5 Reasons Why Accounts Payable Automation is Set to Explode
Stop me if you’ve heard this one before: Accounts payable automation is taking off, and soon we’ll have eliminated paper once and for all.
We’ve been hearing that for at least a decade, which is as long as I’ve been selling to AP. Well, it’s finally happening: The last island of archaic processes is becoming a hub of technology innovation. Now is the time to re-evaluate AP automation and pick a place to get started.
A confluence of five factors is driving us forward. There’s a new, post-recession outlook on AP. Both buyers and technology vendors have assimilated the lessons of early failures and are now taking a different approach. Solutions have improved, and the ROI has become more compelling. New competitive imperatives have emerged. And just about everything else has been automated, so for companies looking to improve their business processes, there’s really nowhere else left to go.
Still in the card catalog era
Decades of automation have bypassed AP. Walk into any brand new office building and you’ll most likely find AP jammed into a back room with no windows and dozens of filing cabinets. Most AP organizations are still stuck in the era of card catalogs and the Dewey Decimal system because it’s not a client-facing, revenue-generating function. Companies never saw a need to invest money in it, other than to hire people. If they were using any automated solutions, the approach was piecemeal--maybe they were scanning invoices, or doing a few ACH payments.
The recession forced their hands. In 2008, everyone was scrambling to do more with less. When people really had to start cinching their belts, they had to take a hard look at some of those back office departments and think about how they could operate more efficiently.
At that time, vendors were selling new solutions that incorporated the entire process, from invoice receipt to scanning to workflow to the payment piece on the back end. That was the kind of solution I was selling at the time. There were a number of problems with those solutions.
Too much, too soon
First, they were too much too soon. Even though we had long used technology and automation for manufacturing, supply chain, finance, and even HR, AP had never gotten this sort of attention. Then all of a sudden you had these solutions that were promising to reengineer the entire process. It was like trying to sell a Tesla to someone who was still driving a Model T. It was overwhelming, and would-be buyers didn’t know where to start. I heard over and over, “If you could do just my payments. Or invoice scanning. Or workflow . . . ”
But vendors weren’t ready to break their product apart at that point. They were new to the game too. The thinking was, “We’ve reinvented the wheel. Everybody’s going to go for this.” Then you get into an organization and start speaking to real people and nobody was ready for that. There weren’t many takers, and companies that did buy these early solutions never got the kind of adoption they were looking for.
Another big issue was that these solutions set up an entire workflow outside of your ERP. You have to get the information from the AP system into the ERP system early, and at multiple points in the process. There were just too many moving pieces, too many places where things could break down and go wrong.
The throw away years
For these reasons, from 2008 to 2010 were in my opinion, throwaway years for AP automation. We talked a lot about it and there were some solutions out there but it never really got off the ground. But, companies started giving the idea some serious consideration, and vendors that came out of that original introduction and still exist today had to specialize to survive.
It segregated the marketplace more, but that’s what needed to happen for it to work. People needed to break off and do just payments or invoice automation and workflow. What we’re seeing now are best-of-breed SaaS solutions that do just that, and easily integrate with ERP and other systems.
The subscription model, short time to deploy, and minimal training requirement all improve the ROI significantly, and companies were willing to take a chance on less expensive, less risky solutions. We’re beyond the early adopter stage now. These solutions have been out there for a few years now, and they have grown their networks, built up a customer base and established a track record of success.
As more companies adopt these solutions, I’m starting to hear more peer-to-peer conversations taking place at meetings and conferences, and that increases interest and comfort with the companies that aren’t on board yet. Disney is a huge adopter and speaks all the time about how they’ve automated their process. When you get companies or leaders that people respect talking about it, credibility and confidence go up.
We can’t go on this way
We’ve reached a point where we can’t continue in our current state. The economy is stable and growing again, and newer companies with a blank slate are automating everywhere they possibly can. That makes it harder for those that don’t automate to remain competitive.
The work force is also changing. According to research by Robert Half, baby boomer retirements are accelerating, and more finance professionals are retiring than are entering the field. As younger generations that have grown up with technology take over, they’ll expect to do everything electronically.
It will be increasingly hard to attract and retain talent to write checks –which millennials rarely do in their personal lives —and process paper invoices. Whereas the recession era push for automation was aimed at reducing head count, this time around the aim is to make AP more strategic by freeing up time for higher order tasks that are more meaningful for the organization and more rewarding for themselves.
We’re in a much better place to have this conversation now. There are great products in the marketplace and we're finally at the point where people are ready to listen. There will always be more important projects going on, and anything that’s client-facing will still trump anything back office. But then again, with today’s cloud solutions there’s not a whole lot of work that needs to go into this.
We’ve finally reached critical mass, and AP really is about to become a hotbed of tech innovation. Don’t be left behind. Invest some time in researching the products. Talk to peer groups. Reach out to people in your industry. Look at your processes today. Pick a place and get started.
This article previously appeared on AccountingWeb.