Q&A: Automating Financial Systems

Automation isn't just for making IT more efficient; it can also streamline processes and improve productivity for your users. We explore the benefits of tackling financial systems first.

IT is continually pressed to do more with less, which is why automating ordinary tasks is so attractive. However, automation isn't reserved for IT functions -- your business users can benefit as well. We spoke with Jim Maguire, senior product manager for ASG Software Solutions to learn what makes accounts payable and accounts receivable functions a good place to start in any enterprise.

Enterprise Strategies: What does accounts payable (AP) and accounts receivable (AR) automation mean? Why target AP/AR above other operations, such as payroll?

Jim Maguire: Automation typically involves taking the necessary steps to eliminate as much manual handling as possible in a business process. For AP/AR, this means completing as many transactions as possible through electronic data interchange (EDI) and automated clearing house (ACH) services. For transactions that cannot be completed this way (typically paper, faxes, and e-mail), this means automating the capture of associated documents and/or images and extracting data from these records for use in automated transaction processing. For items that are exceptions to leverage workflow (ideally Web-based), routing these exceptions and associate documentation and/or images for review, coding, and approval is necessary.

When you're weighing AP/AR options versus alternatives, it's not necessarily a matter of choosing one over the other, but examining where you're going to get more bang for your buck. Automated AP/AR processes can lead to rapid and substantial cost savings, along with management benefits of improved visibility and simpler approvals loops. Businesses of all sizes are losing money and customer reputation due to slow and flawed payment and collection processes. In March, ASG (the company I work for) released survey data in conjunction with AIIM reporting that 77 percent of businesses who have adopted AP automation technology have achieved a payback of 18 months or less, and in some cases as little as six months. Additionally we've discovered that 65 percent of AR system users report a payback time of 12 months or less, rising to 78 percent after 18 months.

Where does AP/AR automation fit in within an organization's larger content management strategy?

A "one-size-fits-all" content management solution just doesn't exist. We encourage companies to carefully evaluate its business and IT requirements to identify the most pressing issues and then select the best business-specific content management solution to address them. Savvy organizations recognize that all their enterprise content -- outbound and inbound documents, images, e-mail, engineering drawings, audio and video files, etc. -- associated with day-to-day business operations must be part of an overall content- and records-management strategy.

When choosing a content management solution, we encourage business to pick one that provides a flexible architecture to meet changing business requirements over the long term. It is also important to find a business-specific content management solution that provides the ability to integrate all relevant content regardless of platform, database, storage device, format, or volume.

What are the key drivers leading organizations to automate their financial processes?

Traditional AP processing can be a laborious and lengthy drain on resources, with an average cycle time of 10-20 business days for written invoices. For AR departments, manually inputting documents are often associated with higher days sales outstanding (DSO), which leads to longer collection periods for money owed. It's these two factors that are pushing IT toward the automation of financial processes.

Based on the research with AIIM, ASG found that 56 percent of respondents cited reducing costs as the number one driver for automating AP/AR processes. Decreasing invoice cycle time came in second place, with 52 percent of respondents noting the importance of efficiency.

It's important to note that companies that have adopted these technologies are reporting significant cost and time savings. Taking into account several factors, including the number of invoices processed, AP managers can determine the direct cost savings of their IT systems. AIIM survey respondents reported an average savings of 33 percent, with over a quarter of organizations reporting a cost-per-invoice savings of 50 percent. For businesses processing an average of 5,000 invoices per month with an average cost of $10 per invoice, a 33 percent savings is equal to approximately $200,000.

The importance of a cost-effective and efficient automation solution is a common notion in the IT community and we don't expect to see that change anytime soon. If we were to do the same survey a year from now, I'd expect we would see a similar response.

What's involved in such a transition -- equipment, training of business staff, IT training?

Automation involves a combination of software and hardware implementations in addition to training. The types of software that must be implemented include scan capture, OCR, ICR, data extraction, content repository, content indexing, content viewing, audit and balancing, and workflow. Hardware requirements include servers and scanners. Most important is the training of IT.

One of the biggest hurdles to overcome when automating business processes is fear -- the fear of change, fear of losing one's job, and the fear that the new process will involve skills sets that existing staff members do not have. It's important to address these up front to avoid problems down the line.

Given the benefits around cost and efficiency, why aren't all companies utilizing automation technology?

There are many reasons why companies choose not to adopt automation technology, ranging from inertia to fear and an overall lack of understanding about the current best practices in AP/AR automation. Many organizations are finding themselves in situations where they've put solutions in place that once helped improve operations but that haven't delivered all the benefits they desired. These companies do as much as they can via EDI/ACH and scan vendor bills, but they manually enter data from images and don't leverage workflow. This leads to longer and often more costly process times.

Another critical insight ASG hears from organizations is that management is just plain scared to invest in new technologies. In some cases, it takes months or even years to see a return on investment, and management just isn't willing to wait that long, especially during difficult economic times. In speaking with companies and others in the industry, we've found that management sometimes prefers the traditional way of doing things and thus is reluctant to make changes.

What are the biggest mistakes IT makes in automating AP/AR? What best practices can you recommend to avoid these pitfalls?

The biggest mistake we've seen organizations make when automating AP/AR is overlooking the fact that exceptions take up a large chunk of employee time and that having instant access to the business documents associated with transaction processing (including invoices, contracts, B/L, POD, returns, complaints and reports) is critical to reducing the time and cost of processing these exceptions.

Companies must evaluate all of the potential costs that traditional processing can incur, not just the obvious ones. This includes measuring the number of invoices processed per month and calculating the current processing cost-per-invoice, taking into account the proportion that are non-PO or non-goods orders. Also, as discussed above, we advise companies to consider how easily they can integrate the AP/ AR systems with existing content repositories, both for access during the process and auditable archive after the process.

With the impending surge of cloud computing deployments, how will AP/AR automation be affected?

We will no doubt see a surge in cloud computing deployments in the coming years, which will have an effect on the automation of IT. Increasingly, vendors will offer self-service capabilities for customers via the cloud and/or portals. Using a cloud automation model allows providers to develop, host, and operate software for customer use, allowing them to experience the key advantages of this approach, which include lowered upfront costs, faster adoption, increased flexibility and greater scalability, interoperability, and usability. The cloud will allow companies to access the most important data related to AP/AR processes on the go, which traditional possessing can't offer.

However, although there are some obvious benefits associated which the cloud, this will also open up a new door of potential issues that IT and finance managers need to be aware of. The biggest will no doubt be security, especially considering the highly sensitive data these departments deal with on a daily basis. Companies must develop and implement a strong governance model for cloud offerings that ensure security is part of the conversation.

What AR/AP automation products does ASG offer and how do they work?

ASG's enterprise content management portfolio includes ASG-ViewDirect for Accounts Payable Automation and Accounts Receivable Automation. ASG-ViewDirect gives AP departments the ability to automate and standardize invoice receipt/workflow processes to reduce invoice processing costs, decrease invoice cycle times, increase invoice visibility, and improve cash-flow management without increasing headcount. The solution also gives AR departments the ability to automate and standardize payment receipt/workflow processes, including short payments and payment exceptions to reduce the time and cost of receiving and applying payments, increase payment status visibility, and improve cash-flow management. All of these result in reduced write-offs associated with goodwill and bad debt.

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