There's this restaurant on Lincoln Road in South Beach, Florida. Like many restaurants in the area, it posts a menu in front to entice the sun-kissed tourists walking up and down the strip.
Their menu is gigantic; by far the largest board on the street. There's a little something for everyone—and it's the worst.
A restaurant that tries to cater to everyone, pleases no one.
This is also the case with software vendors promising to perform every back office task under the sun. No single software solution can be good at everything. What's more, this isn't how software works anymore.
Modern cloud-based solutions allow several disparate services to plug into one another, forming a back office solution that's custom to your organization. You no longer need to wait on a vendor for a “complete" solution that works. Your dream solution already exists.
It's simply a matter of putting the pieces together. This article highlights the priority in each area, what automation should look like, and the next steps in automation.
Accounts Receivable: Automation in accounts receivable (AR) involves creating and sending invoices faster and more efficiently than human counterparts can. Unfortunately, some companies may insist on a paper invoice, in that case, accounts receivable needs to automate the printing, stuffing, and mailing of invoices. During AR's transition to automation, staff should focus on converting as many organizations as possible into receiving electronic invoices. AR should mandate that all new customers receive only electronic invoices.
AR's Next step: Data in AR is a boon for predicting cash flow. Knowing how long it takes vendors to pay helps predict trends for budgeting and forecasting. Connecting these two silos is the logical next step.
Accounts Payable: Automation in accounts payable involves capturing incoming paper invoices and digitizing them—the process of scanning and performing OCR (object character recognition) to enable search—and placing those (now) electronic invoices in a workflow for approval. Payment is then issued once the invoice is approved.
Organizations wrongly fear that automating AP forces them to relent the advantage of float and overlook the benefits of being able to time payments with razor-sharp precision. The ability to control payment in this manner opens the possibility of dynamic discounting.
AP's Next Step: Knowing precisely when money exits an account helps accounting and finance understand how lean the company can run. This too has implications for procurement departments.
Vendor Payments: A payment automation solution needs to fit seamlessly into AP's workflow. AP should be able to send payments with a single click and vendors receive electronic payments and remittances in the method they prefer.
Vendor Payments' Next Step: Discounting. The ability to discount, or modify, payments anywhere in its workflow allows payments to be sent faster. Discounting, or dynamic discounting, enables authorized users to discount an invoice anywhere in the payment's lifecycle.
Discounting: Automating and centralizing the discounting process reduces the time needed to negotiate with vendors. This allows organizations to unearth discrepancies and makes vetting new vendors easier by accessing historical pricing data.
Discounting's Next Step: The procurement department. A vendor is only as good as its product, price, and service; failing to use data from discounting is like ignoring part of this equation. Procurement needs to know the final negotiated price vendors have accepted.
Procurement: Automating the procurement department, in this sense, means centralizing data entry and enabling a collaborative workflow. With the back-and-forth nature of bidding, a system of version control is necessary to assure the right terms and conditions are the ones being bid on. Most importantly, centralization introduces oversight that helps eliminate the possibility of back door and hand shake deals from occurring.
(Procurement's) Next Step: The end result is having procurement data feed into discounting. Discounting needs real-time access to a vendor's terms and conditions to negotiate the best pricing.
Tax and Audit: Organizations know when taxes are due, but they never know when an audit may happen. That's why the best recourse is preparation. Digital archives make researching audits much easier and faster. Having as many departments digitized—especially accounting—makes following the payment trail easier.
Budgeting and Forecasting: Budgeting and forecasting reaps the benefits of automation only once all other areas are automated. That's why this is referred to as the final frontier to back office automation. Put simply, budgeting and forecasting needs a holistic view of an organization to make use of predictive data modeling. And that's only possible once all departments' data—or silos—are interconnected and automated.
It's a Piece of Cake
Today's cloud-based back office solutions are implemented in a piecemeal fashion. The CFO and other executives need only evaluate the requirements of an individual department. It's the very nature of these cloud-based services that affords it the ability to connect with other departmental solutions.
Said another way, it's no longer a single solution or vendor that will automate the entire back office. Rather, it's many solutions, interconnected and sharing data that makes for a truly integrated back office solution.
The net-net guarantees the best solution is implemented in each department. That in turn, yields the best all-encompassing solution for the organization as a whole.
Only by piecing together unique department-specific solutions can companies finally have their cake and eat it too.
About the Author
Ralph is a Research Analyst at Nvoicepay. He's passionate about marketing technology and creating engaging content that delivers value to the consumer.More Content by Ralph Perdomo