As consumers, we’ve become accustomed to cashless transactions, but accounts payable (AP) is a different picture. It boggles the mind that in 2020 — a time when you can buy anything, from anywhere, without ever needing to touch your cash, credit card, or even a physical receipt — AP is still a largely manual, paper-based process for most organizations.
In fact, paper still makes up the bulk of all invoices received, whether they are large enterprises (22 percent), middle market organizations (30 percent), or SMEs (38 percent), according to the 2020 Levvel Research Payables Insight Report. But even if AP departments are receiving invoices in a “digital” format like emailed PDF, staff still need to manually input the data into the relevant systems to process payments.
So it should come as no surprise that “manual data entry and inefficient processes” remain the top challenges faced by AP professionals, with 51 percent of respondents citing it as the main pain point. This is followed by “manual routing of invoices for approval” (37 percent), and “lost or missing invoices” (33 percent).
Many organizations think adding a digital solution to their AP departments can address these challenges in one fell swoop — and while it is one of the most effective endeavors you can take to modernize AP processes, not all AP management tools are created equal. Here, we’ll take a broad look at the three main types of AP software — and how they might fall short of expectations.
The 3 types of AP software
1. ERP-based AP management tools
Some enterprise resource planning (ERP) software comes with AP management tools, either as a built-in feature or add-on to the core system. Almost 60 percent of larger organizations and 47 percent of SMEs rely on ERP-based tools, making it the most widely used option.
Its popularity can be attributed to a low barrier to adoption, as ERP-based tools require less investment to implement since the ERP is already installed. And because AP staff is already familiar with the ERP system, it also means they don’t need a lot of training to use an AP module within the software.
How they fall short:
ERPs are great as financial repositories, but they don’t have the robust capabilities to truly automate the AP function — they simply weren’t designed for it. This is echoed in the Levvel 2020 survey, where users of ERP-based tools reported lower satisfaction compared to other tools. Respondents said they wanted a solution that was “more automated,” particularly in the workflow and imaging aspects.
Meanwhile, ERP users are almost twice as likely as cloud users to have had their software for six years or longer, which means ERP-based tools are likely to have outdated technology and user experience, according to the survey. With so much mission-critical information in many different areas of the enterprise, ERPs are also difficult to update without affecting the whole financial organization.
2. Homegrown AP solutions
Some organizations use homegrown solutions to manage AP processes, either as a standalone or a plug-in to their existing ERP or accounting software. As they can be custom-designed for each organization’s needs, these homegrown solutions can be especially useful to address the challenges of individual AP departments.
For this reason, homegrown tools are more popular among SMEs versus large enterprises, with 20 percent of SMEs reporting that they rely on AP tools developed by internal IT resources.
How they fall short:
Homegrown tools can be a huge drain on resources, as you need to constantly maintain, develop, and update them to adapt to your organization’s changing needs. In fact, companies with homegrown tools generally report the lowest satisfaction among all organizations using automation software, according to the Levvel 2020 survey.
Homegrown software can also quickly become outdated and obsolete, making it the least viable option for organizations that experience growth and change with any regularity.
3. Third-party, cloud-based AP automation
Cloud-based AP automation tools are usually the most modern software of the three options, with most enterprises polled in the survey having adopted them in the past two to three years. It’s also the most dynamic and flexible of the three options. And, because organizations don’t need to shoulder the burden of configuring and updating these tools, they are the most affordable in the long run.
While not a module of an ERP, cloud tools can be closely tied to an ERP through integration; some have specializations or features for specific industries or market segments. Cloud tools also offer a host of other benefits.
For example, respondents in the Levvel 2020 survey said their cloud-based software enabled their organizations to expand their international presence, achieve ROI earlier than projected, and modernize their entire finance functions.
How they (might) fall short:
Respondents noted that barriers to adopting a cloud-based AP solution include a scarcity of in-house resources as well as potential security and regulatory issues.
However, this is far from the truth. Cloud-based tools are actually dynamic, affordable, and flexible. They offer technology that enables business agility, as the report states, which can help your organization keep data safe while adhering to evolving regulations.
Finding the right automation solution
The right AP automation solution will offer intelligent data capture, workflow automation, and seamless integration with your ERP system.
Things to look for include:
- Intelligent capture capabilities that automatically extract information from invoices and supporting documents, eliminating manual data entry
- Workflow management to speed invoice processing and shorten cycle times
- Effortless integration with accounting systems, ERPs, and email, giving AP fast access to review and approve invoices or input additional data without switching applications
- Real-time data and analytics for a comprehensive view of the invoice processing lifecycle
The right AP automation solution is configurable for your department and scalable for the enterprise, enabling your organization to reap the benefits of automation — improved visibility, better control, and increased efficiency across each stage of your AP processes.
AP automation also provides residual and strategic benefits like improving supplier relationships, simplifying audits, and reducing fraud and duplicate payments. To understand the current state of the AP automation market and where you stand among your peers in terms of AP efficiency, download the full 2020 Levvel Research Payables Insight Report.
This article originally appeared on Hyland.com. Inpute Technologies are proud partners of Hyland, a global provider of content intelligence solutions and services.
If you’d like to talk to one of our consultants about implementing an Automated Accounts Payable solutiom for your business or are interested in moving to the cloud, you can email firstname.lastname@example.org for more information.