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3 Ways to Make Your Accounts Payable Function More Efficient for Cross-Border Payments

Imran Shiraz March 29, 2018

How efficient is your accounts payable department for cross-border payments? The truth may surprise you…

Would it surprise you to learn that a best-in-class company can process and approve an invoice in just four days? This compares to a massive 16 days for the least efficient organisations. Where does your business sit, and how could you improve?

What’s wrong with the traditional AP process?

Traditionally, the AP process is known as a “back office” function. It can be manual, paper-based and, often, pretty slow. We’ve all heard of invoices sitting on people’s desks waiting to be processed. You may even have a few on your desk right now.

Let’s take a look at a possible traditional AP department’s workflow:

Paper and/or electronic invoices received from suppliers

Invoices copied or printed

Invoices manually reviewed for purchase order matching, discrepancies and exceptions

Invoice data manually entered into accounting system and coded to general ledger

Routed for approval or discrepancy resolution

Funds paid

In addition to the extra time and resource needed for this method of processing invoices, there’s the risk of data entry errors, duplicate payments and late payments. We talk about the pitfalls of manual data input in our white paper Evaluating your cross-border payment cost and efficiency.

The best companies want responsive processes

As well as old-style invoicing being slow and labour-intensive, there are other reasons AP processes for cross-border payments are becoming more technical and complex, such as:

It’s time to face facts that traditional back-office processes and infrastructure are often not responsive enough for today’s evolving businesses. Many organisations are looking to use technology innovation to centralise back-office functions, with the promise of process efficiencies, cost reductions and timely, more accurate payments.

Here are three ways to potentially boost the efficiency of your AP for cross-border payments:

1. Automate your AP process

When you automate your organisation’s AP process, you move to digital invoicing and your invoice data automatically appears in a custom web-based workflow system. This technology solution is overlaid on your existing accounting and ERP systems so implementation risks or costs are minimized. Plus your teams do not have to learn a new interface or new reporting methods – it all looks and feels familiar.

Once you’re up and running, you’ll have efficient invoice routing and can approve invoices from a mobile device or PC. The system should also come with purchase order verification, exception management, and resolution with appropriate internal controls.

2. Evaluate best-practice process controls

If your current AP process for cross-border payments is flawed or broken, automation will not solve this. At best you may only incrementally improve efficiency. At worst, you may introduce further inefficiencies.

A best-practice AP process should deliver:

When looking for an outsourced service provider, ask them to demonstrate how their product achieves these goals, as well as make sure they have a good understanding of financial standards and industry compliance issues. You should work with them to document your unique business rules and policies in advance so they are all carried across.

3. Leverage payment fulfillment platform

Once your invoices have been approved for payment in a web-based workflow system, they can be integrated with an electronic payment fulfillment platform and paid in real time.

Most leading outsourced technology providers use proven best-practice processes to automate your electronic cross-border payments and give you secure and flexible remittance options, including electronic funds transfer (EFT) and prioritised card payments.

How automated electronic payments work

Your organisation’s AP system can generate a single payment file (in TXT, CSV or XML format), which is then uploaded to an electronic payments platform. The most efficient upload approach is via an automated Secure File Transfer Protocol (SFTP). Typically, you can enable this functionality from your Enterprise Resource Management (ERP) system.

Payment files (including beneficiary and payment information) can be periodically dropped into a secure folder and automatically uploaded for supplier validation and custom remittance.

A reconciliation file can also be generated to describe funding amounts and the exchange rate for foreign currencies for each payment.

Consolidated funding transactions are initiated via an electronic funds transfer (EFT) debit, which can then be reconciled against the AP sub-ledger.

Why switch to digital payments?

The benefits of introducing electronic invoicing and payments, include:

What to consider when you switch to electronic invoicing and payments

You may now be considering finding a third-party provider to help you improve your invoicing processes. Ideally, the supplier you choose will have payments expertise and a strong understanding of compliance issues.

Ask if their technology platform is integrated and scalable and what level of customer support they offer. Features you may want to ask about include secure file transfer capability, supplier validation and custom remittance options. In the best-case scenario you will keep your existing accounting systems and back-office infrastructure meaning a smooth, fuss-free integration.

References: 1. AP Invoice Management In A Networked Economy, Aberdeen Group, 2012