How to optimize the AP business model post-automation
Making an investment in accounts payable (AP) invoice processing automation is a major win for efficiency, accuracy, and cost savings. But automation is not the end of AP transformation—it is just the beginning. After streamlining invoice workflows, the next step is to focus on governance, optimization, and continuous improvement to maximize the benefits of your AP automation solution.
Follow these best practices to take your AP department from automated to true operational excellence.
1. Establish strong business process governance
AP automation transforms your workflow, but without governance, it can become unmanageable. Governance provides the framework to ensure that processes run smoothly and align with broader business objectives. It includes:
- Clear ownership: Clearly define roles and responsibilities. Who owns the AP process? Who oversees reporting, issue resolution, and compliance? Document these roles to prevent confusion.
- Standard operating procedures (SOPs): Automation can only do what it is programmed to. Well-documented and standardized processes help to maintain consistency. Update SOPs to reflect automation changes, policy updates, process flows, and role and responsibility changes, and regularly align them with current business needs.
- Compliance and risk management: Automated AP processes must adhere to evolving regulations and internal controls. Conduct periodic reviews to verify compliance and stay up to date on industry regulations. Integrate risk management into your governance model by setting up frameworks to identify and mitigate anomalies or non-compliance.
2. Focus on continuous optimization
The beauty of automation is that it provides a foundation for continuous improvement. Without having to perform time-consuming daily manual tasks, you can focus on optimization efforts that increase efficiency and improve business outcomes.
Here are some optimization steps to consider:
- Analyze AP data regularly: Use automation to gather data on payment cycles, vendor performance, and exceptions. Regularly review this data to identify bottlenecks, inefficiencies, or opportunities for improvement.
- Vendor management: One of the key advantages of automation is the ability to create a seamless relationship with vendors. Ensure vendor management tools are fully utilized by streamlining vendor onboarding, maintaining up-to-date vendor records, and taking advantage of early payment discounts where available.
- Error reduction: Automation can reduce errors, but it does not eliminate them completely. Set up systems to flag exceptions, and review these regularly to improve accuracy over time.
- Master data management: Make sure your master data is continuously updated and accurate. This data includes vendor details like payment terms and tax IDs, and purchase order data such as unit of measure, pricing, and part numbers. Well-maintained master data reduces errors and exceptions and leads to faster, smoother AP processes.
3. Mature your AP business model
With automation in place and optimization underway, it is time to think about the long-term growth and maturity of your AP operations. This step involves moving from a transactional mindset to a strategic one.
- Expand automation capabilities: Look for areas adjacent to invoice processing that can be automated, such as supplier payments, expense reporting, or procurement. Consider integrating your AP automation solution with other business systems like your ERP, to streamline workflows further.
- Enhance decision-making with data: Leverage access to valuable data for strategic decision-making. By monitoring KPIs, such as invoice processing times, payment accuracy, and cash flow impact, you can identify trends and make informed decisions that impact your organization’s bottom line.
- Strengthen vendor relationships: AP automation provides a platform to strengthen supplier relationships. Automating communications and payments enables more efficient vendor collaboration and can open the door to negotiate better payment terms, early payment discounts, or favorable supply agreements.
- Explore new payment strategies: Be open to adopting new, beneficial payment strategies. You may consider vendor financing programs, early pay discounting, or switching to digital payments with rebates to optimize cash flow and improve supplier relations.
4. Build a culture of continuous improvement
An automated AP function does not mean your work is done. To truly mature, you must foster a culture of continuous improvement. This means engaging your team in regular reviews of performance metrics, encouraging feedback from internal and external stakeholders, and continuously seeking out new ways to improve.
- Employee training and development: Empower your team to manage automated processes effectively. Provide ongoing training on the latest automation tools, data analysis, and process optimization techniques. This investment in people upskills the team and enhances their ability to contribute to long-term improvements.
- Innovation mindset: Encourage your team to stay up to date with industry trends and technologies. Foster a mindset that is open to innovation and willing to experiment with new tools and processes to keep AP moving forward.
5. Measure and report on success
Lastly, measure the right success metrics. Define clear KPIs that align with your automation goals. Track metrics such as:
- Invoice cycle time
- Payment processing accuracy
- Vendor satisfaction scores
- Compliance with payment terms and regulations
- Reduction in manual interventions
Use these KPIs to demonstrate the ongoing value of automation to stakeholders and to highlight areas for further improvement.
Conclusion
Automation is just the beginning of your AP transformation journey. By focusing on business process governance, continuous optimization, and maturing your AP business model, you can take full advantage of the efficiencies that automation offers and transform your AP department into a strategic asset for your business. Do not stop at automation; build a governance framework, optimize your processes, and set your sights on continuous improvement to drive lasting success.
