How to Purchase the Right AP Automation Solution for Your Business
When it comes to improving the way that suppliers are onboarded, invoices are processed, and suppliers get paid, nothing can match the results provided by accounts payable (AP) automation.
According to the Institute of Finance and Management (IOFM):
- Highly automated AP departments spend less than one-fourth as much to process a single invoice as their peers with little or no automation.
- Highly automated AP departments process eight times as many invoices per full-time equivalent as their peers with little or no automation.
- Highly automated AP departments approve an invoice in less than one-fourth the time as their peers with little or no automation.
- Highly automated AP departments experience fewer duplicate payments and other errors as their peers with little or no automation.
- Highly automated AP departments capture seven times as many early payment discounts as their peers with little or no automation.
But these benefits are not possible without the right AP automation solution.
This article provides a guide to buying a solution that will deliver optimal results.
How to buy an AP Automation solution
There are six steps to buying the right AP automation solution.
- Step #1: Assess where you stand. No doctor would prescribe medication without first determining a patient’s ailment. The same premise is true for AP automation. The first step in automating your department is to assess how things currently work. Collaborate with frontline staff and other stakeholders to identify points of pain, uncover process gaps that require manual intervention, and to learn what information stakeholders with they received from AP. Dig into the processes currently required to validate and approve invoices and pay suppliers. You also want to establish baseline metrics for operational performance that can be used to build a business case for automation and to measure the progress you make with automation. And you want to honestly evaluate any existing AP automation systems.
- Step #2: Establish a project team. There’s strength in numbers, the old saying goes. And having an effective project team will help ensure that your AP Automation initiative is a huge success. Assemble a team that includes representatives from key stakeholders. Limit the number of team members so decision-making doesn’t become unwieldy. Determine goals for the project team and responsibilities for each team member. Designate a member of the project team to periodically update senior management on the progress of the initiative.
- Step #3: Determine your goals. You would never drive in an unfamiliar city without a map or GPS. So, why embark on an AP Automation project without knowing where you are going. Work with your project team to determine goals for your project, based on the results of the assessment you conducted in Step 1. Try to align the project goals with overall objectives of procurement and other stakeholders (e.g., treasury may be looking for ways to extend Day’s Payable Outstanding). Be sure the goals of the AP Automation project reflect the strategic objectives senior management has set for the organizations. Create short-term and long-term objectives for the project with clear timelines and measurable outcomes.
- Step #4: Set project requirements. Once you understand your operations needs and project goals, it’s time to define what you’re looking for in an AP Automation solution. This list will help you score vendor solutions. Collaborate with frontline staff and your project team to determine and prioritize critical functional and technical requirements (e.g., invoice data capture, invoice approval workflows, the ability to pay suppliers with virtual cards). Manage expectations by soliciting feedback from frontline staff and stakeholders on “must-have” features and functions and making clear that budgets, resources, and time may limit what’s possible in the initial deployment. When prioritizing features and functions, be sure to consider the impact they will have on your department, stakeholders, and the enterprise.
- Step #5: Build your business case. Winning senior management approval can be the biggest impediment to AP Automation. Developing a business case that spells out the operational and strategic benefits of automation can convince the biggest skeptic. Articulate the challenges your department currently faces (don’t assume that senior management is aware of the issues uncovered during your operations assessment). Be sure your business case includes hard dollar savings (e.g., labor savings), soft dollar savings (e.g., less overtime), and cost avoidance (e.g., less risk of fraud). Use benchmarks from your technology provider, trade groups and other sources to show the potential impact of automation. Include a financial analysis with a clear Return on Investment (ROI) calculation. Be sure the business case reflects the strategic goals of senior management, and not just departmental objectives. Develop scenarios that show senior management the best-case, worst-case, and most-likely outcomes. And spell out how you plan to measure performance against the business case.
- Step #6: Evaluate prospective technology vendors. There are lots of technology vendors out there. Score prospective vendors on how they address your functional requirements. Consider each vendor’s technology, layered services, track record in your industry, product roadmap, and financial standing. Ask vendor references whether they achieved ROI and about the support they receive. And be sure that prospective vendors can meet your budget.
Following these steps will help ensure that your department buys the right AP Automation solution.
Start on your way towards full AP Automation.
Automation is a top priority for AP departments of all sizes, and for good reason. AP Automation can reduce overhead, free up staff time, improve accuracy, accelerate cycle times, strengthen supplier relationships, and mitigate the risk of payment fraud and compliance issues. But choosing the wrong AP Automation solution can set your department back. Following the steps in this buyer’s guide will help ensure that your AP department selects an automated solution that will deliver optimal results.