Embarking on the journey to AP automation is a strategic imperative for modern CFOs and finance leaders. This guide is your roadmap to transforming your Accounts Payable process from a labor-intensive operation to a streamlined, efficient system. Discover how to understand your current state, identify key pain points, and leverage cutting-edge technology to drive significant improvements in accuracy, compliance, and overall financial performance. Embrace the future of AP automation and elevate your financial operations to new heights.
#1 Understand and Document Your Current State
It’s important to have a clear picture of your starting point to correctly quantify the effort needed to get from your current state to your ideal end state (AP fully automated). You should be able to answer the following questions about your current process:
- Process dimension. What are the step-by-step activities for your Accounts Payable process today?
- How many different PO and no PO invoice receipt methods do you support?
- What are the invoice volumes for each method?
- People dimension. Who executes each activity in the current process? What are the different roles and responsibilities? How many people sit in each role?
- Governance dimension. Which business rules are validated by invoice approvers today?
- This part is tough because you need to pull business rules out of people’s heads… They may not know exactly how they are validating invoices. They just “know”.
- This part is tough because you need to pull business rules out of people’s heads… They may not know exactly how they are validating invoices. They just “know”.
- Technology dimension. What technology currently supports the AP process today, if any? How is it connected to other systems (interfaces and architecture)?
- Data dimension. What is the business unit / geographical scope of your accounts payable process? Do you have multiple different Accounts Payable teams/processes by geography? What are the types and volume of invoice processed in these centers? What is the state of your vendor data quality?
To get a good understanding of the above, you may need to meet with multiple different stakeholders in the business. As you carry out this exercise, you should also be thinking about the next step in an eventual AP automation project.
#2 Identify Pain Points and Key Business Requirements
While documenting your current state, you will uncover pain points different business units have with relation to the AP process. These may be related to geography, industry, an outdated process or how particular business units operate. In any case, you should capture these as they come up to inform the messaging and value levers of your eventual business case.
Additionally, documenting your current state will lead you to identify key requirements that an eventual AP Automation solution must support to be viable in your context:
- Tax requirements. Depending on the industries and jurisdictions you operate in, you will have different sales tax obligations that need to be supported.
- Language requirements. If you operate in multiple geographies, chances are your AP process (and supporting applications) must support multiple languages.
- Regulatory requirements. Supplier invoicing is subject to multiple different (and sometimes odd) regulatory requirements in different jurisdictions.
- Integration to your back-end accounting systems. An eventual AP Automation tool will need to integrate with your existing back-end systems (or integration development will need to be priced into your project).
- Do you need the eventual application to support payment? Some AP automation tools will only support invoice receipt, capture/processing, exception management/approval but won’t support payment (this is handled in your existing accounting system). Others support the entire end-to-end process. What do you need/want?
Ensure you capture pain points and key requirements as you document your current state to avoid having to reverse engineer them when you crafting your business case and change messaging.
#3 Get a Sense for the “Art of the Possible”
In parallel to the documentation of your current state, you want to get intimate with the general AP automation possibilities the market has to offer. This will help link your vision to tactical and practical considerations while developing your reflexes for the eventual software selection and implementation phases. There are a number of activities you can partake in to achieve this:
- Meet informally with software vendors before any sourcing event
- Attend AP automation conferences
- Attend consulting firm events on AP automation
- Find and meet with peers who have implemented AP Automation solutions
- Seek out and read AP automation market analyst reports
- Run an RFI
- Etc.
In these activities, ask questions about the dimensions listed above. The more inputs you have to help craft your vision, the better. The quality of your current state assessment and your implementation and deployment assumptions is the foundation upon which the rest of your implementation is built.
#4 Build Your Roadmap and Business Case
Once you’ve documented your current state and mastered “the art of the possible” in the AP Automation market (possibilities, limitations, constraints, etc.), it’s time to turn your strategy into a realistic plan. To achieve this, your business case should always be crafted in parallel to your implementation roadmap. Why? Well, depending on how you decide to implement the solution (e.g. regional deployments, “big bang”, certain invoice types first, etc.), the timing of associated costs and benefits and the efforts to increase users buy-in of your business case will change.
Here are a few of the metrics you can consider for use in your business case.
- Average time needed to process an invoice by type (paper, fax, email pdf, etc.)
- Invoice processed per Full Time Equivalent (FTE) employee
- Percentage of invoice discounts lost
- Fraud detection/amount of penalties for late payment
How will implementing an AP Automation solution positively influence these metrics? What amounts ($) are these benefits tied to? The pain points captured earlier will guide you to the metrics that make the most sense for a winning business case in your company’s context.
Your roadmap may also include preparation activities/initiatives before a software implementation to reduce the complexity/risks of the project and/or increase the benefits. For example:
- Re-engineer business processes to reduce change impact of a technological solution
- Cleanse/Enrich vendor data
- Implement master data governance processes to ensure continuously high-quality data
Building your business case and roadmap in tandem based on what you’ve learned in previous steps will give you a great idea of the potential of your AP automation initiative before formally going out to market to partner with a specific technology provider.
#5 Decide on Your Sourcing Strategy
Once you have a high-level business case and deployment plan, you are ready to engage with AP automation software vendors. This can take many forms based on the number of solutions you are considering and your contractual/negotiation objectives. More formal approaches such as an RFP can be used when requirements are very clear and multiple solutions can be compared “apples-to-apples”. However, if after your current state and market research exercises there is still lots of ambiguity in your vision, design and assumptions, a more informal and collaborative approach (e.g. agile sourcing) might be better suited to help you achieve your objectives.
When you ultimately settle on a given solution provider, you might need to make small adjustments to your business case and/or deployment roadmap to adapt to the chosen piece of tech. This is normal and to be expected as specific solutions will introduce additional constraints into the equation as you operationalize your tactical deployment plan.
#6 Implement the Solution
The next step is to implement the solution according to your deployment plan. All solution implementations follow a similar lifecycle:
- Design. Design the desired end state business processes, security roles, data structures, interfaces, etc. when supported by the new tool in your business.
- Build. Execute on the design. Configure the solution, develop interfaces, prepare the data loads, etc.
- Test. Run through testing scenarios that validate that the ‘build’ matches the ‘design’ and meets the key requirements and main value drivers of the business case. There can be may testing phases that include different user groups (e.g. project team testing, end user acceptance testing, etc.)
- Deploy. Build the transition plan – both for the technical transition to the desired end state and the human transition to the new process (e.g. communication and training).
- Support. Once deployed, support, measure and continuously improve the solution to ensure you realize the value planned in your business case.
#7 The Importance of Change Management
The above can be fairly simple from a technical perspective as solution providers and integrators deploy these solutions regularly as their core business. However, the biggest challenge in these types of projects is ensuring you equip your teams with the new knowledge and skills required to perform the new tasks required of them in your “new normal”.
This can mean developing digital skills to be able to operate and navigate the new solution correctly but can also be unrelated to the tool. For example, what new types of strategic tasks will you expect of employees who are no longer doing administrative work? How do you ensure they are supported in developing the required skills to accomplish these tasks? It is hard to overstate the importance of change management in these types of projects.
After a few months of operation with an AP Automation solution, you’ll wonder how you were getting by without one… These tools are truly transformational for Accounts Payable teams. The newfound automation capabilities and the associated visibility over the general health of the process at any point will feel like a super power.
It is important to note that to get the full benefits of AP Automation, the whole Procure-to-Pay process should be considered and optimized (e.g. implementing purchase orders and invoice matching as referenced earlier). While automating a Non-PO Invoice process will provide benefits, pairing AP Automation with appropriate Procure-to-Pay processes and governance will generate another level of value for your organization.
Partnering on any or all of the steps in the above journey with an integrator like Fluxym can help accelerate and right-size the process for your needs, optimizing the return on investment in AP Automation.