We’ve been hearing for at least a decade that automated accounts payable will eliminate paper. Well, it’s finally happening and it is time to re-evaluate AP automation and pick a place to get started.
A confluence of factors is driving us forward:
- There’s a new, post-recession outlook on AP.
- Both buyers and suppliers 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.
- Just about everything else has been automated, so for companies looking to improve their business processes, there’s really nowhere else left to go.
But this wasn’t always the case.
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 departments 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.
But 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
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 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.
Second, I don’t think any technology company can do the entire AP automation thing well. There’s too much to know about the process, and too much to be good at to make it successful. When you think about the front end, the receipt and scanning of invoices has to be perfect otherwise the entire rest of the process is destined for failure. That’s a technology challenge of its own right there.
The third big issue was that these solutions set up an entire workflow outside of an ERP system. 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
From 2008 to 2010 were, in my opinion, throw away 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.
Companies did start 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.
We can’t continue as we have
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 getting automation 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 the aim is to make AP more strategic by freeing up time for high-order tasks that are more meaningful for the organization and more rewarding for employees.
We’re in a much better place to have this conversation now. There are great products in the marketplace and we finally have an audience who is 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.
What’s happening now?
In the beginning, companies needed to choose whether they would automate payments or invoice scanning and workflow. What we’re seeing now are best-of-breed SaaS solutions that integrate easily with ERP and other systems for a completely automated P2P process.
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. For example, Disney is a huge adopter of automated AP and speaks all the time about how it has automated its process. When you get companies or leaders that people respect talking about it, credibility and confidence go up.
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 into 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.
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