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AP Automation: The Key to Long-Term Financial Health in the Supply Chain

By Steve Murphy
May 12, 2021
in Analysts Coverage, Commercial Payments, Data, Emerging Payments, Payment Automation, Supply Chain
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AP Automation: The Key to Long-Term Financial Health in the Supply Chain

AP Automation: The Key to Long-Term Financial Health in the Supply Chain

This posting is in SDC Executive and speaks to the benefits of automating payments processes.  There have been numerous postings about the subject during the past 12 months, including our own postings as well as ongoing member research. 

There are both hard cost savings and other analytical benefits with automation leading to better cash management opportunities.   Those companies working their way through this challenge should be thinking about it as an end-to-end exercise, rather than a band aid approach to patching up a part of the process along the way.

‘Automating AP began well before the pandemic, but the divide between digital and manual payment systems became even more apparent as everyone transitioned to fully distributed, remote work. As companies urgently tried to adjust, those still relying on manual AP were left behind and others worked to catch up by digitizing their invoices. But, digitization alone, often as Band-Aid solutions, doesn’t cut it anymore; true AP automation uncovers deep insights and should be reimagined as strategic and user-friendly, and, ultimately, optimizes cash flow.’

In this particular referenced article, the author provides some helpful hints around how to build a business case for this automation investment, which is where many of these potential efforts get bogged down due to lack of executive buy-in (the old inertia issue). 

While high level, readers should click in and review since it is a useful roadmap, including things like measurable impacts, quantifiable data, etc.

‘Automating AP creates efficiencies by streamlining the invoice approval process and providing transparency in the payment flow to reduce risk, obtain better payment terms with vendors and deliver projects on time….This added efficiency also gives increased visibility into end-to-end processes that affect cash flow and profitability — how quickly invoices move through, the content of them, where they’re going. The actual tasks of reading and checking invoices is perhaps the biggest bottleneck in the process; it’s the reason why technology like robotic process automation (RPA) played such an early significant role in the automation of AP, followed by sophisticated data capture because bots lacked the critical document analysis skills needed for automation. Too often, companies that make small digital changes can break processes both immediately and down the road. You need to be able to focus on both end-to-end processes and identifying cost-saving improvements.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

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Tags: AP automationAutomationCash flowFinancial HealthOptimizationSupply Chain

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