May 2019 — The strategic value that Accounts Payable can bring to an organization is no longer questioned as it was for decades in the past. In fact, in a recent survey of 118 AP and Finance professionals in the Microsoft Dynamics ecosystem conducted by Dooap, AP leaders were asked ‘how valuable their AP team was to the greater organization?’
By Bob Cohen
Ninety-four percent (94%) of organizations perceived the AP function as either “valuable,” “very valuable,” or “exceptionally valuable” to organizational operations. While this shows the great progress that has been made in the way AP is perceived, sadly, a majority of organizations in the survey are still very tactically- and transactionally-focused in nature.
Data entry is rampant. The majority of Dynamics customers are struggling with the manual receipt and entry of invoice data. Greater than two-thirds of survey respondents said they have limited automation of both Invoice receipt and data entry. When it came to invoice approvals and routing, the data was, not surprisingly, very much the same. One-third of all companies are manually approving and routing invoices and only 24% say they are “very” or “fully automated.”
Understanding the current state of the AP function is one of the most important steps in technology transformation, and also an easy one to skip in the rush of selecting a new solution.
Technology plays a key role in fostering the strategic importance of accounts payable. Without the right solutions in place or the executive support necessary to pursue the proper technology, AP is likely to remain relegated to the back office. Leading AP teams, on the other hand, have successfully made the case that AP can provide value far and above the efficient processing of supplier invoices.
Accounts Payable departments have traditionally lagged other functional areas in their use of automation. Manual, paper-based AP processes can work for a business but they do not work well enough for a modern one. As a result, an increasing percentage of executives have started to take a hard look at their internal business processes in a bid to drive increased efficiencies and cost savings. This has, in turn, led to a greater focus on departments like accounts payable.
The AP team faces several key obstacles on the road to achieving greater relevance and impact within the enterprise. These include the amount of paper in the process, the length of time it takes for an invoice to be approved, and poor visibility into AP data. Each of these is a significant barrier that AP departments must surmount to become more strategic; and each is linked, in many ways, to the others. For example, a lack of visibility into AP data can lead to exceptions taking longer to resolve, which extends the time it takes for invoices and payments to be approved, and then increases invoice processing costs. These top challenges facing AP (see Figure below) are not insurmountable, but they will require a concerted effort to address.
The Accounts Payable department for many years was viewed simply as a tactical function whose primary responsibility and value to an organization was to pay bills. Little thought, if any, was given to how to transform the function to a strategic, value-adding contributor to the overall business endeavor. However, this has begun to change and the perception, along with the realization of the greater value locked away in AP, is beginning to be more and more appreciated every day. Most Microsoft Dynamics shops have some automation but still remain very manual and tactical in nature. Everyone will benefit in the long run, from the CFO all the way down to the line-of-business manager as the AP function leverages technology and improves the AP function and its strategic importance to the organization.
About the Author
Bob Cohen, Research Director at Ardent Partners, leads Ardent's coverage of Accounts Payable, Business Networks, and Travel and Expense Management. He is a seasoned professional with more than fifteen years of experience helping enterprises transform their Source-to-Pay operations.
Research Report: The State of AP Automation in the Microsoft Dynamics Ecosystem
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