The Imperative of Implementing a Payables Management System

Luis Juarez, Director of Financial Operations, FirstService Residential

Luis Juarez, Director of Financial Operations, FirstService Residential

The AP landscape is constantly changing, much like your business. With the emergence of new technologies designed to streamline processes, reduce headcount, and shorten the payables cycle, the success or failure of your business may depend on it. Without an automated AP department, the only option for scaling may be to hire additional staff. The task may seem daunting for businesses that have yet to implement a Payables Management System (PMS). With a clear understanding of the benefits and ROI and obtaining buy-in from leadership, you may find yourself in a sustainable situation, susceptible to errors resulting from manual production. These costly errors can take many forms, such as duplicate payments, fraud, late payments, missed invoices, and a lack of visibility into the payable environment within your organization. With so many applications available, one size may only fit some, and additional tools may be required. Instead of focusing solely on the benefits, I would like to highlight some core features to consider when selecting a PMS.

● Invoice Processing - Look for applications that offer intelligent OCR and artificial intelligence (AI). If your PMS relies on people extracting and keying info, you’ll have to do a more thorough job reviewing invoices. The most common error is the incorrect invoice number, which leads to costly duplicate payments.

● Exception Management - Invoice exceptions are documents your PMS could not process because it did not meet the invoice submission requirements. This can account for about 20% - 30% of document submissions, with each document taking your team between 2-5 minutes to review and take action on. Multiply that over a year, and the costs start to add up.

Consider a system that alerts suppliers anytime a submission does not meet requirements, or better yet, a system that rejects the document with details on how to resubmit properly. Doing so can resolve the issue right at the entry point instead of allocating organizational resources once it enters the system.

"A more efficient approach is to select a system incorporating Artificial Intelligence (AI) to learn from exceptions and reduce the number of cases requiring human intervention"

A more efficient approach is to select a system incorporating Artificial Intelligence (AI) to learn from exceptions and reduce the number of cases requiring human intervention.

● Payment Solutions – A PMS would not be complete without a payment solution. Consider a system that can offer multiple payment methods such as checks, ACH, virtual credit cards, and rush payments. For those that want more control, look for a system with payment approval workflows. This provides a final opportunity to review and release payments.

An entire article can be written on this topic alone, but some key benefits to outsourcing your payments include:

● Management of outstanding payments by reaching out to suppliers.

● Management of the preferred payment method so there’s no payment “exception” list for your team to manage.

● Significant cost reduction as manual processing payments is labor-intensive and time-consuming. No more manual printing, reviewing, tearing stubs, stuffing, and mailing checks.

● In the event of fraud, your organization’s bank account is not compromised. Depending on your PMS provider, funds to pay your suppliers are transferred from your organization’s account to theirs, and in turn, they pay your supplier. Your PMS provider manages their own Positive Pay, and if fraud occurs, their bank will be compromised.

The COVID-19 pandemic has significantly changed various industries, leading many companies to adopt remote working. By implementing a fully automated Accounts Payable (AP) department, your team can operate smoothly even outside the office environment. When the shutdown orders were issued, I had to relocate everyone to their homes within a few days. Thanks to a dependable Payables Management System (PMS), we were able to establish a remote setup effortlessly. Moreover, the PMS helped us reduce the number of in-house payments from over 20% to 5%. This resulted in operational efficiency, reducing fraud risk with manual checks circulated in the office.