Many organizations keep seeking ways to reduce costs within accounts payable through process simplification and automation. In recent years, organizations have embraced technology and adopted digital solutions to advance their accounts payable processes through automation, streamlining manual and labor-intensive processes.
Through our experience supporting organizations to help improve their accounts payable outcomes in Microsoft Dynamics 365 (D365) Finance & Supply Chain Management and adopt digital solutions, we found that there are eight focuses to consider before embarking on an accounts payable automation initiative. Giving attention to these key areas can support stronger outcomes for both your current accounts payable organization and investment in a digital solution.
1. Purchasing Cards Are Used for Small-Dollar Expenditures
By establishing the practice of using purchasing cards (p-cards) for low-dollar purchases, organizations can simplify the procurement process by purchasing directly from suppliers for small-dollar expenditures that do not warrant a complex procurement process. P-cards can also reduce the administrative burden by lowering invoice volumes and simplifying reconciliation and accruals functions.
2. Purchase Orders Are Issued for Each New Order
Although it may appear initially as though the procurement and accounts payable processes will become more complex and time-consuming, when purchase orders are issued for each new order (typically above a dollar or item threshold), organizations can make sure that financial approvals are occurring in advance of purchasing, gain insight into cost commitments, and simplify and expedite the invoice process.
3. Three-Way Matching Is Applied for Purchasing Scenarios Where It Adds Value
In many organizations, invoice receipts can sometimes serve as the initial trigger indicating that receipt confirmation has not yet been completed. When this happens, accounts payable processing may slow down, and the control benefits of three-way matching can be diminished. With that in mind, there are situations where it may be appropriate to consider alternative approaches to three-way matching, such as for non-inventory purchases, e.g., utilities and services; one-time purchases; or low-dollar, routine transactions with established suppliers.
4. Invoice Approval Workflows Are Strengthened & Streamlined
Establishing system-supported workflows that systematically leverage delegation of authority or signing limit policies can reduce invoice processing time, strengthen financial controls, and lessen the administrative burden of having to manually route invoice approvals to the appropriate individual.
5. Centralize Accounts Payable Functions for Standardized Processes
By centralizing the accounts payable function, organizations gain the ability to standardize processes and controls, help enhance resource allocation, and improve visibility and decision making as key information is centralized and more accessible.
6. Establish a Single Channel for Vendor Invoice Submission
Invoice channels can range from personal mail or email to shared email inboxes or online vendor portals. Having a single channel where vendors submit all invoices can streamline the entire invoice process, simplify the accounts payable function, increase the efficiency and accuracy of data entry, and enhance security by helping to ensure that sensitive financial information is better protected by a centralized system.
7. Invoice Coding Is the Exception & Not the Norm
Traditional coding of invoices to expense accounts is a time-consuming, manual process that should be avoided for most invoice scenarios. Alternatively, organizations can leverage procurement or expense categories that are mapped to expense accounts that can streamline the coding of non-purchase order invoices in a more intuitive manner. This approach, in combination with strong, automated approval workflows, can enable the accounts payable function to complete invoice coding more efficiently and effectively without having to engage other staff members.
8. Internal Service-Level Agreements Are Established for Invoice Processing Time
Defining and establishing service legal agreements (SLAs) for the accounts payable function, such as invoices are processed within two business days of receipt, can reduce internal inquiries from staff members on the status of invoices and increase accountability of all stakeholders. Further, analytics and reporting should measure each component of the procure-to-pay process to identify areas where accounts payable SLAs are impacted, such as receiving, vendor onboarding, and disputes.
How Forvis Mazars Can Help
Many organizations look to accounts payable automation to address challenges that technology alone cannot resolve. When the fundamentals of an organization’s current accounts payable function are not fully supported, investments in technology can deliver diminished returns on investment by unforeseen barriers, inefficiencies, and additional resource requirements. Our team at Forvis Mazars can assist you with these underlying factors and support efforts to help streamline your accounts payable automation initiatives in Microsoft Dynamics 365. Connect with us to learn more about how you can enhance your broader procure-to-pay objectives.