The importance of automating invoice processing to efficiently manage cash and payments has become even more critical during the COVID-19 pandemic. Many Dynamics 365 Finance and Operations users in Accounts Payable are still mostly relying on manual methods to process invoices, according to a study by research and advisory firm Levvel. This article covers how AP departments can achieve effective automation.
During the COVID-19 pandemic, the ability to expedite invoice processing has become more important than ever in order to effectively manage cash and payments. Companies can accomplish that by digitalizing their Accounts Payable (AP) process, yet unfortunately, when it comes to automation, Dynamics 365 for Finance and Operations (D365FO) users have come up short. Many companies are still relying on manual methods to process invoices and it’s significantly impacting their efficiency, according to a recent report from research and advisory firm Levvel – “Unlocking Invoice Management Efficiency in Microsoft Dynamics 365 FO - Exploring Software that Improves User Experience and Productivity for Finance Teams.”
The problem is pervasive. Seventy-four percent of respondents reported that manual data entry and inefficient processes was a key pain point in their invoice processing workflow, followed by the manual routing of invoices for approval at 68%.
Part of the problem lies with the limitations of Dynamics 365 FO itself. With its comprehensive business management functionality, including advanced finance and business operations capabilities, D365FO is a solid ERP for finance departments. And, as part of the Microsoft suite of solutions, users benefit from the Microsoft ecosystem, support and connectivity. While Dynamics 365 FO is a strong platform for finance and accounting, it offers very limited automated AP functionality, requiring departments to handle much of their data entry and invoice routing manually.
Manual processes wreak havoc with visibility and control
But along with manual processes comes problems. Manual invoices not only slow down processing with time-consuming, inefficient and costly tasks, but also result in poor visibility and control. Without this visibility, it’s impossible for AP departments to know what invoices they have and where they are in the process or what their outstanding liabilities are. The result? Invoices are often lost, companies typically miss early-payment discounts, and are all too often burdened with late fees.
The report found that when asked for the top three pain points in AP department, 37% noted the high number of discrepancies and exceptions, 32% indicated lost or missing invoices, while the same number of respondents mentioned the large number of invoices received in paper format. It’s important to note that an average of 37% of survey respondents receive paper invoices, with the highest in the SMB community (48%), followed by the mid-market (41%) and then the enterprise (22%).
Limited visibility into invoices also means diminished control over the process, making it difficult to automatically enforce internal policies or ensure compliance to regulations. Without enforced controls – such as segregation of duties and having two approvers sign off on invoices over a certain dollar amount – it’s also easier for fraud to find a foothold.
Enabling automation
The good news is that organizations can greatly benefit from AP automation, and it doesn’t have to be a difficult process.
The Levvel report recommends that organizations turn to third-party solutions to digitize their processes and deliver the efficiencies, visibility and control that their AP operations need. It suggests that AP departments consider the following criteria when evaluating technology:
- Seamless integration. The automated solution should seamlessly integrate with MS D365FO. In addition to being able to leverage the Microsoft ecosystem, the AP solution will be able to easily communicate with ERP, for example, accessing the vendor master file and transferring approved invoices for payment. Seamless integration also makes D365FO upgrades automatic, so it doesn’t require any work on the user’s part.
- Expanded functionality. Third-party AP solutions extend the ERP’s functionality as well as offer new capabilities. Look for a robust AP solution to automate the majority of the invoicing process and incorporate intelligence to help users address exceptions. For example, they provide matching capabilities between the invoice and POs, goods received and other documents; automated workflows, including coding, routing, approvals; and enable rule-based checks and controls. Other advanced functionality might include Optical Character Recognition (OCR) and data-capture capabilities, mobile capabilities, and the ability to support and process multiple invoice types, including e-invoices.
- Cloud-based functionality. The ideal AP solution should be cloud-based to enable anytime, anywhere access on a secure, scalable hosting service like Azure. By using cloud-based hosting, IT maintenance is reduced, and secure back-up capabilities help ensure business continuity.
- Advanced user interface (UI) and user experience (UX) designed specifically for AP. The user interface should be easy-to-use, intuitive and designed to address the specific needs of the AP department. Users today expect business applications to be as easy and convenient as their consumer apps, and AP is no different. Ease-of-use will also help to promote adoption, enabling organizations to gain process improvements more quickly. In addition to a specially developed UI for the desktop, there should also be one designed for mobile devices, enabling the AP staff, reviewers and approvers to easily conduct business from anywhere. Mobile access is particularly critical now for employees working from home during the pandemic.
Many companies are turning to extended solutions to expand the capabilities of D365FO AP functionality, and provide robust capabilities with a better user experience. By digitalizing your AP department, you can benefit from critical visibility and control over your operations. In addition to increasing efficiencies, improving accuracy and reducing costs, you can eliminate some of the most pressing pain points and strategically manage AP operations to move your organization forward during COVID-19 and beyond.
