“From a strategic perspective, cash management is suddenly on the front page of management’s priority list,” said Dan Dehner, a partner at CFGI, a financial consulting firm and NetSuite Alliance Partner.

Why? Because when times are good, companies tend to become lax about their back-office finance processes. When the business climate shifts and an economic downturn is either looming or already happening, those organizations must pivot to conserving cash.

And accounts payable is the gatekeeper for how companies manage their cash flow.

“There’s nothing like an economic downturn to expose and exacerbate weaknesses in the way organizations go about paying their bills,” said Dehner. Not to mention rising interest rates, persistent inflation, and supply chain disruptions.

“If there’s one thing we’ve learned over the last three years, it’s that finance leaders need to be ready for anything,” said Mark Brosseau, president at Brousseau and Associates. “They should also know that if there’s one way to achieve financial stability, it’s by leveraging your accounts payable [AP] function.”

Throttled by Manual AP Processes

Excessive manual processes can derail an AP strategy. Yet the Institute of Finance and Management found that 84% of a typical AP practitioner's day is spent on manual transaction processing. Studies also show that very few AP departments are automated to the point where transactions can flow directly to their enterprise resource planning (ERP) platforms without human intervention.

In fact, most AP employees spend their time double-keying data into different systems, shuffling papers, and chasing down information. This takes time that would be better spent on value-added, growth-generating activities like analyzing data, collaborating with procurement departments, or strengthening supplier relationships.

“Most CFOs would like their AP teams to be able to spend their days on exactly the opposite types of activities that they’re consumed with today,” said Dehner.

The challenges don’t end there. Manual-intensive AP processes also:

Create massive inefficiencies for a department that’s expected to help with cash forecasting, put information into context, and provide controls over finances.

Cost a lot of money and time: “AP invoice approvals are taking longer these days,” said Brosseau. “This has a lot to do with the difficulty in adapting paper-based processes to today's remote work environment.”

Can lead to job dissatisfaction at a time when new AP practitioners are difficult to recruit and retain. According to Brosseau, one-third of these professionals are currently looking for jobs or plan to within the next six months.

“When you put all these inefficiencies together, it's no wonder that PwC says that $1.5 trillion is being held on global balance sheets,” said Brosseau. “The culprit is the friction in corporate finance processes.”

This is where automation comes into play. When cumbersome approaches are replaced with automated solutions, the time it takes to approve and process vendor invoices can be reduced substantially. Rather than sifting through emails to find invoices they need to approve, for example, C-level executives and managers can receive notifications on their mobile phones and approve invoices with a couple of screen taps.

“When you can get smart insights at the fingertips of the people who need them, those professionals can make better decisions faster,” Brosseau said. Those leaders can also be more adaptive to changing business requirements and economic conditions.

Automation also helps AP departments optimize cash performance by enabling an optimal payment mix for suppliers and a rationalization of payment terms. When they replace their manual systems with an automated approach, companies gain better visibility into cash flow activity and can adjust accordingly. Other benefits include a better track record for on-time payments, the ability to capture early-payment discounts, and more accurate cash forecasting reports.

Some companies opt to implement Tipalti (opens in new tab) once their volume of outbound payments grows significantly or when they expand operations internationally. Top signs that it’s time to move to an automated AP approach:

  • A growing number of invoices numbering hundreds or thousands per month;
  • Supplier/vendor onboarding is being handled manually via email or phone;
  • You manage multiple entities, send money in local currencies, or must track foreign exchange rates; and
  • The company needs a touchless, seamless billing process — including self-billing capabilities.

4 Steps to Take Right Now

Companies that are ready to build a successful, automated global AP strategy can get started with these four steps:

1. Get commitment from the top. Buy-in from senior management is imperative to the success of an automation initiative.

“Executives have to show their commitment to turning AP into a strategic powerhouse,” said Dehner. The CFO plays a particularly vital role at this stage and must not only have a “seat at the table” but should be the one who drives the initiative and ensures that the right systems are in place both for today and for the future.

2. Establish a culture of automation from day one. “Nothing moves the needle like automation,” said Dehner, who advises companies of all sizes to establish a culture of automation with tools that effectively eliminate the need for manual AP management processes. With NetSuite, for example, companies instantly get better insights into cash flow and improved vendor management.

“You want to make sure you’re using the right tools at the right time as your business grows, all the way through the entire company lifecycle,” Dehner added.

3. Help front-line staff understand the benefits. The next step is to get buy-in from your team, which may be apprehensive about the prospect of replacing manual processes with automation. This is an important step because these are the employees who know how the existing AP workflows are set up and what is and isn’t working. Take the time to explain how automation will free them up to be able to handle more strategic work and tasks that they were hired to do. And get these valued team members involved in selecting the tools that they’ll be using.

“These are the people who know where the pain points are,” said Brosseau. “They also don’t want to do manual tasks any more than anyone else does, so they can get pretty excited about automation.”

4. Track your key performance indicators (KPIs). A global AP strategy isn’t a “set it and forget it” exercise. It takes good KPI tracking to get it right, yet about 40% of finance departments don't track any metrics at all.

“Without those metrics, it's hard to know what's working and what's not to be able to chart your progress as you implement improvement strategies or to even build a business case for automation,” said Brousseau. Once you start tracking metrics like total number of invoices processed, average cost per invoice, and the time it takes to process an invoice, you’ll be able to track which areas are or aren’t working, adjust as needed, and report back to senior management with the results of the automation investment.

Future-Proof Your Organization with AP Automation

No company needs an overly complex finance or accounting department, yet that’s exactly what organizations get when they rely too heavily on manual AP management processes. In many cases, companies are literally “stuck” on those systems and missing out on the key benefits of automation.

“Trying to convince companies to spend money to save money later is a tough sell, but that's really where the very strategic importance of the CFO comes in,” said Dehner. “The CFO is in a good position to be able to get other senior managers to understand that ‘yes, sometimes you need to spend money to save a lot more money later.’”

By putting an ERP like NetSuite in place, companies can make their AP processes more efficient, improve cash management, create stronger bonds with their suppliers, and give financial employees the power to add value to the overall organization.

Another way companies waste time: manual fixed asset management. Learn how to do it better by joining our webinar,How To Manage Fixed Assets with Less Risk, Expense, and Effort (opens in new tab).