Automation can significantly improve the efficiency, transparency, and organization of an AP department, but oftentimes it can be hard to convince C-suite executives to make the switch. In this blog, we will explore how finance teams can make the business case for AP automation to upper management, while showing how business leaders can better structure their AP teams for success.
Key takeaways:
- Making the business case for AP automation involves:
- 1. Focusing on the Business Goals
- 2. Showcasing Examples and Research
- 3. Demonstrating Business Cost and Time Savings
- 4. Addressing Concerns From Upper Management
- Highlighting the Benefits
- Switching to an AP automation solution offers significant benefits for businesses, including cost savings, ROI, improved working capital, ability to scale, enhanced visibility, reduced errors, and more.
5 Reasons why C-Suite executives resist AP automation
At the C-suite level, resistance often comes from lack of awareness of how processes are really playing out within the AP department, what risk and costs are associated with the status quo, and how much of a hurdle adopting AP automation presents. If they are going to sign off on changes, they want to know exactly how it will make things better, and not worse, and that the benefits will be worth their while.
Here are five primary reasons executives are resistant to automating the accounts payable function:
1. Belief that the current AP processes are working well
Many executives have the impression that the current state of things is sufficient–as it has always been. As the saying goes, “If it isn’t broke, don’t fix it.” In some situations, they may already believe what they’re currently using is equivalent to an AP automation platform. This is often the case for companies that employ ERP systems with an existing module that allows for entering bills and printing checks. In fact, they may have made a significant investment in such a system and hence want to realize value from it instead of adopting something new.
Any company that invested in an ERP system with modules or features that claim to automate tasks may also be under the impression that automation in general is limited because the features offered by their pricey system are limited. They don’t see any reason to invest more in additional tools whose value looks ambiguous at first glance.
2. Perception of current AP process expense vs cost of AP automation
Another cause for resistance is a lack of understanding about how much current manual AP processes cost relative to the expense of an automated platform. Because there may not be much visibility into current costs–both in terms of money and employee time–they can’t weigh this against the costs of automation.
This misconception can be addressed by demonstrating just how many resources are going into current processes. Resources such as the cost of printing paper checks, the time spent on manual processes, the delays in payments creating friction with vendors (and more work as employees scramble to address concerns and answer questions), and even the added risk associated with increased error rates and potential for fraud. In contrast, AP automation can improve efficiency, streamline processes, reduce errors, promote a positive vendor relationship, and even lead to cost advantages such as early payment discounts or virtual card rebates.
3. Skepticism about integration and associated security risks
Many CFOs are wary of integrating anything with their bank or ERP system. They see such integrations as creating more points of potential failure in security, compliance, and risk. What they may not realize is that their current state of affairs may have even more points of failure. Companies who have not adopted AP automation put themselves at more risk for duplicate invoices, constrained supplier relationships, fraud and stolen information. In fact, integration often comes with easier ability to send and receive secure payments.
4. Lack of clear business case or ROI
In order to make a change in the way things are done, C-level executives must see that it will clearly lead to tangible benefits. If this is unclear, then their motivation to change anything wanes.
But as anyone in technology knows, not updating with the times can cause severe problems down the line. This is true of AP technology as well. Consider the impact of the COVID-19 pandemic, for example. The shift to remote and hybrid work–which is destined to remain ongoing–meant that manual and paper-based processes were much more difficult to tackle.
If checks are mailed, for example, someone has to print them, sign them, and mail them on one end. On the other end, someone has to get the mail, endorse the checks, and deposit them. This eats up time and money and can cause significant delays in doing business. With AP automation and integrated electronic payment options, payment happens faster, more securely, and with less moving around and paper shuffling.
Additionally, many businesses these days may be experiencing employee turnover as part of the “great reshuffle”, which then puts places that relied on AP process knowledge stored in people’s heads in a bind. With automation, however, the processes all get programmed into the system. This also makes it much easier to handle fluctuations in invoices since scaling up and down when using automation doesn’t require personnel additions or changes.
5. Fear of lack of control
Sometimes when people hear the word “automation” they immediately envision tasks happening without human intervention or oversight. Executives may fear that adopting AP automation means they lose visibility and control when it comes to how invoices are handled and how and when payments are made. But this couldn’t be further from the truth. Automation simply takes away the tedium and inefficiency associated with AP processes while providing complete control and the ability to adjust and change the process at any time. Companies will actually benefit from having more control on when bills are paid and more insight into the entire AP process.
Accounts payable challenges and pain points
Businesses encounter various challenges within their AP processes, leading to inefficiency, errors, and increased costs. Common issues include error-prone manual data entry, lack of visibility, fraud risks, inefficient workflows, high costs, scalability difficulties, and compliance maintenance. These challenges can adversely affect a company’s bottom line, reputation, and competitive edge.
Missing invoices:
Manual AP processes often result in confusion regarding invoice receipt and approval, leading to delays and inaccuracies in payments. Unpaid invoices can disrupt financial reporting and strain supplier relationships, affecting the company’s financial health and operations.
Lengthy manual processes:
Traditional AP processes involving paper-based tasks like invoice capture and manual data entry are time-consuming and prone to errors. Lengthy approval times and delayed payments can result in late fees, unfavorable terms, and supply chain disruptions, impacting business operations and finances.
Scaling Problems:
As businesses grow, AP teams face resource constraints and struggle to handle increased invoice volumes efficiently. Manual processing of invoice exceptions and discrepancies requires extensive time and effort, diverting attention from value-added activities and hindering business growth.
Physical document storage:
Paper-based document management poses challenges in document storage, retrieval, and tracking, leading to rising storage costs and inefficiencies in AP operations. Lack of centralized electronic document storage can hinder document management and auditing processes.
Duplicate invoices:
Manual data entry increases the risk of duplicate payments, leading to financial losses and reconciliation challenges. AP departments lacking visibility into invoice statuses struggle to identify and prevent duplicate payments, affecting financial accuracy and compliance.
Fraud risks:
AP departments are vulnerable to various fraud schemes, including vendor fraud, invoice fraud, and BEC (Business Email Compromise) scams. Manual payment methods, such as checks, heighten fraud risks, with a significant percentage of companies experiencing fraudulent activities related to check payments.
How to make the business case for AP automation
There are several steps AP departments should take to make the business case for AP automation. Consider the following:
Focus on the business goals:
Instead of focusing on how AP automation can make the job of the AP department easier, or how it might help with certain frustrations, place emphasis on how AP automation can help the overall business meet its goals. Contrast the actual cost of current processes in dollars, hours, and associated risk with the cost of automation in terms of those same variables.
Consider starting by having a conversation with the CFO or decision-maker to determine what they see as the primary goals of the company in terms of cash flow. Then your pitch on the benefits of AP automation can be curated to support those goals. Executives are much more interested in how an investment in AP automation will affect the bottom line and overall strategy.
Showcase examples and research
From there, bring in compelling examples and research that support the adoption of AP automation including case studies from similar businesses that have found success in doing so. You can also create clear KPIs and objectives so you can illustrate the improvements AP automation brings as it is implemented.
Demonstrate cost and time savings
One challenge for AP teams is highlighting phantom costs associated with relying on outdated processes. While checks have hard costs (such as stamps and paper), phantom costs such as the strain on vendor relationships and time management can be more difficult to calculate. Below are some of the costs associated with not automating the AP function:
- Security risks: Companies who choose not to automate payments face increased security risks from fraud and theft. Nearly 3 out of 4 companies (74%) were targeted for a payments attack. However, this risk can also extend to confidential payment details, posing a threat to your organization or the relationships you have with vendors.
- Waste of resources: AP departments who are not bogged down with invoice payments can spend more time on tasks that help the bottom line. Companies that switch to a more strategic approach to AP, instead of a reactive one, can optimize cash flow and prioritize vendor relationships. Additionally, finance teams can focus on other aspects of the business since the AP process will be running so smoothly.
- Rebates: By implementing virtual cards, companies can cover a portion, if not all, of their AP platform expenses via rebates.
Address concerns from upper management
41.2% of people surveyed noted that concerns in enrolling vendors in an e payment system is an obstacle in converting their process to epayments. 64.4% note that suppliers may not be willing to accept these forms of payments. 25.2% anticipate that accepting new payment types will lead to more and new processes.
However, AP automation platforms like MineralTree will reach out to vendors and help companies enroll suppliers into virtual card programs. MineralTree also makes it easier to pay suppliers using their preferred payment method, without adding additional processes.
When building a business case for AP automation, it’s important to include concerns that upper management may have and address these in your presentation.
Highlight the benefits
Payment automation not only improves the efficiency of the AP team, but can also improve relationships with vendors, while improving inefficient processes. Below are some benefits for companies.
7 Benefits of AP automation for upper management
Making the benefits of AP automation clear to upper management is key for promoting adoption. Here is a summary of seven primary benefits, some of which have already been discussed earlier in this article:
1. Streamline hybrid and remote work processes:
With AP automation, people and papers don’t need to be in the same physical space at the same time. Invoice capture, approvals, and payment initiations can all happen electronically.
2. Save time and optimize resources:
AP automation makes time-consuming manual tasks fall by the wayside, freeing up your team to engage in more strategic initiatives focused on business goals.
Tasks such as PO matching, invoice approvals, and invoice capture can all be automated. For companies looking to take a more strategic approach to their financial functions, automating these manual tasks can be a great start.
3. Avoid problems associated with hiring and turnover:
March 2022 saw a record number of employees quitting their jobs, with about 4.5 million people leaving their employees. Additionally, 44% of employees noted that they are looking for a new job. For companies looking to continue conducting business as usual, it’s important to have processes in place that can handle the reshuffling of teams. If there is turnover, having a tool that offloads most of the work makes that transition a little bit easier.
When employees leave, their knowledge may leave with them–leaving the rest of the department in a bind. Automation keeps this information within the system instead. Also, with inflation and rising wages, hiring new workers to meet increasing demand is getting more and more expensive. AP automation instead makes it much easier to scale to meet demand without needing to increase headcount.
4. Save money:
Adopting automation and a paperless AP process can lead to cost savings, especially around payments by eliminating the cost of printing and mailing checks, enabling faster payments so the business can take advantage of early payment discounts, and by opening the door to virtual card rebates. In some cases, these savings total more than the investment in the automation platform itself.
5. Reduce errors and risk:
Manual entry and manual processes are much more prone to human error, whereas with automation, many of these missteps simply don’t have room to occur. Securing digital payment options available as part of an automated platform can also reduce risk associated with fraud.
6. Improve vendor relationships:
By using an AP automation platform, vendors get paid much faster and will experience fewer delays and hiccups. The visibility provided by such platforms can also make it so that vendors get all of their questions answered immediately by logging in instead of playing a game of phone or email tag.
7. Improve cash flow:
Because an AP automation platform makes it possible to strategically balance payment mix and schedule exactly when payments will leave the corporate bank accounts, it allows organizations to hang onto cash longer and optimize the flow of cash.
In total, these benefits help AP departments become strategic in their operations vs reactive. They are better able to weather turnover and demand flux all while streamlining AP workflows, realizing cost savings, and keeping vendors happier.
How does AP automation benefit companies?
Switching to an AP automation solution offers significant benefits for businesses, including:
Cost savings and ROI:
Automating high-volume tasks like printing checks and collecting approvals saves significant time and resources. With checks costing $5.00 and invoices $10.00 each to process manually, automating just 500 payments can save $4,800 monthly. With rising wages and overhead costs, automation becomes more cost-effective for businesses and drives ROI, especially when leveraging virtual cards for rebates.
Improved working capital:
Automating payment execution ensures timely payments, reducing the risk of overdue payments and maximizing opportunities for early-pay discounts. Delays in payments can strain supplier relationships, impacting delivery times and responsiveness. With automation, business can allow for strategic timing of payments, freeing up working capital and optimizing cash flow.
Scalability:
Companies experiencing rapid growth face challenges in expanding AP departments sustainably. AP Automation allows for processing more invoices with the same number of staff.
Time efficiency and reduced errors:
With AP automation, departments can avoid errors caused by manual tasks and the sheer volume of invoices managed. Automation streamlines processes like invoice capture, coding, and approval, which helps to reduce manual data entry and invoice processing times. Quicker invoice turnaround times also allow staff to focus on analysis and offer valuable insights to improve efficiency.
Enhanced visibility into AP process:
Automation provides increased visibility into AP operations by showing relevant data to authorized parties. Reports can instantly identify late payments, aging invoices, average approval time, and payment processing times. Multi-entity businesses can centralize invoice submission, automate payments, and track expenses for each location without manual intervention.
Compliance monitoring and process control:
AP automation ensures compliance with regulations and creates trackable audit trails, which helps reduce the opportunity for fraudulent activity. By enhancing compliance, businesses have improved peace of mind when it comes to ensuring that invoices are handled and processed securely.
AP automation success stories
Here are just a few examples of organizations that are already realizing the benefits of AP automation:
Simple Mills facilitates growth with AP automation
The leading provider of better-for-you snacks faced challenges processing over 1,000 invoices per month with a single staff member. Knowing that this number was expected to grow even more, the company turned to MineralTree for an AP automation solution. The adoption proved successful, enabling a faster and more efficient AP process. It also led to improved collaboration throughout the business and better visibility into billing processes. Moreover, rebates from virtual card adoption have helped offset the TCO. Simple Mills is processing a 50% increase in invoices without any new hires due to MineralTree.
Myro Therapeutics streamlines invoice management
This biotech company selected MineralTree to automate and optimize vendor payments. This has helped them avoid the processes associated with manual invoice input, PO matching, and payment approval. The AP platform’s automation capabilities and ability to streamline the invoice-to-pay process was a big step up from the company’s previous method which involved using their bank’s bill payment service.
Cascade Senior Living improves visibility into the invoice management process across locations
This healthcare management company was facing significant back office burden due to its use of an outdated manual system that provided low visibility and was particularly challenging to use with managers spread out in remote locations. By implementing MineralTree’s end-to-end AP automation solution, their processes are now much more transparent, centralized, and streamlined.
Forge Biologics uses AP automation to generate revenue
Forge Biologics seeks to bring life saving gene therapies into reality. However, explosive growth became a challenge for their team, as they expanded from 30 employees to 200. As the number of invoices increased, their AP department realized valuable resources were being spent facilitating invoice payments, instead of growing the business.
Forge Biologics decided to partner with MineralTree and now pays about 90 percent of its invoices via electronic payment methods. In particular, virtual cards have become a key component of Forge Biologics’ payment mix and the team is on track to earn $80,000 in rebates this year.
House of Cheatham saves 20 hours a week on manual AP tasks
House of Cheatham is one of the oldest personal and beauty care product manufacturers in the United States. Their company is committed to excellence and accuracy in all of its processes. However, their AP team was relying on manual processes, which made it difficult to gain insight into invoice payments and approval status.
House of Cheatham decided to partner with MineralTree and the implementation of the AP automation solution took less than an hour. David Carter, House of Cheatham’s staff accountant, noted that “in total, MineralTree is saving us about 20 hours a week. We’ve been able to use this time to focus on making other processes better and more effective.”
AP automation supports BrightView health’s business growth
BrightView Health provides outpatient medication-assisted treatment in Ohio and Kentucky. During the span of just two years, their treatment centers expanded by 650% (from 4 to 30). When Controller Matt Santell joined BrightView, 65-80% of invoices were still being delivered via the mail. leading to a number of manual tasks. However, when the total number of invoices grew from 3,000 to 10,000, their accounts payable team realized they needed a new solution that could support their rapid business growth.
BrightView Health selected the MineralTree solution, increasing the amount of invoices being processed each day. Santell noted that their entire AP process has been reduced to “mere minutes.” They have also been able to reduce time spent on quality assurance, since MineralTree is able to catch duplicate invoices, before they get paid. Accounts payable workflow automation helped their team improve their entire process, while saving time and resources.
Quartzy drives efficiency and revenue with AP automation
Quartzy, a leading life science product distributor, was looking for a solution that could integrate with its ERP system, while providing real-time visibility into the invoice process. MineralTree, which offers a two-way integration with ERP platforms, like NetSuite, was a perfect fit for the company. It provided more reporting and superior PO matching capabilities.
In addition to the above benefits, Quartzy was able to take advantage of rebates by implementing SilverPay, MineralTree’s virtual card. Their AP team was able to take advantage of $100,000 in rebates, ultimately covering the cost of their AP automation platform through B2B virtual card payments.
Switch to AP automation with MineralTree TotalAP
MineralTree TotalAP is an end-to-end AP automation and payment optimization platform designed to make paying vendors easy, impactful, and profitable. It integrates seamlessly with your existing ERP system and comes with automated allocation templates, automated coding, and a variety of payment methods with vendor payment support. MineralTree even handles vendor onboarding and ongoing adoption so you don’t have to. If your organization is interested in multi-entity support from a product that can scale with you, then request a demo today to learn more on how MineralTree can help your team create and execute a roadmap for AP transformation.
FAQs
Is AP automation worth it?
Absolutely! AP automation is valuable for businesses of any size, as it reduces the cost of manual processes, improves efficiency, reduces errors in manual data entry, enhances supplier relationships, and provides better cash flow management. For instance, Quartzy, an online lab management platform, earned $100,000 in cash back rebates simply by automating their AP process and optimizing payments.
How does accounts payable automation work?
Accounts payable automation works by automating the capturing, coding, approving, receiving, and processing of invoices. In turn, AP departments will experience improved efficiency, expanded visibility, and reduced operating costs.
