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Budget2In theory at least, it should be a fairly simple endeavor to cost-justify an Accounts Payable automation initiative, yet often it is not.

Numerous studies, including a recent one by the International Accounts Payable Professionals group, (IAPP) have highlighted the gross inefficiencies that exist within A/P departments because of a lack of automation.

Companies are spending far more money, effort and time than they need to on A/P functions because of their continued dependence on manual processes.

The Accounts Payable departments themselves are often under tremendous pressure to reduce costs. Yet, efforts to build broad, enterprise-wide support for A/P automation efforts have often failed for a variety of reasons.

Making a Business Case Can be Challenging

One common problem is that C-suite executives often have little idea about the need for automation within their A/P departments.

The recent IAPP study showed that with the exception of the CFO and the controller, few other senior executives including the CEO, COO, CIO and the CTO are aware about A/P automation needs or benefits. To learn more read my earlier blog post: Accounts Payable Automation and the C-Suite.

Chart Awareness1Accounts Payable departments themselves are also not very adept at documenting how they will benefit from automation or how they will measure return on technology investments.

Evaluate Existing Processes

According to document management vendor Kofax, any cost-justification initiative needs to begin with a thorough evaluation by A/P managers of where their departments are, where they want to be, and what it will take to get to that destination.

Though many A/P executives figure they already know what needs to be done, it is still important for them to accurately identify all the sources of their costs and the opportunities to reduce them.

It is an undertaking that requires a thorough evaluation of the strengths and weaknesses of the A/P function using metrics such as the timeliness and the accuracy with which invoices are processed and the number of steps involved from procurement of an invoice to payment.

Yakidoo offers workshops that are geared to help companies define the issues they face and create a path to A/P automation.

Review Costs and Identify Opportunities to Reduce Them

In order to properly cost-justify an A/P automation initiative, A/P executives also need to review all of their invoice handling and exceptions handling processes. The goal should be to get an accurate estimate of the fully-loaded costs to process a single invoice.

That means looking at items such as data entry costs and clerical costs such as those associated with copying, filing and faxing invoices. Building an accurate estimate also means calculating the costs involved in handling errors and exceptions and looking at ancillary costs such as those involved in mailing and storing paper documents.

Take a Phased Approach to Automation

The next step is to identity the specific functions or processes that can benefit the most from automation. Experts often recommend that companies with heavily manual processes take a phased approach to implementing new technology.

A phased approach is not only more manageable, it is often easier to cost-justify as well. For instance, cost-justifying a document scanning technology is likely to be a whole lot easier than justifying end-to-end automation of the A/P function.

Also key, is the need for A/P managers to understand their company’s project approval process and to identify the key executives that are likely to be involved in it. When preparing their case, AP managers should try and involve the executives who will be the ones that are signing off on it.

Often, finding a sponsor from within the executive suite can make a critical difference when cost-justifying an A/P automation initiative.

A Quick Note About Our Workshops

A Yakidoo Business Process Optimization/Automation Workshop provides a thorough documented analysis of a company's business processes and capture requirements in order to set the foundation for a phased and successful A/P automation project. If you're interested in learning more about a workshop let us know.

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We’d also be happy to act on your behalf and get answers to the key questions and concerns you have about accounts payable automation. If you have questions leave a comment below, contact us through this web formsend us a Tweet or contact me personally on Linkedin. Help us shape the editorial agenda for this blog so you can get the most value out of what we produce.

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ECM and Automation for Accounts Payable
Invoice Management and Manual AP Processes Continue to Plague CFOs
ECM in Action: Accounts Payable Processing [included demo video]
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About the Author

Victor Avatar 1Victor Bensusan is CEO of Yakidoo. He has 20 years experience in Finance and Information Technology primarily in the area of process automation, information management and business performance improvement.

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