Stuart Evans explains why accounting departments in UK businesses should go through the journey of digital transformation. Using real-life data from an Invu implementation Evans provides a benchmark so that businesses can measure their own performance.
Accounting digital transformation - why businesses do it?
The main driver for businesses to put themselves through what can sometimes be a painful process of digital transformation is increased control and efficiency, because after all – time is money. Both time and control are very important for the invoice and purchase process and by removing excess effort in routine transactions, this allows more time for accounting departments to employ critical thinking over exceptions and financial data – making business decisions based on strategic insight.
A new driver for invoice automation in the UK is a “duty to report” introduced in the Small Business, Enterprise and Employment Act of 2015. This has created a duty on large businesses to report on their payment practices to deter them from withholding payments to smaller suppliers and therefore disrupting the overall UK economy. These requirements mean that large businesses needed to provide a six-monthly report on how quickly invoices are turned around from receipt to payment. This shift means that accounting departments no longer only needed to report on the financial amounts of invoices, but on each individual invoice and how quickly it was turned around to payment. Invoice automation not only improves the metrics, but also provides the data for the reporting in a click.
Trust the machine
Financial controllers in accounting departments place a lot of trust in the tangible elements of their job function. They trust the rubber stamp of invoice approval or the spreadsheet which they manually input the data and the complex formula that is perfectly understandable to them, but clear as mud to anyone outside accounting. Going digital and moving towards automation means that trust needs to be placed in machines – which can sometimes be difficult for businesses at first as it requires change management and relinquishing control over traditional manual processes.
An example of how invoice processing automation and purchase order processing has benefitted one organisation is with Adactus Housing - a housing association based in the North West of England. Adactus has 350 employees and processes 30,000+ invoices per year. Previously they had no central purchase order system and just used departmental spreadsheets. They needed purchase order controls because as a housing association, auditors demand transparent processes to demonstrate it is spending their allocated budgets responsibly.
From receiving an invoice to posting, Adactus has a mean average of five working days for the process to be completed - this is skewed significantly by some invoices being held up by up to 50 days from the point of arrival. However, if we consider the mode value of days to posting data we can see the most likely case is just one day end-to-end - from receiving to posting.
Of these, the touchless invoices that are processed using data capture, automation and leveraging the technology is just under a quarter of the invoices Adactus receives (24%).
Conclusions and learnings: Keep things simple
As part of going through digital transformation, accounting departments have the opportunity to simplify their invoice/purchase order approval process and it is vital they do so on day one, to avoid uncertainty and doubt when using a new system. When the rubber stamp, staples and boxes are gone, the staff need to adapt to a new (better!) way to work and that change needs to be made safely if it is to succeed. Once the new process is established, simpler cleaner authorisation models are far easier to measure and self-manage.
The technology created in today’s digital world is done so to make complex processes more straight forward to execute. However, the added visibility and audit trail on the processes provided by using technology is where the real benefit is seen. At all times in the approval process of invoices or purchase orders, each step is tracked and monitored and it is clear to the accounting department where any bottlenecks may occur.
Going digital should not be scary or painful, and if your accounting department is not already using an invoice processing or purchase order processing solution then the time for change might be sooner than you think, as the invoice process is one of the quickest, safest processes to choose for digital transformation, and it offers a compelling return on investment.