Why do we need Accounts Payable Automation?
Automation is somewhat of a buzzword for many businesses. Digital transformation has seen a steady uptick on google trends in the last 5 years, and the finance department is no exception, with the 2024 Hackett Report listing automation within the top 5 finance priorities for CFOs. The 2024 APA benchmarking survey said that 68.1% of us have at least half of our accounts payable process automated, with 6.6% fully automated.
And it’s understandable why we should do this. We spend hours processing invoices and supplier payments, which are getting larger as our organisations diversify suppliers to strengthen their supply chain. Manually entering invoices takes a long time, and so does trawling through documents. Did you know that 76% of office workers spend 3 hours per day on data entry?
Simply put, we don’t have the time or the resources to keep up with growing demand. Importantly, we want to concentrate on the job at hand – paying suppliers and keeping them happy. We want to add value, and we don’t want to do tedious tasks that computers can do for us. All of this means that we are turning automation to increase productivity.
The gains of automation
Automation can positively impact the way we work. It can speed up the payables process, increase visibility, reduce risk and free up our time. Instead of stressing about the work piling up, AP teams can complete their day-to-day tasks and even work on more strategic initiatives.
Invoice automation is perhaps one of the better-known tactics for accounts payable, and statistics from Quadient say that invoice automation reduces data entry by over 80% and can bring down the cost of processing a paper-based invoice from £12 to £3 or less.
We can see the productivity benefits in action in the graph below, which shows clearly that with automation, the number of both reconciliations and invoices processed increases.
With all these positives, we’ve seen many organisations planning to completely automate their Accounts Payable processes, thereby creating touchless processing. IFOL’s AP 2023 automation trends survey found that 15% of respondents had already automated their process. 49% anticipated ‘their AP department reaching a fully automated state in 1-3 years, and 26% expect full automation in 3-5 years’. Just 8% were not planning on automating their AP process.
Is no-touch, too much?
Before we make this leap into a world of automation, we need to consider what a no-touch process truly means from a negative impact viewpoint.
We may see a decline in essential skills, including data input and attention to detail. But, pressingly, is a dependence on automation, an innate trust in it to do things that it may not actually be able to do as well as you think. With this comes lax controls and high risk.
Let’s imagine for a moment that when the invoice arrives, it has been inputted somewhere along the lines. At some point, a human will have entered data. That’s the first thing that we need to account for.
Let’s imagine that also at some point a human or two haven’t been entirely honest. The invoice that comes in matches the PO and the goods numbers are correct. The cost is grossly over what it should be, but because it matches your other data, it is not flagged. So, it goes through 3-way matching with no problem. There are no changes on the supplier file, so nothing to check there. And then it’s automatically paid. In this scenario, the pricing issue only gets found when someone reviews the transaction – maybe it’s the AP manager, wondering why that particular pay run was so high, or maybe it’s found via audit. By that point, the likelihood of getting all the money back is diminishing, you’ll spend money getting it back, and it’s extra work for all involved. Not to mention the reputational damage of the fraud not being found in a timely manner.
And here’s the problem. Using technology is fantastic, but automating everything could be at the cost of our controls. There is very little risk oversight, and only scant checks from software not designed for the task. Without a person inputting the data and seeing the usual price, pattern recognition, without anyone checking before the payment run, this issue can grow. Next time it could be a PO issue, a duplicate invoice. The issue is that without a small interjection before payment, issues can slip past, and cash leakage occurs.
Augmentation. A different way for Accounts Payable processes to be productive.
So now we know the concerns, it begs the question: How do we balance the use of automation for productivity with stringent controls?
And our answer. Instead of simply automating, augment our processes.
What we mean by this is that alongside the automated process, there should be the ability for a human to oversee, pause and interrogate what they see. In this way, we can get that all-important oversight and specialist checks, without dealing with every single invoice, or relying on rudimentary and often flawed methodology (automated 3 way and 4 way matching).
Another aspect is to ensure the technology that you use to automate your task can actually do the job. You scrutinise whether it is a rudimentary test or not.
We often find that automation technology comes bundles with things like dupe checkers, fraud checkers etc. While these do run the types of tests meant to mitigate the risk of automation, they can be rudimentary. Take the 3-way match as an example. It’s a great way to catch some low-hanging fruit.
But now the fraudsters are more sophisticated. They are doing things with AI we would never have dreamt of this time 5 years ago (simulating your boss over a video call anyone?), and we need to have better controls to deal with it.
We recommend utilising purpose-built software to detect your risks, allowing your process to run unhindered, and simply letting your team review what is necessary before the payment run.
Can we help?
FISCAL provide one such example of Accounts Payable risk management software, designed to aid in your controls.
