You’ve digitized your accounting processes – but are you more efficient?
Co-founder & CEO
Bad accounting processes are a waste of time and effort, pulling valuable resources away from finance professionals who could instead be concentrating on future plans and strategies.
May 27, 2022
4 min read
This article was originally published by Forbes, Apr 11, 2022, 06:45am EDT
It’s a truth as old as the abacus: inefficient accounting plagues operations at all kinds of businesses, from mom-and-pop shops to the largest enterprises. Bad accounting processes are a waste of time and effort, pulling valuable resources away from finance professionals who could instead be concentrating on future plans and strategies. What’s more, inaccurate and disorganized financial data can lead to errors, oversights, compliance issues, and misinformed decision-making.
In the face of these challenges, businesses have worked for centuries to implement solutions to better automate their accounting workload. Over time, leather-bound ledgers and mechanical calculators have given way to computerized spreadsheets. Today, a wide variety of digital accounting solutions exist on the market, all of them promising to save companies precious time and money.
However, it has become clear that not all these solutions are created equal. While automation might mean a company’s accounting practices are no longer 100% manual, that does not necessarily mean they are more accurate, nor more efficient.
Unmet promises of automation
Automation is a broad term that translates into all kinds of applications within finance and accounting departments, from document recognition to payment transfers. However, it’s unclear whether this automation is translating into actual efficiencies.
For example, according to an Institute of Financial Operations & Leadership survey on automation trends, 25% of respondents say they've automated invoice management – but 68% of accounts payable (AP) teams say they manually type invoices into their enterprise resource planning (ERP) system. Some tools only pull invoice header information, leaving AP teams the time-consuming task of coding the expenses to their general ledger (GL) accounts. Similarly, some technology providers will automate half of the process, while relying on inexpensive offshore accounting clerks to finish whatever work their software couldn’t handle.
Rigidity also plagues many accounting solutions. Rules-based automation tools are inflexible – and, when bent too far, they will break. Invoice dates and numbers must be in the exact right place, or the system won’t recognize them – completely ignoring the reality that invoices come in all types and formats, including handwritten notes. In a world where some enterprises handle 10,000 invoices per month, this level of “solution” just isn’t cutting it.
And the cracks are starting to show: There has been an increase from 36% to 41% of businesses that are intending to change their AP automation solution within the next 12 months, indicating a desire for solutions with more leading-edge features and capabilities.
"Automating the ingestion and coding of invoices has proved to be a huge time-saver as we continue to increase the number of invoices that don't need a human touch. The manual nature of invoice processing has always been a challenge in our industry, but it is finally being addressed by Vic.ai."
Understandably, businesses don’t want to take on a new vendor without knowing whether they will actually gain any efficiencies. Thankfully, companies can be confident that one single factor will make a significant difference in terms of both efficiency and accuracy: artificial intelligence.
Artificial intelligence (AI) is the essential ingredient to true autonomy – the tipping point between digitization and efficient, accurate automation without human intervention. AI algorithms continually learn and self-correct, creating a positive feedback loop that makes the system smarter and more accurate over time. Rather than building rigid rules from generalized data, AI solutions allow for business-specific precision. AI can pull directly from a company’s invoice data to continuously learn from costs and accounting behavior. With a centralized platform and multi-language recognition, AI also has the power to see and learn from global finance teams.
These tiny nuggets of data, added together and continually built upon, result in significant preservation of human resources that can be put to better, “smarter” use. In fact, today’s AI – which can be up to 99% accurate – has already been proven to cut invoice processing by up to 80% from the current best in class. The result? Improved productivity, optimized resources, accelerated growth, enhanced financial agility, and increased financial control.
Evaluating new tech solutions
Now that accounting firms and enterprise businesses are beginning to recognize that automation doesn’t always equal efficiency -- what should they be looking for in a new technology solution?
- Artificial intelligence. First and foremost, true automation cannot be achieved without the continuous learning at the root of artificial intelligence.
- Use of historical data. A strong solution should have the ability to immediately integrate a company’s historical data, to begin building intelligence and accuracy from the get-go.
- Process times. A solution should tell users how long it’s taking to process each invoice – demonstrating continual improvement, due to AI.
- Automation percentages. Likewise, a solution should tell users what share of invoices are being handled without being touched by a single person up until the point of approval and payment. Here again, AI means these percentages should continue to improve the longer the tool is in use.
- Invoice storage. To help companies execute on these efficiency gains, smart solutions should include storage of all past invoices for easy reference and tracking – assisting with pattern spotting, predictions, approvals, and future planning.
- Approval workflows. A good solution will include a standardized, easy-to-read approval workflow. Long gone should be the days of managing approvals via Excel or email – not to mention, clerks chasing down approval signatures.
- Digital audit trails. A solution should ease the auditing process by acting as an online repository for all vendor invoices, keeping track of the full audit log, and recording the full approval history.
As technology continues to improve, the promise of AI goes far beyond resource efficiency. In the near future, AI may help companies derive valuable insights from their accounting data – and use that to make strategic decisions that will benefit their growth and sustainability. For now, businesses should deploy AI to its fullest extent – capturing true autonomy in their AP processes and saving precious time and resources.
Begin streamlining your accounts payable today
Begin your autonomous accounting journey with a solution that understands and works alongside your AP function, and is not limited to a predetermined set of rules that in many ways further complicate accounting.
Click the image below to download the "10 ways autonomous AP processing can drastically improve your workflow" E-book to learn how you can reimagine your financial operations.