ERP systems are meant to provide structure, visibility, and efficiency to business operations. However, numerous organisations are still unsure of the value of their ERP investment. Companies tend to focus on sales, inventory, or production processes when evaluating performance, but one area may be silently impacting the overall return – accounts payable.
One of the most integral and important business functions is Accounts payable (AP). It links to the purchase, supplier, invoice, approval, and payment processes. A modern ERP system can fall short of its value even when the processes are slow and not integrated.
Efficient use of AP is the hidden cost of Inefficient AP.
While the accounts payable department may seem to be a standard back-office task, it affects the entire organization. Employees may be spending time on manual invoice entry, paper-based invoice routing and approval, duplicate invoices, or payment mistakes, which leads to unnecessary costs.
If these problems persist following an ERP installation, companies might think that the software itself is faulty. The difficulty could actually be the configuration, integration, or adoption of the ERP system by the employees.
The tools provided by an ERP platform are valuable to the business only if there are efficient processes in place.
Manual Processes Can Sabotage the ERP Benefits.
l One of the significant challenges is maintaining manual efforts after ERP deployment. Financial tasks can still be accomplished using spreadsheets, email approvals, paper invoices, or separate systems by employees.
l This results in data disconnects and diminishes the value of having all the ERP data in one place. Employees can have to spend hours to input information that can be automatically captured.
l AP, then, is definitely an area that deserves a look by any enterprise considering the performance of any ERP system. If the invoices are still languishing in the organization, it might be that there are opportunities for automation that are not being taken advantage of.
l The number of times the word “invoice” is mentioned is increasing. The word ‘invoice' is being more frequently used.
l There should be transparency about the status of invoices. Otherwise, finance teams can have a hard time knowing if an invoice has been received, approved, scheduled, or paid.
l A well-integrated ERP system can give you a holistic view of financial data. This can assist companies in tracking outstanding invoices, pinpointing bottlenecks, and enhancing communication between finance and purchasing departments.
l Improved visibility may also enable management to see where the money is going and how the obligation to suppliers impacts cash flow.
l Supplier Relationships May Be Impacted
Efficiency of AP is not just an economic concern. It can also impact supplier relations.
Poor payment timeliness and accuracy can lead to dissatisfaction with vendors and impact future due dates. If companies fail to pay on time or if they fail to communicate clearly, suppliers can become less flexible.
This streamlines invoice processing and payment management, leading to more reliable supplier relationships. With ERP-Assisted AP processes, finance teams can ensure accurate records and help drive more uniformity in payment.
Adopting ERP is a business problem.
ERP is not about technology; it's about business. Staff need to be familiar with the way the system works and why it is important that processes are standardised.
Businesses may have to run two systems if employees go on using the old techniques because they are familiar. This can lead to data duplication, data inconsistencies, and manual effort.
Training should be ongoing after an ERP system goes live, though. Business processes should also be regularly reviewed to identify if they continue to meet changing business requirements.
Automation can enhance AP Performance.
In today's world, automation is playing a vital role in accounts payable. Automate invoice capture, routing, matching, notifications, and payment processes, depending on the ERP platform and implementation.
The aim is not to automate all the things. Rather, businesses should look for repetitive tasks that are time-consuming and also allow for mistakes.
An example of this is automatically assigning an invoice to an approver and not having to wait for approval, as this can reduce delays. Automated matching can also be used to locate discrepanciebeforeto payment.
ERP implementation is just the beginning; measuring its success is the next crucial step.
Just installing ERP software and giving employees access to it isn't enough to make an ERP project a success.
Businesses should track metrics like invoice processing time, payment accuracy, approval delays, duplicate payments, supplier enquiries, and employee productivity.
These can help determine if ERP is actually enhancing financial operations.
Unless things change, it may not be just another software upgrade that solves the problem. Workflows might need to be redesigned, existing data might need to be cleaned, employees may need to be educated, or disconnected workflows may need to be integrated.
The Bigger Picture for ERP Buyers
ERP systems are projected to provide tangible benefits for businesses in terms of operations as they invest in digital transformation. It is important to note that this value is not just about technology, as Accounts Payable is such an example.
While an ERP system can be used to streamline information and offer robust automation features, it's important for businesses to set up these features to align with their efficient business processes.
Conclusion
If a company is wondering about ROI on an ERP investment, reviewing AP could show issues that are impacting the entire company. An underutilized ERP system can be enhanced to become a better asset for your business by streamlining invoice management, approvals, supplier communications, and financial visibility.
More features aren't necessarily the future of ERP. It's about taking current capabilities to the next level of effectiveness to achieve faster, more connected, and more intelligent business operations.
FAQs
1. What are the reasons why an ERP system may not provide the returns that are desired?
Issues such as poor implementation, low employee adoption rates, outdated processes, data quality issues, lack of training, and disconnected systems can all impact the performance of the ERP.
2. Why is accounts payable a crucial part of ERP performance?
AP integrates purchasing, suppliers, invoices, approvals, and payments. The processes involved in AP can become inefficient, leading to delays, errors, and unnecessary administrative expenses.
3. ERP systems can help automate accounts payable.
Today, most ERP systems offer AP automation capabilities, including invoice processing, approval workflow, invoice matching, notifications, and payment management.
4. What is the best way to gauge the success of ERP in a business?
Processing times, error rates, approval delays, duplicate payments, employee productivity, supplier inquiries, and more can be monitored across the organization.
5. Will the ROI of ERP improve if AP is improved?
Better AP can make payment and approval processes more efficient, minimize errors, improve financial visibility, and reduce manual efforts, all of which can positively impact ERP ROI.
