In the last 10 years, accounts payable (AP) has experienced a technology evolution that is gradually moving departments away from the paper-intensive manual processes of the past. This evolution has been driven by an increased management focus on business process improvement, cost reduction and the availability of new disruptive technologies. But how does an organization strike the right balance between just enough automation and too much? We asked Nick Babinsky, Director of Business Development at Billtrust, a series of questions to help us understand how AP technology is driving future trends for accounts receivable (AR) automation.
Question: Can you talk a bit about the push-pull relationship between accounts payable (AP) and accounts receivable (AR)?
Nick Babinsky: AR and AP teams don’t always move in sync. There is often tension between the two, which is odd when you think about the fact that both groups are focused on automation and moving away from paper. It is ironic that as an accounts payable (AP) department adopts an electronic process, it can create unique challenges and inefficiencies for accounts receivable (AR).
Question: Can you explain where the current trend of automating AP came from and how it can benefit both suppliers and buyers?
Babinsky: The trend is that more and more businesses are focused on automating their accounts payable processes to improve their working capital. In the payor’s quest to automate accounts payable (AP), they focus on more efficient ways to receive invoices and creating a more automatic workflow, so the invoices are approved and paid on time.
While a large part of the market still relies on manual processes, there is a drive within many organizations to implement automation as part of their overall AP strategy. According to a recent survey, the top five accounts payable (AP) invoice pressures today include
- Need for real time availability of data.
- High cost associated with invoice processing.
- High percentage of exception.
- Losing/difficulty finding paper invoice.
- Missing out on vendor discount.
Many of these businesses are turning to automation to eliminate these pressures. 43% are currently evaluating AP vendors, while 22% indicate that they will be switching to an automated system within two years.
As more AP departments are making the switch to automation, they’re asking their suppliers to help them reduce manual work by submitting invoices through these accounts payable (AP) portals. This triggers an automated workflow that ultimately leads to faster payment. Although this appears to make the AP department’s life easier, this creates an overwhelming challenge for the accounts receivable (AR) teams which now need to build custom invoice submission processes to satisfy the unique requirements for each one of these portals. In many cases, that could involve a person logging in with a unique password/username to a portal, keying in data and uploading documents - taking hours out of an FTE’s day. The end result is positive - faster payment - but it comes at a price for accounts receivable.
Question: Is AR still behind AP in terms of automation, or do you think AR is finally starting to catch up?
Babinsky: Today, businesses are trying to optimize their working capital using three mechanisms: 1.) accounts payable 2.) accounts receivable and 3.) inventory management. Accounts payable involves how efficiently can I pay my bills. Accounts receivable is how quickly can I get money in the door. For inventory management, it's all about avoiding having all of my cash in capital assets. From this standpoint, AR is absolutely starting to catch up to AP. CFOs recognize they need to automate both AP and AR to optimize working capital. Both accounts payable (AP) and accounts receivable (AR) departments want to improve the company’s efficiency and maximize profitability. Since both sides are interested in similar end goals, the key to helping them work together is to give them the tools they need to do so. Automation helps businesses understand what their customers want by providing them with choices and the ability to integrate with AP systems, to make receiving decoupled payments more efficient, and automating the entire integrated receivables process.
Question: How will Customer Portal Automation complement Billtrust’s Quantum Invoicing suite?
Babinsky: Customer Portal Automation is just another invoice delivery channel for our clients. It fits right into Billtrust’s Quantum Invoicing philosophy - that we let our clients, the suppliers, do business with their customers how they want to - whether it’s via print, fax, email or through accounts payable (AP) networks. In a perfect world, suppliers and buyers would strike the ideal trading terms, allowing both parties to reach the best possible DSO (days sales outstanding) and DPO (days payable outstanding). While it’s impossible to control when your customers decide to pay you, there are strategies - like having a direct connection with multiple AP networks - that increase the likelihood of timely payments and will keep your customers happy.
Question: What is robotic process automation, and how does it work with Customer Portal Automation?
Babinsky: When I go to accounts receivable (AR) conferences, I will hear about the frustration about how to get these invoices into AP portals. Manual keying is creating a lot of real challenges. The solution we developed for Customer Portal Automation uses a similar technology to what we are already using in both Quantum Cash App and Virtual Card Capture.
Robotic Process Automation or RPA uses technology to complete repeatable tasks, automating much of the manual work that has been previously involved in trying to integrate with accounts payable (AP) networks. The RPA technology is able to automate the login process to these AP networks and input the necessary information required by these networks, without human intervention. As our Data Scientist, Farhad Khalafi, likes to say, “these software robots are widely used in all areas of credit and AR processing.” A robot often “wakes up” when certain data arrives (e.g. a bank payment or AP portal login/form appears), acts on the data and passes the transformed data to the next process in the workflow. Whether it’s through direct integration or using this RPA technology, IT departments don’t have to cringe. Billtrust is taking the burden off of our client’s IT teams and eliminating that automation hurdle
About the author:
Nick Babinsky is Director of Business Development at Billtrust. You can reach him @NickBabinsky