Is your Accounts Payable Solution working for you? Think Again…
Businesses have traditionally focused more on collections and Accounts
Key Facts
Receivable. However, an equally important function of an Accounts
administrator is to keep track of the companies Accounts Payables. An Account 34% or more companies use 3 systems or
payable unit oversees a range of tasks which may include authorizing purchase more to pay invoices
orders, bank withdrawals, keeping track of the general ledger and much more.
Delays in posting expenses can add 1%-5%
Earlier the Accounts Payable function was largely confined to a transaction to transaction costs
recording and book keeping role; not as a vital cog of a company’s business. But
with the increasing pressures on operating margins, the streamlining of the The billing error rate is 12%-15% in the
accounts payable process is now seen as an equally critical measure to improve absence of a program to validate invoices
a company’s profitability to improve the company’s credit ratings and
ultimately the business relationships. The efficiency of the Accounts Payable
process has a bearing on a company’s cash flow, credit rating and operational costs. Thus any improvement in the
Accounts Payable process can have an immediate and significant impact on a company’s overall profitability. Most
Business Process Management (BPM) and Workflow Automation Solutions enable enterprises to initially gain better
control over their accounts payable processes with varying degrees of success. Yet, for the gains to sustain, the BPM
automation solution must not only reduce transaction times, it must also enable companies to leverage create processes
that automatically optimize use of the company’s cash, people and system resources.
What your Accounts Payable Solution should be focusing on
The responsibility areas of the Accounts Payable Solution can be categorized into 5 broad areas:
1. Invoice recording
2. Invoice payments and reconciliations
3. Document management
4. Compliance (with internal policies and external regulation)
5. Reporting and Analytics
Typical Deterrents that the Accounts Payable managers often encounter may be one or more of the following issues:
High Transaction volumes - Organizations struggle to cope with large volumes of transactions that increase geometrically
with business growth.
Traceability and accountability - Maintaining a clear audit trail of all activities on an invoice from sending for approval,
approver comments, queries, clarifications, final approval and payment is difficult especially when communication on an
invoice is through multiple channels – email, phone, et cetera.
Multiple delivery channels for invoices - Unlike purely paper based invoices in the past, invoices may be delivered
through email, fax, EDI, or just appear as entries in credit card statements. Processing invoices that are received through
non-traditional channels is a challenge.
Vendor Management - The lack of visibility into current status of an invoice makes responding to vendor queries a
difficult task. The challenges are compounded by long lead times for release of payments, inability to define and
maintain standard processing times, and inability to estimate expected payment dates.

Document Management - Since vendor invoices could potentially be
received at any location, obtaining approvals require the transmission of
invoice copies either through email, fax or by mail. There is always a risk of
loss of paper documents. Retrieval of supporting documents and approvals Facts: Common Invoice Errors
during audits puts a huge strain on accounting resources.
64% of invoice prices do not match
the contracted rates
Accounting and compliance - Invoices need to be accounted under
appropriate heads in the appropriate accounting periods. This is especially 21% of invoices have incomplete
necessary for compliance with corporate and tax laws. The absence of a documentation
clearly defined, verifiable process makes compliance and certification of
compliance difficult. 16% of invoices are paid despite late
deliveries, shortages, non-compliant
Protracted invoice processing times - Long invoice payment cycles are a quality and transportation, packing
result of movement in paper documents to approvers and back. Further, errors and damaged items
approvals go into pending status when approvers are not available or are
travelling.
Increased possibilities of fraud - Manual processes and lack of traceability of prior approvals increase possibilities of
frauds perpetrated through collusion between approver and vendor and circumvention of process controls.
Application Integration - Vendor payment processes require the validation and verification of invoices against Purchase
Orders with the purchase order value in the ERP. Integration of payment processes with ERP is necessary for elimination
of errors. Yet, application integration in the presence of multiple systems is a significant challenge.
Inability to balance conflicting needs - Companies often face the daunting task of balancing the demands of each of the
above processes - efficiency measures in one could adversely impact another. For example, any measure to reduce
clerical errors during invoice recording such as a second review of all transactions, may reduce clerical errors but will
increase the time taken to process a payment and may not allow the company to benefit from payment discounts.
Similarly, measures to reduce costs of storage of physical documents may compromise with statutory compliance for
record maintenance.