Improve Financial Operations Visibility with Accounts Receivable and Accounts Payable Automation

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Today’s increasingly competitive global economy requires businesses to make decisions faster than ever. Businesses need instant insight into the status of their people and processes. But manual, paper-based processes undermine decision-making. Paper makes it difficult for businesses to make smart decisions about their operations and their working capital. Manual processes create inefficiencies and headaches for front-line staff, introduce compliance and security risks, and stymie collaboration with trading partners.

Automating accounts payable (AP) and accounts receivable (AR) processes uniquely addresses the requirements for visibility and reporting, enabling businesses to:

  • Reduce costs and improve cash management
  • Empower worker effectiveness
  • Enable business agility
  • Support strategic planning

This white paper explains the three ways automation improves financial operations visibility and reporting, and details three companies benefiting from automation.

Looking through the Fog

About 45 percent of controllers surveyed by IOFM in 2014 identified the lack of visibility into invoices and payables information as their top payables challenge. Another 42 percent of controllers pointed to difficulty handling, managing and finding invoices as their biggest payables challenge.

Similarly, in a 2013 Aberdeen Group survey of senior finance executives, lack of visibility into invoices and payables documents was the top challenge identified. Nineteen percent of senior finance executives cannot effectively manage cash according to current needs, Aberdeen Group found.

In AR, Aite Group finds that timeliness of payments (identified by 23 percent of businesses) and internal processing delays or errors (17 percent) are the top challenges with receivables processes.

Paper processes limit visibility into system and business health because:

  • Essential information is not captured
  • Data is poorly organized
  • Information is not timely
  • Systems are not well-integrated
  • Decision-makers do not have access to key variables

To be sure, it’s difficult to improve what you can’t measure. For instance, streamlining AP processes requires organizations to know their average time to process an invoice, their number of invoices per vendor, and their number of duplicate invoices. Similarly, improving staff productivity requires managers to know how many invoices and exceptions workers process each day, and the average time it takes a worker to process an invoice.

In AR, organizations need to know the total amount of outstanding payments and expected timeliness of payments. Improving productivity requires managers to gain insight into the time staff spend processing order and payment documents as well as the volume of documents processed. Moreover, managers need insight into time spent resolving customer disputes as well as staff involved in resolution. And to optimize working capital, organizations must have visibility into their accruals, liabilities, receivables, and cash on hand.

Automating AP and AR processes empowers organizations to address all of these challenges.

In fact, 41 percent of senior finance executives cite improved visibility into invoices and payables information as the biggest benefit of AP automation, topping all other benefits, including lower invoice-processing costs and fraud mitigation, according to a 2014 survey conducted by IOFM.

Automating workflows and document processing provides AR professionals with greater visibility into cash flow and helps them identify bottlenecks in various AR processes, such as resolving customer disputes and payment processing, to accelerate day’s sales outstanding (DSO). Reducing DSO (identified by 54 percent of senior finance executives) and improving cash flow forecasting (42 percent) are the top priorities of senior finance executives, according to a 2014 survey by the Association for Financial Professionals (AFP).

Seeing Things More Clearly

Finance executives are focused like never before on improving financial visibility.

A whopping 68.9 percent of controllers surveyed by IOFM indicated that improving visibility into cash flow and cash management was among their priorities for the coming year. Additionally, 66.4 percent of controllers reported that developing effective measures to gain visibility into overall performance of finance and administration functions was among their top priorities for the coming year, according to IOFM.

This focus on enhancing visibility is no surprise when you consider that controllers rank cash flow analysis as their most important job function, according to 2014 research by IOFM. In fact, most organizations regularly track and/or report on cash flow against current and future expenses, according to IOFM’s 2014 Senior Finance Executive Report. Payments management, regulatory compliance and risk mitigation, and liquidity management — other activities that benefit from improved financial visibility — also ranked among the most critical job functions of controllers.

Visibility into business and financial information also separates best-in-class companies from their peers. Aberdeen Group reports that best-in-class companies have more than four times the rate of visibility into overall organizational cash flow on a daily basis, compared to average companies.

It is for these reasons that solutions for enhancing financial visibility top the list of technologies controllers plan to deploy in the coming year. Sixty percent of controllers surveyed by IOFM indicated that electronic approval and exceptions workflows were among their technology initiatives for the coming year, topping all other technologies. Additionally, 44.8 percent of controllers reported that deploying an image repository for document archival and retrieval was among their technology priorities for the coming year.

How Automation Improves Visibility

Automating accounting processes improves visibility into system and business health. Automation, as offered in products like an enterprise content management (ECM) system, centralizes important business content in one secure location, delivering information whenever, and wherever, users need it. Once information is under control, organizations have total visibility into the status of processes, documents, and content as well as compliance requirements.

ECM solutions combine five key components to drive improved visibility through automation:

  1. Digitize paper documents: Paper documents can be scanned into the system wherever they enter the organization, whether at a remote office or in a central mailroom.
  2. Import electronic documents and information: Electronic documents are captured in their native format, directly from enterprise applications such as an electronic invoice portal.
  3. Extract data from documents: As documents are captured, relevant data is pulled off the page and shared with other systems, saving the time associated with manual data entry.
  4. Route documents based on pre-established rules: Documents are electronically routed to processes, databases or systems for approval and/or exceptions handling based on preconfigured business rules. Users have the ability to define and manage workflows based on their unique business rules as well as the requirements for specific document types.
  5. Integrate with systems of record: Documents and information are seamlessly delivered to an ERP system and other financial systems to accelerate posting and streamline research.

Importantly, ECM solutions include four capabilities especially designed to improve visibility:

1.Business activity monitoring

Both internal and external events cause variability in business cycles and processes. Business activity monitoring provides real-time visibility into the status and results of critical financial processes. Dashboards display configurable charts and threshold options to empower users to automate business process analysis and adapt to changing business conditions.

When thresholds are met or surpassed, users are alerted of the status change with visual, colorcoded notifications, providing the opportunity to act quickly and minimize any negative impact on cash flow. The actionable information provided by business activity monitoring enables users to more quickly address workflow bottlenecks and exceptions, make better-informed business decisions, and identify areas for improvement.

2.Reporting dashboards

Legacy systems typically provide limited financial information that is delayed until report runs are complete. Interactive reporting dashboards provide financial operations with real-time visibility into system, process, and business health, allowing users to:

  • Monitor performance
  • Analyze trends and exceptions in real-time
  • Make proactive business decisions
  • Review license usage

Users can quickly create dashboards, highlighting the performance data that is most important to them without the need to engage IT resources. Data can be presented in charts, graphs, scorecards, maps and more, and can be shared among teams, departments or an entire enterprise; or saved, printed, exported to Microsoft Excel or uploaded to a document management system for archival. Granular security and permissions also protect sensitive content and control how users interact with dashboards.

3.Report services

Pre-configured reports provide users with valuable information into system health and business activity. The reports enable users to analyze trends, share productivity metrics across the organization, and make proactive decisions based on data. Data can be presented to users in a variety of formats including tables, bar charts, and pie charts. Reports can be exported in XML, HTML, or Excel formats or saved as PDF, JPEG, or TIFF. Pre-configured reports support database security by not requiring users to have administrative database rights. Organizations also can create custom reports based on their needs.

4.Exceptions reports

Exceptions reports provide users with information on missing, aging, or expired content. By comparing primary and secondary documents, exceptions reports enable business users to:

  • Confirm the existence of required documents
  • Identify broken transactions
  • Validate record relevance
  • Promote data integrity
  • Rapidly audit an entire repository

Exception items can be automatically routed downstream for review. Automating exception reporting provides assurance that all required and/or matched documents are stored and indexed properly, in turn, streamlining business processes and supporting compliance initiatives.

These capabilities provide the insight into the status of people and processes required to make smart operational and working capital decisions while enhancing efficiency, compliance, and security.

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