By Michael Creeden, Manager, Solutions Consulting at Tradeshift
Accounts payable (AP) was long regarded as a bit of a business backwater, but the recent chaos in procurement and supply chains has underlined its strategic importance.
Most enterprises now understand the imperative of improving their AP processes, including the transformative power of automating low-value, repetitive manual tasks. Many are making significant investments in AP automation software. But therein lies a problem. Like most technologies, automation isn’t a “black box fix” to today’s challenges; it requires users to fully understand what automation needs to succeed and how it necessitates significant changes in internal and external processes, supplier relationships, employee training, and more.
I recently joined Jordan Mullins from the Shared Services and Outsourcing Network (SSON) to discuss the strategic points of automation in the AP process. We spoke about the areas enterprises often overlook in their AP automation strategy and the golden rules that organizations should follow to achieve the best possible result. Here are my top five:
1. Take out the trash. Everyone knows that if you feed garbage in, you get garbage out. Why should an automated AP solution be any different? The whole point of automating workflows and approval processes is to reduce - or even eliminate - human intervention. AP automation software is only as good as the data that feeds it. If businesses want to reap the benefits of AP automation, including the gold standard of straight-through processing, they need to ensure that the data coming in from suppliers is digital, clean, and compliant. Before automation can improve your AP workflow, enterprises should focus on ways to engage suppliers and digitize their relationships so that digital e-invoicing becomes the standard.
2. Prioritize supplier engagement. One of the biggest challenges facing any new technology is adoption. For example, the problem facing the first people who bought telephones was that they didn’t have anyone to call. What did they do? They sold the benefits to their friends, relatives, and customers. Likewise, you can’t expect suppliers to get on board with AP automation (and to supply reliable and clean data that the technology requires) if they don’t understand what’s in it for them - and what problems it solves. For example, one of suppliers’ biggest aggravations: the proliferation of "supplier portals," which force them to transact in the way that suits the buyer who owns each portal. Suppliers are central to the success of any AP digitization initiative, so demonstrate how moving to an automated solution removes friction; for example, by removing the friction associated with traditional portals. So, when you’re evaluating various solutions, don’t just ask what AP automation can do for you - ask what AP automation can do for your suppliers.
3. Don’t replicate inefficient AP processes. It’s comforting to stick with what you know, but that’s not how anyone makes progress. The whole point of AP automation is that it enables enterprises to adopt far more efficient workflows and processes, including the ability to customize workflows for different needs and circumstances. But customization can be a double-edged sword if businesses use this flexibility to recreate inefficient pre-automation processes. Sure, sticking with the familiar might seem like it will shave the costs of implementation by reducing the need for retraining, but it’s a massive false economy compared to the benefits that can be achieved by being bold and imaginative with AP automation. Instead, businesses should choose a solution that enables them to review processes and workflows and determine how they can achieve maximum efficiencies and ROI and provides a clear roadmap to straight-through processing. Investing in automation only to replicate outdated processes is like buying a smartphone simply for the clock function. Be ambitious for your organization and your employees, and think about how the tech can make everyone work smarter.
4. Never mistake OCR (optical character recognition) for true transformation. Your AP automation solution is either digital, or it’s not. There is no in-between. The problem is we see many enterprises who think that OCR is a meaningful step on the pathway to digitization. It’s not. While AP automation might involve some OCR capability, on its own OCR offers minimal transformation, as enterprises will still be dealing with high volumes of paper and unstructured PDF invoices. Enterprises should partner with their technology provider to develop a strategy to move suppliers to digital-first submission options. Tradeshift, for example, gives suppliers of all sizes the ability to submit digital e-invoices, whether it is through integration with their ERP systems, via a purchase order flip capability, through PDF connectors, or directly via the user interface. If you want to reap the benefits of AP automation, you need to take the plunge and embrace digitization across the organization (and across your relationships). Stopgap solutions like OCR only complicate processes - especially for your suppliers - and delay the benefits of true AP transformation.
5. Don’t expect overnight success. There might be no technological stepping stone to digitization, but that doesn’t mean that transformation has to be all at once. A phased approach is almost always the right way to approach a challenge of this magnitude. One of my former bosses always told me, “you can't boil the ocean.” Enterprises, especially those with a global presence, should consider a roll-out that focuses on one headquarters or region at a time, if possible. Short-term, smaller business wins can lead to better digital transformation success.
If there is a common thread running through this advice, it’s that digital transformation in AP must directly involve suppliers to succeed. Once you start having that conversation - and certainly once you start using the solution - it becomes an easy sell.
Our customers experience high levels of supplier engagement because the Tradeshift network enables a value-based, data-driven approach to new processes and provides suppliers with a toolset that makes their relationships with customers stronger, more compliant, more agile, and far less work. Everything, in fact, that automation promises - simply by following the five golden rules.