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Shockingly, only one-quarter of businesses worldwide have fully automated their accounts payable department’s processes. According to Institute of Finance Management (IoFM), a whopping 62% of invoices received by organizations are still manually handled. Buried deep under mountains of paper-work, AP professionals do not know how to build winning case for AP automation that’s driven by hard numbers.
Learn More: Merlin for AP Automation Software;
Here is a six-step strategy to develop a robust business case for automating AP processes with an e-invoicing portal.
Step 1: Aligning with the Accounts Payable Department’s Top Goals
There would be no case for automation if deploying an e-invoicing portal doesn’t fit into the tight budgets of the AP department or the overall Finance function. The proposal should also align with AP’s top priorities for the year. According to Ardent Partners, some of AP’s top priorities are:
- Reducing processing costs
- Improving visibility into invoice and payment data
- Enhancing reporting and analytics
- Improving supplier collaboration
- Strengthening collaboration with procurement
- Bettering integration with Procure-to-Pay (P2P) processes
Paystream Advisors calculated that organizations spend between $10-$15 in processing paper invoices – even after paying so much there is a large risk associated with manual error in keying or misplacement. This is supplemented with long approval cycles, time-consuming and repetitive supplier inquiries, and high storage costs.
More and more AP departments are citing enhanced reporting and analytics as their top priority. With improved visibility into invoice and payment data, AP can have actionable insights for bettering treasury strategies, contract compliance, budgeting and easing the audit process.
As AP professionals predominantly deal with buyers and suppliers on phone, email and snail mail, they are wasting tremendous time, money and effort in operational tasks where an automated system would not just tackle the operational bits but also ensure regulatory compliance and more efficient documentation.
Collaboration between AP and Procurement means a direct reduction of ‘maverick’ or unplanned expenses and better handling of invoice exceptions. One of AP’s top priorities has been to integrate their systems better with the P2P system and manage financial data with deep visibility and improved cash management.
Apart from these top priorities, AP departments also face problems that are unique to their business and industry context and it is extremely essential to build them into your case.
Step 2: Overcoming Objections
Effectively responding to anticipated objections raises the odds of a proposal winning approval. Here are some common examples of objections to deploying an e-invoicing and supplier portal with solutions for tackling each.
| Objection | Solution |
| Already using scan and capture and/or ERP for invoice processing | Businesses that use scan-and-capture technologies (such as optical character recognition) save $1.26 per invoice by migrating to electronic invoicing. Integrating accounts payable with an ERP system facilitates better enterprise visibility. |
| Don’t want to lay off AP staff | Reduction in headcount from automation can be channelized into more value added tasks like data analysis and process optimization among others |
| Invoice volume is too low to justify automation | Organizations typically having 30,000 invoices in a year reap the benefits of automation in less than a year; others may reap it in less than three years |
| Impossible to on-board hundreds or thousands of existing suppliers on the portal | Many e-invoicing solutions provide outsourced supplier-on-boarding capabilities. To begin with, it is enough to on-board your largest suppliers first because they contribute to roughly 80% of the organization’s spending |
| Lack of technical expertise might prevent suppliers from adopting invoice automation | While suppliers find e-invoicing solutions easy to use, their biggest barrier to adoption is if an organization charges them additional fees to use it. Today’s solutions are free to use for suppliers |
Step 3: Knowing the Key Value Levers
Accounts payable organizations should consider the potential impact of several key levers on their operations when developing a business case for deploying a supplier portal.
- Increased staff productivity
- Enhanced cash management
- Stronger supplier relationships
- Better analytics for decision-making
- Streamlined compliance, control and tracking
It is important to note that not all of these levers have equal importance for all organizations. For example, a particular organization might have more to gain from enhanced cash management where it is trying to maximize its Days Payable Outstanding (DPO); while another organization might stand to gain more from streamlined compliance, control and tracking because it is trying to remain updated with local requirements across a global geography of buyers and suppliers.
Step 4: Benchmarking Accounts Payable Operations
It certainly is hard to track improvements without setting benchmarks of typical and best-in-class operations organizations. IOFM found out that 46% organizations unfortunately, do not track KPIs. Studies from research partners are particularly useful for this purpose. A Hackett Group Performance Study noted some of the following best-in-class benchmarks, among others:
- 4.5% of suppliers accounting for 80% of invoice volume
- 70% invoices received electronically
- 40 Days Payable Outstanding (DPO)
- $2.27 cost per invoice
- 3 days invoice cycle (with PO)
Step 5: Calculating Savings Opportunities
Once AP is ready with its current benchmarks, it can start calculating potential benefits of deploying e-invoicing. Benefits should be calculated as direct financial savings and process efficiencies or productivity. Some of the parameters required for calculating include number of invoices processed, compensation of AP full-time equivalents (FTEs), % break-up of invoices received (paper, electronic PDF, scans, OCRs etc.), invoice processing costs, total invoice spends, early payment discounts captured, DPOs, and so on.
For a clear picture on the potential savings and benefits of a proposed automated solution, an organization can look at all three or one of the following three scenarios:
- Scenario A: No Automation – where all invoicing is currently paper based
- Scenario B: Limited Automation – where there is a small percentage of electronic invoices
- Scenario C: High Volume & High E-Invoicing – where there are more than 500,000 invoices per year and a good chunk of them are electronic
As an example in Scenario A, an organization can save up to $866,826 from moving 70% of its invoices from paper to electronic. This is in addition to 79% improvement in invoice processing cyle time days and 15% improvement in DPO.
Step 6: Finding Comparable Case Study Examples
There can be no better evidence about the merits of introducing a new system than its success with industry peers. An example – as a result of deploying the Zycus E-Invoicing supplier portal, a private insurer reduced its invoice approval cycle times by one-third, in turn, enabling the company to achieve 1% savings for prompt-payment discounts on 33% of its total spending.
For more detailed examples on benchmarking your AP processes and the three scenarios mentioned in this blog, please read this IOFM Research Report titled ‘Show Them the Money: The Payback on Accounts Payable Automations’.
Request a Zycus e-Invoicing demo today. | Learn more about the Zycus E-Invoicing solution.
