Spending it wisely
Some business functions in an organisation tend to attract more technology investment than others. The same concentration bias also seems to apply to some type of projects (compliance, sales generation, etc).
Nevertheless, there seldom seems to be enough factual analysis on where best should a tech budget be deployed to. As a finite resource that it is, IT capital should be deployed efficiently for businesses to thrive and grow. In fact, an analysis from McKinsey Quarterly (“Spend wisely, not more, on IT”) shows that targeted IT investment in automation is highly correlated with a business higher profitability. From the analysis, best performers in the segment (banking industry) were those that focused their tech investment in particular onto automating their back office functions (as opposed to Big data, multi channel or other general initiatives).
However boring it may sound, companies must consume goods and services as part of producing their own goods or servicing their own customers. A lot of effort hence go into processing and paying bills and that makes it a very good candidate for automation.
Effortlessly processing your bills
A very traditional process, Account Payables (AP) is sometimes overlooked as destination for tech investment in a company. Interestingly, in the aviation industry, the effort involved in purchasing goods and services grows linearly with the number of flights an operator delivers. A seemingly nice issue to have : the more you fly, the more bills you will have to settle. Global point-to-point flying produces various expenditures such as fuel, landing and handling, permits, and other ground services that are either on a per flight or per turnaround basis. Furthermore, suppliers may be located anywhere in the world. Invoices will come in all shapes and forms: different language, different media (paper, pdfs, and emails), different fields, different taxes, different breakdown levels etc. Best practice dictates that each invoice must be accurately processed before going to the ledger: typed/imported, each line item account coded, allocated to its respective flight, approved by the appropriate stakeholder and controlled (is the cost as expected ? Has the service really been rendered?) so that it can finally be scheduled for a payment run.
This may be a very labor intensive and error prone task, even for “small volume” operators, let alone bigger organizations. The manual effort is a misapplication of the valuable accountant/controller’s time who should really be doing controlling and other higher value added tasks. It also hinders transparency or generate delays on all sorts of important recurrent financial reports (from cash flow to P&L) as bills will only be categorized after a later stage. Automating and digitizing the payable process enables the AP team to focus on what matters most to the business.
From paper to digital – move it all online
This article is no promotion of a “one size fits all” approach: businesses have different processes due to local regulations, tax requirements and so on. Therefore, any initiative should start with an old fashioned business process reviews: How do we pay our bills now ? (the results of which is very interesting as usually it unveils surprises). Then quality time should be devoted to defining “How do we want it to work ?”. Coming up with a future proof, flexible yet robust process is the subject of several researches, it constitutes a real challenge – but one that needs tackling.
Once the process is clear, technology must be ruthlessly deployed on anything and everything that represents low value added manual task. Scanning, stamping paper invoices, emailing, even account coding, it all should be moved to online channels and digitized. Of course, not every task can be automated away: invoice controlling may be facilitated but talented controllers still know best how to spot the unexpected (in my opinion).
The goal of such digital initiatives are not restricted to reducing manual effort by doing more with fewer hands. Technology provides mobility : invoices can be processed (coded, controlled , approved) anywhere in the world, from someone’s laptop and a secure internet connection. Additionally, technology enforces data validation hence improving the quality of the data that is generated. Needless to say, making business decisions in volatile markets – like fuel presently – on the back of inaccurate data, may seriously harm a business.
Another virtuous side effect is the accessibility and transparency. I once had a boss who at occasions would “deep-dive” in the companies’ invoices to “feel” the business. By processing and storing invoices and supporting documents online, any authorized person can access any single invoice , anywhere in the world – 24/07/365. In other words : that is the knowledge of when a bill was received, approved, by whom, paid, and more, all at a click of a mouse or a tap of phone.
Finally, a business without proper automated controls may permit the same invoice to be settled multiple times. It is not unusual for a supplier to be sending the same bill through different channels and to different people in the hope of getting paid faster. This Dupe payment issue is estimated to be on average 0.05% – 0.1% percent of all invoices, according to Infor (a technology vendor).
As the industry evolve, some operators become more efficient by automating tasks, moving processes online and building a platform for growth.
However important disruption might be, research shows that it still pays to get the basic right.
Be sure to be doing it, your competition certainly is.