Why Accounts Payable should be the first stop in your finance automation journey

The success of every enterprise depends largely on how well it is able to control costs. The implementation of finance automation technologies that enable greater automation supports this strategic goal and decision-makers are right to look for opportunities in this space.

A business function that stands to gain a lot is the procure-to-pay (P2P) cycle which spans many processes and stakeholders in the organization. Within P2P, Accounts Payable processes can be considerably improved through finance automation, especially if invoices are handled with a strong reliance on manual inputs.

The advantages of finance automation are well-known – and business leaders realize that they are necessary. The dilemma facing organizations that want to automate or upgrade their automation systems is whether to tackle the entire P2P cycle head-on or go for a phased approach with AP automation.

The endpoint and ideal scenario is the automation of procurement, but in this blog we argue that it is more cost-effective and efficient to begin your finance automation journey with Accounts Payable.

We advance four interrelated reasons for this. First of all, AP Automation is “an easy win” with a quick and clear return on investment (ROI). Secondly, AP Automation projects are smaller in scale than P2P initiatives, so acceptance, training, and adoption are typically easier to achieve. You might even consider AP automation as a necessary test run for broader P2P automation. Thirdly, specialized AP Automation software is currently more advanced and complete than the broader procurement solutions on the market. And finally, the effectiveness of your procurement efforts can be either amplified or undone by Accounts Payable. AP Automation will improve your procurement processes right off the bat, whereas painstaking efforts to transform P2P can still be frustrated by problems with Accounts Payable.

We shall address this last point first.

1. There is no optimal procurement without optimal AP

Procurement can do the best job possible in sourcing vendors and negotiating terms, but all this counts for little if there is friction over payment, which is the job of Accounts Payable. Any inefficiencies or errors that occur in AP processes will inevitably hamper the efforts of procurement as vendor relationships come under pressure.  

The pain points can be relatively minor. Vendors do not have visibility on the status of their invoices and are forced to email you or get on the phone for updates. This is an irritation, not a dealbreaker. What will alienate vendors is frequently late or erroneous payments which tend to occur when invoice handling processes rely heavily on manual inputs, exposing them to risk of error. A lack of adequate control and finance automation can also lead to failures in compliance. While this does not directly impact vendor relationships, any damage to your reputation will weaken the hand of procurement in negotiating terms.  

The point is that these problems have their origin in Accounts Payable, and that only AP Automation can help you overcome them. Accurate and timely payments, coupled with end-to-end transparency, mean that vendors like doing business with you and are predisposed to offer favorable terms. In other words, if your AP invoice handling process is not automated it will be harder for procurement to deliver a performance that is consistently optimal. 

This is why AP Automation lays the groundwork for procurement transformation. Once AP processes are streamlined, procurement can confidently commit to timely payments and take advantage of early payment discounts. This positive payment behavior, coupled with seamless collaboration, enhances vendor relationships, giving procurement the leverage to negotiate improved terms.

2. It is easier to get buy-in for finance automation through AP

The success of any digital transformation depends on how readily the change is accepted and adopted by stakeholders, both within your organization and your wider business ecosystem. Let’s take a brief look at each: 

Internal stakeholders. The transformation of Accounts Payable impacts a smaller group of colleagues than a wholesale automation of procurement, making it easier to implement and learn from the mistakes you make. Testing the waters with a smaller undertaking such as AP Automation will give you insights that can be scaled to other areas, and broader transformational initiatives. There is always resistance to change, but if that change can be implemented rapidly and be seen to yield positive results, there will be less friction next time around when you are ready to tackle the more complex challenge of procurement transformation. 

External stakeholders. An incremental, AP-first approach is equally advantageous when seeking buy-in from external stakeholders, particularly vendors. AP Automation means vendors encounter far less friction and error in getting their invoices paid so they have every incentive to embrace the change.

3. AP automation in finance automation is a quick win

AP Automation delivers its return on investment in identifiable and indirect ways. Shifting from manual to automated input saves resources and speeds up the invoice-handling process, resulting in a lower cost per invoice handled. The late payment fines or the compliance penalties that did not happen as a result of automation are not part of the ROI arithmetic but make a compelling business argument, especially as AP Automation projects can be completed in a relatively short timeframe. 

Compare this with broader Procure-to-Pay (P2P) or Source-to-Pay (S2P) transformations which are more intricate in scope, take much longer to realize – and therefore carry greater risk. Nothing undermines your project ROI more than delays in execution. The risk of delay is much lower with AP automation.   

The negative consequences for your business also include: 

• Loss of competitiveness. Delayed transformation can make your business less agile and responsive, impacting competitiveness in a dynamic market landscape. 

• Negative vendor relationships. Vendors and partners expect efficiency. Delays in payment processing or communication can strain relationships, leading to dissatisfaction. 

• Employee turnover: Delays in adopting efficient processes may lead to frustration among employees, risking talent loss.  

The positive flipside to this is AP Automation which results in:  

• Staying ahead of the pack. Swift implementation ensures your business remains competitive by quickly adapting to evolving market demands. 

• The reputation you deserve. Efficient AP processes contribute to timely payments, fostering positive relationships with vendors and partners. 

• Talent retention. Automation frees up time for professionals to focus on strategic work, improving job satisfaction and reducing churn. This shift enhances the overall work environment, making AP Automation not only a technological upgrade but also a strategic investment in retaining skilled talent. 

A successful AP Automation project builds confidence among key stakeholders, both internal and external. As the benefits of AP Automation become tangible, your stakeholders are more likely to view transformation programs overall as a strategic investment.

4. The right finance automation solution for AP exists

In many cases, procurement automation  tools are by their very nature much less granular than specialized AP solutions which means the benefits of automation may not be as transformative – and will also take much longer to realize.  In terms of your business case, the ROI will be delayed and much less clear.  An AP-first approach implemented with the right AP Automation solution has decisive advantages, including: 

• Deep expertise in AP. These solutions are designed specifically for Accounts Payable, so they have a deep understanding of the process and can automate it more effectively than general-purpose ERP or P2P suites. Cevinio is an example of such a specialist solution. Within this space, we are focused on the needs of companies with complex AP structures.
   
  But won’t an AP-first approach limit integrations with other systems? Not at all, because Cevinio solutions connect with all your ERP systems, from different providers and different versions. 
   

• Enhanced visibility. Specialist solutions can provide real-time visibility into AP processes, which helps to identify and address problems quickly. With the Cevinio Analytics Suite, for example, AP teams get detailed information on the invoice process and so improve it over time. 

Other benefits of AP Automation include improved compliance, and better cash flow management. Do you want to achieve these benefits within a relatively short timeframe? 

For many finance leaders, the answer is a resounding yes – and they embark on their finance automation journey by tackling Accounts Payable first. 

A fast and smooth implementation with Cevinio

Cevinio ensures that the implementation process runs smoothly and enables you to achieve your business goals. We follow our Implementation Playbook, which has guided numerous international customers towards successful project delivery. This playbook includes the following steps: 

• We provide comprehensive education to our clients right from the outset, ensuring active participation and optimizing outcomes in blueprint and design. 

• We focus on core flows and then pick up speed. Through the execution of a pilot, we demonstrate the effectiveness of the global base design, establishing an optimal foundation for a successful and seamless progression.   

• Having established the core, it’s time to initiate the deployment. Through configuring localization specifics and implementing functional enhancements, we roll out the solution systematically in phases across the global Accounts Payable infrastructure.

Conclusion 

Business leaders know they have to automate their finance processes to remain competitive and optimize compliance. If it is your ambition to eventually automate your P2P cycle, it might seem counter-intuitive to start with Accounts Payable which effectively concludes the cycle. 

However, we have shown that AP automation is in fact a sensible and cost-effective place to start, not least because current general-purpose P2P solutions are not sophisticated enough to make the most of automation.  Somewhere along the line, a P2P transformation project would require the help of an AP Automation solution to achieve the wide-ranging benefits on which your business case is built. 

If you would like to know what Cevinio's AP Automation platform can do for your organization and what an AP automation project would involve, please get in touch.