Published in the CMA Update Magazine | Summer 2009 - by Catherine Dahl, CMA

In your organization, has a vendor invoice ever sat under the paper pile on someone's desk? Have you ever paid a bill twice because a duplicate invoice slipped through? Do you store your historical accounts payable files in boxes off -site or in some faraway room, resulting in a groan when a request for those documents comes through? Does your company make copies of invoices and send them to multiple locations for approvals at various levels of management?
If you answered yes to one or more of these questions, your organization suffers from "accounts payable pains."

Not to worry, there is a solution. Automating your accounts payable process and workflow can eliminate these pains and save your organization significant resources at the same time.

Analyzing the cost and efficiency of the payable process rarely gets the attention it deserves in small to mid-size organizations. And rarely is there something truly evolutionary in the field of accounting that actually leads to measurable savings, is easy to do and relates to accounts payable. But the automation of accounts payable is precisely that: new, efficient, capable of saving significant resources - financial and non-financial - and, as an added bonus, green.

Although this technological process has been available for some time to Fortune 500 companies, in recent years it has become available to small and mid-size companies in simple and affordable platforms. Thanks to the Internet and web-based outsourcing, any company can take advantage of workflow process automation.

What is accounts payable automation?
Accounts payable automation (APA) is the final frontier in process automation. Most companies still code, approve and file their vendor invoices by hand. APA changes the manual workflow into a paperless, digital process.
In other words, invoices are centrally scanned into a digital format via optical character recognition (OCR) software, and routed for coding and approval via the Internet and email. This process uses a web-based software application, "SaaS," as well as an off-site, secure document archival system. The OCR component eliminates the need for manual data entry, since digitally read, coded and approved invoices are then imported into the accounting system.

Measurable benefits of automation
• Labour cost-savings - OCR capture and integration into enterprise resource planning (ERP) systems such as SAP or accounting software, such as QuickBooks, can significantly reduce the number of full-time equivalent (FTE) accounts payable clerks needed. The alternative is to increase payables volume without adding more staff .
• Increased utilization of cash discounts - most manual processes are too slow to maximize these opportunities.
• Improved payment accuracy - APA completely eliminates duplicate vendor payments.
• Improved document retrieval and storage - the best APA systems are database archival systems. Finding documents is as easy as opening a web page and searching - extremely fast and simple.
• Reduced operating costs - APA can result in the elimination of physical paper storage, as Canada Revenue Agency currently accepts PDF copies for tax purposes. APA also reduces invoice routing (i.e. mail and courier) costs and the time staff spend making multiple copies of vendor invoices.

Additional intangible benefits of APA
• Faster invoice dispute resolution.
• Easier rerouting or repackaging of accounts payable backup documents to customers.
• Reduced business disruption after a disaster, as documents are off -site.
• Easier audits.
• Better regulatory compliance, as delivering vendor invoices to electronic repositories guarantees important data is recorded, properly validated and easily accessible to the audit process.

Benefits of using SaaS applications over proprietary software
Why use a web-based option (SaaS) over purchasing or designing an in-house software system? Generally, cost is the reason, but there are many other ways SaaS makes the APA process accessible to smaller companies.
• Lower cost of ownership - this cost is borne by the outsourcing company.
• No installation or maintenance of hardware or software.
• Enhanced data security - most SaaS vendors have 24-7 physically secured and electronically secure data storage at a level most small to mid-size companies would find cost prohibitive.
• Affordable bandwidth.
• Disaster recovery/business continuity, as data is hosted and backed up off -site.
• Ease of upgrades, as this rests with the APA vendor.
• Continual access to new program features.
• Reliable service levels - SaaS providers typically monitor their systems 24-7 to proactively identify and fix potential problems.

How quickly it adds up: a case study
Let's assume ABC Company has $1,500,000 in annual vendor payments, and two accounts payable clerks who process 1,000 invoices a month. The average clerk can usually process as many as 600 to 900 invoices per month with a manual data entry system (source: By the Numbers: Accounting, OSBC, 2005). The all-in salary of one FTE is $36,000 annually, or $3,000 a month. ABC Company has access to vendor discounts of one per cent to two per cent on about 54 per cent of those invoices, but only captures 63 per cent of those available, a typical situation (source: IOMA's benchmarking study, 2005), which adds up to $299,700 in total vendor payments that are available for missed early payment discounts.
ABC Company is typical in that it loses 0.03 percent of total payables through unrecovered duplicate payments (source: IOMA's benchmarking study, 2005); also in that the company pays $250 per month for long-term off -site storage.
Table 1 on page 14 outlines how much an APA system could save ABC Company. As illustrated by this example, a good APA system will pay for itself many times over. Keep in mind each company has its own unique set of processes and problems.
When considering this type of automation, a detailed analysis is recommended and can be furnished by your APA provider. In addition to easily measured savings, a company should consider the soft costs saved by a reduction in frustration and "pains" that exist outside the accounts payable department.

Who is the leader?
There are several APA options out there today to choose from. Table 2 on page 15 assesses some of the more popular choices.

Three keys to successful adoption of APA
When considering automating the payables process, there are three critical keys to success:
1. Plan ahead - analyze your process, cost out the inefficiency of your current system, make an implementation plan and know your workflow.
2. Assess your organization's ability to adapt to change. Going paperless is not as simple as it seems, as we are so used to paper.
3. Have a centralized routing system for all vendor invoices. To gain the efficiencies of an APA system, paper has to be discarded after it is scanned - or, mandate electronic vendor invoices.