Without automating previously paper-based processes, there are some challenges that can arise for controllers. These include:
- Poor cash management: More and more often accounts payable departments need to analyze financial data in order to provide insight into the financial state of the organization and to achieve objectives, like improving net income and profit margins. Many companies are getting rid of financial reporting on spreadsheets, but 45 percent of controllers still identified a lack of visibility into invoices and other financial information as a top payables challenge. Forty-two percent of controllers said that difficulty handling, managing and finding invoices was their biggest challenge. It’s tough to manage cash when controllers don’t have the visibility and automation capabilities they need to work with and analyze company financial data, especially when they are still working with manual, paper-based AP processes. The result is often late payments and fewer opportunities to capture early-payment discounts.
- Difficult operational control: How do you implement effective controls in a manual, paper-based accounts payable environment? It’s difficult! Ardent Partners found that the average organization receives 74 percent of its invoices in paper, email, and PDF or fax format. If you’re not using an automated document management solution, then getting invoices as an email, PDF or fax is no better than getting them on paper because information still needs to be manually keyed and documents need to be physically routed, stored and managed. This requires multiple people handling invoices and the risk of losing or misfiling an invoice is much higher.
- Poor and unsafe compliance and security processes: Document retention regulations are difficult enough to navigate, but they’re made even more problematic if an automated solution isn’t in place. The risks of being noncompliant include penalties and fines, even for unintentional errors. And as if that isn’t enough, many hackers are tech-savvy enough to steal financial information from the other side of the world. The threat could also occur closer to home in the form of employees who have the opportunity to manipulate manual financial processes to steal information or money, as well as cover their tracks. How can you combat this? Audit and compliance preparedness are very important to make sure your AP department is following regulations and staying secure. Manual, paper-based AP processes make it difficult to track invoice history and approvals, ensure adherence to approval policies, safeguard the chain of custody, prevent unauthorized access to data, provide information required for audits and prevent documents from being disposed of prematurely. Other risks of a manual environment include the ability to back-date documents, make unauthorized payments and create fake invoice authorizations.
These challenges sound daunting, but stay tuned for our next blog post where we’ll talk about the solution to these challenges. Spoiler alert: It involves paperless automation software!