A structured approach to process automation
For CFOs of small to medium-sized businesses with complex supply chains, the adage of “every little helps” has never been more applicable.
If you feel the time and effort spent on invoice processing is too much, the chances are you’re right. So, if you’re looking to reduce the cost of invoice processing, where should you start? The three key contributors to your costs are going to be people, process, and technology. Logically, the first place to look is the process itself. Start by building a detailed map of the existing process, from receipt to reconciliation, via logging, PO matching, GRN, approval and payment. Having mapped the current process, define your desired target state, identify areas for optimization and develop a roadmap for migration.
The processing of invoices takes time and effort. Whilst the total financial impact of processing each invoice may be small, comprised of the cost of personnel, systems, overhead and a variety of other allocations, the cumulative effect can become significant over time. This effect is felt most acutely by businesses with a large number of suppliers.
Throwing away the manual
Manual processing is, by its very nature, time-consuming and subject to risk. If you were mapping a typical invoice journey, it might look something like this:
A paper invoice is delivered and makes its way to the in-tray of the accounts payable department. Once opened, it begins a part virtual, and part physical, journey across the organization. AP checks the invoice is from an approved supplier and it is logged onto the system. Someone then looks for a matching purchase order. If one exists, we can move on. If one doesn’t, we already start to run into problems.
Of course, the existence of a PO isn’t enough on its own, we need to see if the goods have been received and that means a three-way check of the invoice, PO and goods received notification. Assuming the goods have been received satisfactorily, we still need to check payment terms and, depending on the value of the invoice, forward for approval. Any variances between the three documents will bring the process to a halt and will require further investigation. Once approved, the payment needs to be made, the account statement reconciled, and the invoice securely stored for the required period.
Even though there are relatively few steps in this business process, there are multiple dependencies and multiple opportunities for delays or errors to creep in. Automating the process can generate significant time savings, mitigate the risk of human error, and provide valuable business intelligence, supporting better future decision making. Of course, there are other, peripheral benefits to be gained from digitizing a process, including ease of audit and even saving on physical storage requirements. The latter might seem small, but in a hybrid working environment, where many businesses have downsized their physical office space, every square foot of space counts.
If you are looking to digitally transform a process, remember the three key areas to focus on:
• Process – map the current process and have a clear future state in mind.
• People – make sure you invest in training to make the most of this valuable resource.
• Technology – eliminate data silos, focus on integration, and surface meaningful intelligence.