The Business Case for Invoice Automation
e-invoicing Trends, Accounts Payable Optimization, Buyer-Supplier Ecosystem, Digitalization, Source-to-Pay, Invoice Process Automation, Business Network, E-invoicing
The business case for Accounts Payable automation is fairly straightforward but there is some nuance to consider as you begin planning your digital transformation project. If we can agree that the main elements of any project include people, process and technology - we can then focus in on some key considerations you should keep in mind for your own project.
If I said that your business case was entirely based around the transactional cost of processing a single invoice, how would you react? It’s almost that simple but does it really help you to hear that according to Billentis*, if you process 100,000 invoices per year and paper invoices cost €17.60, you could reduce your costs by €11.60 just by switching to e-invoices? If all your invoices are paper-based (and yours may be) then you don’t need much more than that. In fact, the only part of that (see source below) business case which is challenging is the premise of shifting from paper - it might be great for some parts of the world but in much of Europe, we’ve been digitalized for years already. So we need more.
Let’s get back to people, processes and technology - and start with the tech. The tech we are talking about is mainly an invoice processing system for your AP team and a Business Network through which you will receive your invoices as e-invoices. There are plenty of real issues around tech security, e-invoicing formats, system scalability and ergonomics but let’s ignore those because they aren’t part of the business case. What does make a difference are the self-service options for your suppliers to set themselves up on the network, enable e-invoicing, receive e-orders and otherwise collaborate. This ‘network front-end’ is super important and makes a big difference to supplier engagement and onboarding. The workflow system is the second main piece of tech and it just needs to have one focus - automate as much of the process as possible. This then leads us to discuss the process but to summarize about the tech - it’s e-invoices rather than paper, it’s electronic workflow rather than manual and it’s a business network that creates the backdrop to efficient buyer-supplier communication and collaboration.
The business case surrounding the process is essentially just the efficiency gains when shifting from a manual to an electronic (and automated) process - but there’s more. You can’t just move the same s**t faster, you need to process your invoices differently. Invoice Automation tools give you options for examining how escalation works, how you order, how you engage with suppliers when there’s an issue. An effective process also opens doors to early payment programs and other supply chain finance options which can both strengthen your supply chain AND lower costs of purchasing. Some like to offer this type of math: If 25% of your suppliers would offer you early payment discounts, and your process was efficient enough to allow you to pay early - you could in theory be lowering your costs by ~2% on all of those invoices. Early pay programs are great but as payment terms get smaller and the dependability of being paid on-time increases to close to 100%, the need for early payment decreases. Primarily the business case in process efficiency comes from the automation of coding, workflows and approvals. This can save massive amounts of time and ultimately reduce the number of FTEs in your AP department.
Speaking of people, it’s not just about headcount reduction - though it is entirely true that the modern AP team is smaller and much more agile. The business case for invoice process automation (as it relates to people) is simple; with e-invoicing creating opportunities for more automation, there is just less for people to do. This, in theory, gives them more time to focus on more ‘value adding tasks’. If we are talking about your AP people, they can then focus on the true exceptions which require their energy. They could focus on analytics, looking for insights into supplier rationalization, payment terms harmonization, removing bottlenecks, spotting fraud or other anomalies. For your reviewers and approvers - these are often the busiest people in your company and they typically are adding very little value when they are forced to code or approve an invoice. Giving more time to these ‘rain-makers’ can only be good for your top-line results.
In summary, the business case is not very complicated - good data (e-invoices), a business network (supplier self-service), automated workflow wherever possible, people doing more value adding tasks.
In my next blog post I’ll dive into the value of the Business Network, but in the meantime, broaden your mind and read some of our other blog posts on ‘cash agile’ - might be a game changer in a post-invoice economy.
Rowan has more than 10 years of experience in the purchase-to-pay arena. During this time, he has managed the go-to-market for a diverse set of portfolios including Accounts Payable Automation, B2B Networks, Financing Services, eProcurement and Product Information Management.
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