail mail any more, we still have printers, buy paper and invoices continue to exist in paper form. The problem with paper is that it is an analog format. The information contained within it is not easily accessible or searchable. Paper files are only typically accessible via one or two fields. For example, looking for Invoice #1002 from Widgets Inc., one would possibly look in the Widgets Inc. file and search the enclosed invoices (arranged in Invoice # order) until we come to the invoice we are looking for.
Challenge #2 - Digitization but not Transformation
Enterprise Content Management (ECM) or Content Services can offer some help here. In fact, since the early Document Imaging systems first arrived as far back as the 1980s, there have been improvements. Capturing an electronic image of the invoice and indexing using a few key fields is certainly an improvement. However, this merely digitizes an image of the document, typically in a PDF format. What it fails to do is to digitize the business information that the vendor invoice contains in such a way as to enable the data to be passed electronically to be acted upon by application responsible for the approval and ultimate payment of the invoices.
Challenge #3 - Invoices are like Snowflakes
Optical Character Recognition (OCR) technology has been around for a while now but it is not enough to read each character on the page. It is necessary to understand the context of what is on the page. What does the invoice mean?
OCR does a pretty good job at processing fixed forms, i.e. identical forms where data fields are located in exactly the same location on the form. Creating a rigid template that looks for text in a predetermined location and assigns it to a specific data field. This capability can deliver huge benefits in productivity and cost reduction by automating time consuming and expensive manual data entry.
The problem here is that invoices are not fixed forms. Like snowflakes, while they follow certain structured principles, they are as unique as the vendors they come from. While they all contain the same underlying information, the manner in which it is presented is determined by the vendor and not the purchaser.
Coming into the Light
What is required is the ability to not only capture documents but to understand them. This understanding is necessary on a number of levels. First, the system should be able to recognize the type of document that is being processed. Invoices are not the only type of document that could be received. Unless you want to manually sort all the documents by type before processing, it makes sense to have a system that can automatically recognize documents and classify them into different types. Once a document has been classified, the system knows what information it is looking for.
Having recognized the technical challenges with the automation of Accounts Payable systems, you should not lose sight of what matter the most, which are:
1. Reducing costs.
2. Increasing efficiency.
3. Delivering consistent and reliable outcomes.
So before you implement a new automation process, make sure that you are addressing the most important of targets, which is not the automation process itself, but the actual reasons that matter the most.
At MAK Bookkeeping, Inc. we provide turn-around consulting engagements, where we tackle the most pressing aspects of running a business by either reducing taxes, increasing profits and/ or making sure you have enough money in the bank account when you need it to operate and grow your business. We are accepting new Clients by the end of the third quarter of 2019 and would love to hear from you.