Talk to most small and medium sized businesses about invoicing and the response from a Managing Director is invariably “I wish I could get them paid more quickly”. As businesses grow their needs and requirements evolve. This tends to lead to an evolving business structure. However there are times when businesses benefit from a thorough appraisal of how they are conducting business and how this could improve – particularly as technology also evolves.
Growing pains in business process
Take, for example, the issue of incoming invoices. When a business is launched these will be infrequent and are likely to be handled by the owner manually. Over time the volume of invoices increases to the point where a dedicated member of staff may be needed. As technology evolves, so does the typical invoice: from paper to fax to email or attachments. Businesses that deal with large corporates will be familiar with the specific invoice requirements that are often dictated by such companies. All of this places an increased workload on finance staff to the point that many businesses, particularly those that receive large volumes of invoices, need a growing pool of finance personnel.
Over time this can become a bureaucratic nightmare, with staff chasing paper around a complex approval process, handling irate suppliers that have not been paid; month end becomes a constant frustration and an annual audit is a farcical paper chase around the office. None of this activity is related to a business’ core objectives and can have a detrimental effect on both cash flow and profitability.
Larger corporations have managed this process through digital finance automation for some time, automatically scanning, processing and allocating invoices on arrival and using sophisticated approvals processes to electronically sign off invoices for payment. The arrival of the Cloud has finally made it possible for smaller businesses to do the same.
Cloud to the rescue
Cloud based accounts payable applications offer businesses a number of key advantages. First invoices are securely stored in the Cloud for access. This in itself is a significant positive when it comes to audit or when there is a need to demonstrate financial compliance: no more lost paper invoices; no more physical storage requirements; no more long and complicated audit visits. However the most effective applications provide a level of functionality far beyond this single advantage. Invoices can be scanned instantly if arriving by post or processed into the back office system if arriving electronically.
Sophisticated data extraction techniques enable key information to be automatically uploaded (for example supplier address, tax codes and numbers, volumes of goods supplied, unit cost and total invoice value). These scanned invoices can then be matched to purchase orders already input into a back office system. Where there is a perfect match (and this should be 90% of the time or more), the back office system can process the invoices for approval and ultimately payment automatically. Almost immediately Accounts Payable staff do not have to process the vast majority of invoices at all and can instead focus on the exceptions, for example where a delivery has fallen short or an invoice has been incorrectly coded.
Simple to adopt and use
Whilst the process itself is complex, the user interface need not be. Accounts payable personnel can be trained in a matter of hours. Furthermore, the invoice approvals process can be accessed through any connected device, including a tablet or mobile phone through an app. Suddenly managers are not faced with a pile of paperwork to sign off every time there are in the office, but can approve invoices on the go, still with full transparency to view the source documentation. The best Cloud-based accounts payable systems will ‘learn’ over time to reduce the small number of exceptions further, by looking for regular payments and flagging up anything unusual – an important business compliance benefit.
In the past such systems would require dedicated servers, IT maintenance and capital investment, but Cloud computing enables companies to roll out finance automation with almost no investment in hardware – other than a scanner with a network connection – and to benefit from the scalability afforded to applications in the Cloud. Typically the small monthly cost of the software as a service (SaaS) would be vastly outweighed by the benefits of radically reducing the cost per invoice and the reduction in staff time being dedicated to mundane and repetitive tasks.
Small and medium sized businesses have always had the edge over large corporations in terms of flexibility and agility – traits that have enabled them to compete against the obvious advantages that larger businesses enjoy such as the ability to invest in infrastructure and new processes. The exciting opportunity that Cloud technology brings to small and medium sized businesses is the capability to compete with larger corporates by adopting cloud-based processes and applications, particularly in non-core, but none the less critical, business functions such as finance and human resources. This effectively levels the business playing field further and opens up the ability for managers to remove ‘business clutter’ from their lives and refocus on core activities, safe in the knowledge that automation is taking care of the mundane.
About the author
Simon Shorthose is MD of ReadSoft, a position he has held since 2009. In a career spanning 20 years, Shorthose has held senior positions at IBS Europe (Vice President Sales Europe), IBS Automotive (VP sales EMEA), IBS UK (Managing Director), Catalyst International (VP Sales & marketing EMEA), Isotrak (Business development Director) and at Hays PLC (Sales & Marketing Director).