Controllers Council recently held a panel discussion on How to Reduce Costs and Risk of Paying Bills, sponsored by BILL.
BILL is the leader in financial automation software for small and mid-size businesses. our expert panelists are Ken Fick and Joe Fleischer. Ken Fick is president and CEO of FPA Experts. They provide FP&A services and of course and related services. Ken has more than 20 years’ experience in both corporate finance and consulting. Joe Fleischer is webinar content marketing manager for BILL, and he has more than 16 years’ experience, including cfo.com and Argyle.
Following are key takeaways to this discussion. If you are interested in learning more, view the full webinar archive video here.
What costs of managing payables or mid-size companies in particular most likely to overlook as their volumes of payables increase?
The first and very most important one is time and labor costs. Managing payables can be a time-consuming process and requires a dedicated staff. And many times, these costs are masked, but what I call superhero finance people, so these could be accounts payable people or supervisor, whatever, that just get the job done. And that could be overtime that is either booked or not booked and just frustration regards to pushing it through. But the senior leadership probably doesn’t notice it because it’s still getting done. So, I think time and labor costs is the first component that is typically overlooked. They’re kicking into those costs. The second would be payment processing fees. They can add up quickly, especially if the company is using multiple payment methods as their volume increases.
These include fees like transaction fees, wire transfer fees, and foreign currency exchange fees. So, they can be hidden fees or overlooked by companies as well too. Late payment fees. So, failing to pay invoices on time can result in late payment fee as we know. And that can really hurt the company’s credit rating over the long term. And obviously it does have a cost to it. But in order, as we are going through COVID, supply chain is such an important part of our businesses, you don’t want to try to, or you don’t want to do things that would alleviate any type of supply chain risk. And late payment fees would make you appear as a poor partner to a vendor. So that that’s something that is overlooked. Invoice errors and disputes, errors and disputes in invoices can lead to delay in payments. And then you have the whole late fee payment issue.
What stages of managing payables are finance teams most likely to encounter the most significant costs and risks?
I’ve seen risks in several areas in the invoice processing or the receipt of the invoice. A lot of time manual invoice processing can be time-consuming as we know it can be error-prone leading to delays and missed payments. You have somebody physically looking over it and trying to the triple match it, with the purchase order and with the packing slip. So that’s an error that cause significant costs or a risk for a company. Moreover, in this part two, the processing of the invoice fraud is significant risk at this stage. Well, with scammers sending fake invoices or poaching as a legitimate vendor.
The third area would be the payment approval process. It covers significant cost and risk there without proper controls you can have unauthorized payments, it can be made. You have the fraud issue as well too.
The fourth would be the payment execution. So, it’s already approved, but the executing of that payment such as the transaction fee, wire transfer, foreign currency exchange. But additionally, if payments are made using outdated or older system like paper checks, there’re additional cost to that.
And the hardest part about that process is delegation at getting the leadership, particularly this organization.
How can finance leaders identify stages of managing payables that lend themselves best to automation?
The first would be volume. High volume tasks are excellent candidates for automation, but they can be time-consuming, they can be error-prone, and they require significant labor costs. The second is anything that has repetitive tasks. So repetitive tasks such as data entry that we do for invoicing, invoice matching, also good KMA for automation. By doing this, it also reduces risks. It frees up staff for more valid tasks and improve efficiency.
What types of goals should finance leaders establish even before introducing automation in AP to mitigate the risk that you described earlier of simply speeding up a bad process, a process that is not helpful to begin with?
I think goals are extremely important and especially if there’s already pain points and that you can identify what those goals are, because the goals help you determine if it was successful or not. If you have no goals, then how do you know it really was improved? Well, we’re doing things faster. Oh okay, but how much faster? You know what I mean? Well, was it worth all this money we spent on it? So, some specific goals would be the improvement of efficiency. So, what I mean by that is producing manual tasks, streamlining workflows, and increasing process speed. So that would improve efficiency. Those are tangible goals with quantifiable numbers that you can put to these types of engagements or process improvements. The second one would be to reduce errors. So, eliminating manual data entry for example would have the reduction of the risk of human error.
To view the complete webcast, download full webinar here.
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BILL, the intelligent business payments platform, helps automate your PO-to-payment process and save 50% of your time on accounts payable. With BILL, you can turn your finance organization into an efficient, paperless environment with automated approval workflows, digital document capture and management, and built-in team collaboration. It centralizes your payments process for both domestic and international vendors, integrating with your accounting software and tools in your tech stack to keep information up-to-date. Getting up and running with BILL is fast and easy, and personalized support ensures your company can gain efficiencies right away.