Automating the invoice processing and payment (AP) workflow is becoming a top priority for today’s finance leaders, and for good reason: highly automated accounts payable departments process invoices faster, more accurately, with better control, and at a lower cost than their peers that are still using a manual, paper-laden process. But many organizations miss out on the full benefits of automation because they pick the wrong technology, or they take the wrong approach to deploying it. A contributing factor is that procurement automation, payments automation, and invoice payment/AP automation are sometimes used interchangeably and there seems to be a lack of clarity about how to differentiate the three.
Let’s see if we can shed some light.
Before you start your journey to automating your finance workflows, ask yourselves and align on, “What is the primary goal in automating our AP workflow?” From there, determine what the best solution would look like. You may discover that what you actually need is different than what you originally thought. For example, Yooz and Sage Intacct client, Tim Carter, CFO of Salsarita’s Mexican Grill, started a search for an automated document processing solution. What he discovered was that the company really needed a complete invoice processing and AP solution to achieve its business goals and gain the most efficiency.
So, what’s the difference?
Procurement Automation: Procurement (P.O./P.R.) is the first step in the P2P process. Automated solutions guide employees across the buying process. Another way to refer to it is “spend management.” It is a portal where all vendors and their products are listed in one place, so it is easy to compare prices and any promotional or volume discounts. It also provides comprehensive insight into spending and prevents rogue purchases. These types of dedicated solutions typically require a several months long implementation and considerable IT involvement. It also requires participation from the vendor, such as entering the P.O. and generating the invoice. Procurement automation tends to make sense for large, decentralized companies.
Payments Automation: While procurement automation is the first step in the procure-to-pay (P2P) process, payments automation is the final step in the P2P process and solves for signing and mailing physical checks. It is an integrated solution that allows organizations to make check, ACH, virtual card, and wire payments, taking automation a step further than “okay-to-pay” once invoices are received, processed, and approved.
Seems simple, right? Not necessarily. In many cases, the payments automation solution is integrated with the P2P or AP automation solution. In some cases, data capture (powered by optical character recognition, or OCR) and invoice processing is outsourced. Method of payment comes into play: Depending on the payment partner, there might be an interchange fee for credit card processing—paid by the vendor—with a portion of the fee kept by the payment partner and a portion passed on to customer. ACH (automated clearing house) is the least expensive and fastest way to make payments.
There is also the matter of logging in and out of different platforms that are not seamlessly integrated. It can get tricky when, for example, a client uses an outsourcer to enter invoices into its payment automation system. From there, the payment is made by a different system and the user must manually download the remittance information and upload it to their ERP (enterprise resource planning). Consequently, the user has to log in and out of three different systems!
AP Automation: We reviewed procurement automation—the first step in the P2P process, and payments automation—the final step in the P2P process. What about all the invoice processing steps in between? That’s where accounts payable (AP) automation comes in. With a complete end-to-end solution, like Sage Intacct Marketplace Partner Yooz, seamlessly integrated with the Sage Intacct ERP, there is one platform and one login. Easy!
Here’s how it works with the most sophisticated AP automation solutions:
Once invoices are received, the system will read (leveraging optical character recognition, or OCR), GL code them, and decide which workflow they need to follow for approvals. When invoices are approved they are automatically synced into the ERP system, completely simplifying the Pay and Export steps (in comparison to the complicated scenario we reviewed in the Payments Automation section above). Here’s an example: The client runs a payments report from the AP automation system. Once payments are approved, all necessary information is exported to your integrated payment partner’s system to remit payment. The payment partner then sends remittance information back into the AP automation system which pushes to the Intacct ERP. One login. One set of master data held in the ERP or accounting system. All seamless to the client.
Remember, before jumping right in to talking about the features and benefits of any automation provider you are considering, know what your primary goal is in automating your AP workflow. A good place to start might be to ask yourself, “What part of my process costs the most time and/or direct expense? And from there, determine what the best solution would look like.