The Accounts Payable (AP) department is a critical part of business, and efficient AP processing can bring a host of financial and operational benefits. Leading organizations big and small have been increasingly implementing AP automation to drive revenue, competitive advantage, and employee productivity.
Due to this increase in demand, the market has seen an influx of new AP automation tool types and software providers over the past decade, including the rise of cloud-based AP automation tools. And organizations are becoming aware of these innovations.
Levvel Research shows that over 40% of those organizations already using AP automation software reported to be at least somewhat likely to change AP automation platforms in the next year. The Levvel Research 2020 Payable Insight Report has uncovered this fact and much more. Read on to get caught up on the ever-changing state of the AP automation market and see how your organization’s AP efficiency compares to your peers’.
Top Market Shifts in Accounts Payable
One of the most significant obstacles to AP automation for companies, according to Levvel’s survey results, is simply getting started. Specifically, organizations struggle in choosing a vendor and conducting market research. As a result, Levvel suggests that vendors may consider streamlining the entire analysis phase for companies. In the meantime, organizations feeling overwhelmed should consult unbiased industry experts for guidance.
For those organizations that already have AP Automation technology in place, Levvel foresees that providers will need to shift their focus to the next level of innovation and automation that fit the customer’s changing needs.
Survey data shows that an increasing number of organizations are receiving invoices electronically, with 22% of all invoices arriving via supplier portals. On the other hand, EDI and XML invoices have seen a much smaller increase. This means that software vendors will need to invest in strong supplier portal capabilities.
Why AP Automation: Benefits by the Numbers
When it comes to organizations’ top AP issues or challenges, here are some of the top responses from Levvel’s survey respondents:
- 51% reported manual data entry and inefficient processes
- 37% reported manual routing of invoices for approval
- 33% reported lost or missing invoices
- 31% reported invoice to payment matching
- 27% reported inability to approve invoices in time to take advantage of discounts
- 25% reported duplicate invoices and/or payments
- 25% reported that the majority of invoices were received in paper format
Regarding organizations’ top benefits after using AP automation software, here are some of the top responses from Levvel’s survey respondents:
- 64% reported quicker approval of invoices
- 55% reported increased employee productivity
- 55% reported a reduction in paper invoice volume
- 53% reported lower costs related to overall AP processing
- 45% reported Improved visibility into unpaid invoices
- 36% reported reduced invoice exceptions and/or duplicate invoices
- 30% reported better compliance with regulatory requirements
Types of AP Automation Software
When organizations choose to automate their AP processes, they must choose between 3 main types, all with their own unique sets of pros and cons.
ERP-Based AP Software
As the most popular tool of choice for finance departments, ERP-based AP software can be a built-in feature or an add-on to the department’s core ERP software. So why is it so popular? The answer is simple: it’s easiest to install and maintain. Since the ERP is pre-installed, they naturally require a lower investment in implementation than other types of AP automation software. This also means that they need less training, so organizations can skip the learning curve.
But there’s a catch- ERP-based AP software cannot fully automate the AP function. This is because they lack the comprehensive abilities and features offered by other software designed solely for AP automation. ERPs tend to be older than other types of software and are also difficult to update. This means they’re more likely to become outdated and difficult to use. ERPs are often older than other types of software. ERP respondents are almost twice as likely as their cloud counterparts to have had their software for six or more years.
Homegrown Automation Tools
Homegrown automation tools are customizable to fit each organization’s unique needs and technology already in place. These tools may be highly appealing to industries with niche needs. However, they are not without their downsides.
For one, they are far from scalable. As business needs change, homegrown tools need to be maintained, developed, and updated regularly, or they will become obsolete. This can be a huge financial burden for organizations and can be very time-consuming for staff. Compared with organizations with other types of software, organizations with homegrown tools are the most likely to have software that is six years old or greater and report the lowest satisfaction across all respondents.
As the latest and greatest in AP automation software, cloud-based tools are flexible, scalable, and affordable. In comparison with businesses with homegrown and ERP-based software, most cloud-based businesses have adopted their solutions in the past two to three years.
Organizations can conveniently tie their cloud tools to an ERP through integration, despite cloud-based tools’ not being a module of an ERP. Some cloud-based tools even offer special features for specific industries and market segments to better serve their unique needs. Many cloud-based software users also reported that their software helped them achieve their ROI faster than what was anticipated, bring their finance function up-to-date, and expand their international presence.
5 Key Features of Cloud-Based AP Software
- Invoice Receipt: There are several levels of automation that you can apply to the invoice receipt process. More basic cloud-based tools, in short, may use optical character recognition (OCR) to automatically detect text contained in scanned images and convert them to a digital format. On the more advanced side, other tools may combine OCR with artificial intelligence (AI) that can intelligently enter information into the appropriate invoice fields within an ERP. 78 percent of organizations using invoice receipt reported that they felt it was an important feature of their AP software.
- Invoice Management & Workflow Automation: Invoice management and workflow solutions manage how different invoice types are automatically routed for approval and processing. Organizations can also customize their workflows to their unique needs. Over 90 percent of survey respondents view invoice workflow as important, and it has one of the highest user satisfaction ratings.
- Electronic Payments: ePayments software allows organizations to optimize their payment processes by streamlining the often-tedious payment management steps.
- Reporting and Analytics: Reporting and analytics tools provide critical business insights. At their most basic, these tools allow users to export data into another tool, and more advanced tools provide customizable interactive dashboards. Over 90 percent of organizations responded that reporting was an important feature, making it one of the most highly valued AP automation tool features.
- Supplier Management: This feature provides centralized control and optimizes supplier data. Suppliers can use a supplier self-service portal to conveniently upload invoices, check payment statuses, and update payment information. About 80 percent of organizations reported supplier management functionality to be an important feature of their AP software.
What’s Holding Organizations Back from Implementing a Cloud-Based AP Solution?
Cloud-based tools are considered by many to be the way of the future, but many organizations are not making cloud-based software their top priority. According to Levvel’s survey results, here are some of the respondents’ top barriers to adopting a cloud-based AP solution:
- 33% report budget constraints
- 31% report that their current processes work adequately
- 28% report a lack of resources to manage an automated solution altogether
- 26% report a lack of understanding of currently available solutions
- 25% report lacking executive sponsorship/buy-in
- 25% report implementation and training are too time-consuming
- 19% report that there won’t be an ROI
The Latest and Greatest AP Technologies
Artificial Intelligence (AI) and Machine Learning (ML)
AI is a machine designed to mimic the human brain’s thought process and leverage logic. ML takes this process to the next level. It is the machine’s independent ability to learn habits and patterns over time and use this insight to improve upon processes. In AP, these technologies can detect errors and discrepancies, match items across purchase documents intelligently, and learn invoice and supplier habits. As a result, they can help organizations to improve invoice capture while decreasing human intervention.
Big data are sets of data that humans can’t draw significant conclusions from due to their complexity or sheer volume. With AI and ML algorithms at work, however, we can analyze and detect meaningful trends. This phenomenon is known as big data analytics. With these insights at hand, organizations can better understand their organization’s past performance as well as predict future outcomes.
Blockchain’s role in AP relates to ePayments. It is a collection of records that carries and stores unique information related to events and transactions and is expandable. Blockchain is a valuable emerging technology for organizations because it can’t be changed in any way after the event happens. This ability makes it very reliable and secure. While it’s still a very new tool, it has already been effectively used to increase data and money transfer security, reduce latency in transfers between parties, and help facilitate connections for individuals and groups.
Levvel’s AP Automation Tips for Starters
Before you implement any technology, Levvel recommends that you closely examine your processes. This insight will ultimately help you settle on the right solution for you that’s designed to solve your unique problems. If you don’t know where to start, work with a consultant that can help you discover your true needs. Additionally, your department could be facing process and structure-related issues that can’t be addressed by automation alone.
When your organization is ready to take the plunge and move to the Cloud, Levvel offers the following key questions for your consideration
- How many invoices does my organization process each month and does this volume vary by season?
- How many suppliers does my organization have?
- How many people outside of the AP department usually touch an invoice?
- Is my organization’s AP department centralized, decentralized, or somewhere in the middle, and does the invoicing process look different across multiple locations?
- How many approvers are involved in the invoice review process?
- What does the supplier dispute process look like?
- What methods does my organization currently receive invoices in, and in what volumes? What methods does my organization prefer to receive them in?
- Does my organization deal with any specialized invoice types?
- Does my organization conduct business internationally?
- What’s my organization’s industry and annual revenue?
- Is my organization growing?
- Does my organization have any part of its AP process already automated?
- Does my organization have any automation involved in the non-AP back office?
- What is my organization’s ERP system?