Revolutionising Accounts Payable in Shared Services
Mr. Vijay S,
Global Director & India Finance Site Lead
Twilio
Many businesses have turned to Shared Services Centres (SSCs) as a solution to centralize control and reduce costs in order to improve efficiency and productivity. Finance Shared Services leaders are under pressure to find new ways to reduce costs while increasing profit. Management is looking for ways to leverage data and insights for greater profitability now that transactional efficiencies are table stakes. The top line, rather than the bottom line, is increasingly under the spotlight.
Accounts Payable has always been a preferred opportunity for Shared Services to gain efficiencies through centralization and standardization however despite the benefits of centralizing invoice control, many Finance SSCs are hampered by inefficient processes, late payments, high operating costs, a large number of exceptions, inaccurate reporting, limited visibility of invoice spend, and a lack of invoice flow traceability. One of the challenges for AP is that it has historically been regarded as a cost center, however, the evolution of AP solutions extends far beyond document management and approval workflow solutions, which historically served to convert manual, paper-based processes into manual, albeit electronic, processes. How can AP overcome this to become a value and profit generator in Shared Services?
AP provides such a chance through new platforms that enable automated, seamless processing based on digitized data input (e-invoicing and procurement data). While this meets the cost-cutting and standardization criteria, it also presents previously untapped opportunities to drive more value and profitability for the business through newly available analytics, providing transparency over volume, suppliers, process flows, and cash-generating opportunities. Forward-thinking businesses are now adopting a digital-first strategy to automate the entire process – from purchasing a product or service to paying the bill. The most important outcome of this truly digital strategy is the genuine business insight it provides based on high-quality data inputs (invoices and purchase order data). Improving data quality at the input level, on the other hand, does more than just speed up processing. It also enables better enterprise-wide reporting and analytics, enhancing the ability to extract cash from the balance sheet and strengthen working capital. Because of real-time analytics in areas such as spend (both indirect and direct), supplier performance, KPI benchmarking, and early payment discounts, modern cloud-based solutions provide critical decision-making transparency. As a result, when AP adopts a digitized, data-driven approach, it improves its contribution to other functions as well: procurement benefits from 100 percent spend visibility and treasury/working capital management benefits from cash flow transparency.
Transparency leads to better decisions as AP leaders consider how they can influence ‘cash’ rather than just ‘cost.’ It begins with best practices that combine digitization with good user functionality, simultaneously, increasing the use of electronic invoices (e-invoices) improves AP performance due to the knock-on effects of automated invoice validation and streamlined invoice routing, while better supplier interfaces (often supporting self-service) result in fewer supplier inquiries. Analytics capabilities built into modern AP solutions go far beyond traditional spend reporting to include automation rates, invoicing rates, on-time payments, and performance against benchmark averages. Pre-defined dashboards provide actionable, real-time data analysis that highlights problem areas while also highlighting opportunities to improve the business’s cash flow. As a result of the data telling a clear story, AP leaders can identify what drives profitability – and what drives costs and within that framework, SSC leaders can establish their own benchmarks to manage their journey and focus on the value-adding, profit-generating opportunities that elevate AP as a business partner.
Thanks to new automated solutions, the days of AP as a transaction factory are giving way to a value-adding, profit-driving future. AP teams can now devote the time they used to spend on processing to more of a reporting and compliance function, which ticks the insights-driven ‘value-add’ and ‘risk minimization’ boxes. This approach also fosters a culture of continuous improvement by shifting AP’s focus from ‘pure execution’ to ‘learning behavior,’ opening the door to new opportunities for collaboration and mutual benefit, shifting the focus from cost minimization to profit maximization. The options for AP leaders are clear: assess the current AP process landscape for gaps or bottlenecks and address these with best-practice solutions that fully leverage digitization.