A guide to international accounts payable strategy
As the economy ebbs and flows, businesses must preserve cash and make their financial processes efficient. In a bear market, customer payments may be late, slowing down your payments to suppliers. Large companies are not immune to this phenomenon. In 2020, 244 large businesses sought bankruptcy protection, the most since the recession of 2009.
During a bull market, your business could receive thousands of invoices a day from suppliers that expect faster processing and payments. Manual processing of invoices can be tedious and inefficient and may lead to errors.
Global businesses need an international Accounts Payable (AP) solution that does invoice ingestion and processing in seconds. This article explains the problems with manual AP processing, the steps to build a global AP strategy, and the benefits of automation over manual AP operations.
Drawbacks of manual accounts payable process
Finance teams spend 84% of their time, on average, daily on manual AP tasks. This limits their productivity and effectiveness. However, only a few businesses have implemented automated AP solutions for touchless transactions. Some of the manual AP tasks that take several hours are:
- Entering data into multiple systems
- Sorting spreadsheets and paper invoices in files
- Errors in data entry which demand reprocessing
- Over or underpayments to suppliers
These drawbacks deprive the finance team and CFOs of spending more time on strategic activities such as:
- Financial data analysis
- Identifying opportunities for cost optimisation
- Collaborating with other departments
- Improving relationships with suppliers
- Finding better suppliers and setting up processes
Building a global accounts payable strategy
Paying international invoices can be complex. It could incur higher processing charges and be risky and opaque if you do not use AP automation with global payment solutions. You need to carefully manage taxes and exchange rates. Traditional ways to pay an international vendor are:
- Wire transfers
- Credit cards
- Prepaid debit cards
- Virtual cards
- Cheque payments
- Money orders
- Electronic payments
- Global ACH
- Other global money transfer services
However, all these methods are expensive and opaque and require manual work. They do not give a real-time status update. Banks typically give low exchange rates and charge up to $35 per transaction. PayPal exchange rates and transfer fees are very inconvenient. Here are a few steps to building a global AP strategy in your organisation:
Get senior management support
Senior management, including the CFO, must drive global AP automation and ensure that it meets the current and future goals. They need to set goals, create a vision, form a team, and lead the change.
Implementing AP automation
Make AP system automation a priority from day one to streamline the operations. This includes critically analysing current processes and replacing tedious manual jobs with advanced workflows. As the business grows, automation tools in AP improve the cash flow and supplier management.
Demonstrate the benefits of AP automation to the finance team
Talk to the finance team and ease their concerns about losing a job because of automation. Involve the finance team in selecting the automation tool.
Your team has the knowledge of current AP and can suggest its benefits and drawbacks. Show them that automation of low-level tasks will open greater work opportunities for them with activities that directly impact the company’s goals and strategy.
Track the progress using KPIs
A staggering 40% of businesses do not track the progress of their global AP strategy through KPIs. Some of the essential KPIs to monitor after global AP automation are:
- The number of invoices processed each week/month
- Average cost of processing per invoice
- The time taken to process an invoice
You may implement additional KPIs according to the nature of your business or data analysis requirements.
Benefits of automation in global accounts payable process
Locked-in exchange rates, long processing times, no real-time updates, and manual entry of data make traditional global payment methods obsolete. Here are the benefits of switching to international accounts payable service:
- Receive, record, and track global invoices
- Remove the fee of intermediaries
- Get real-time visibility of payments
- Connect with the ERP system
- Get built-in compliances and regulations
- Know the exact exchange rates
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How can Infosys BPM help?
Infosys BPM Accounts Payable on Cloud (APoC) SaaS platform leverages artificial intelligence (AI) and machine learning (ML) models for enhanced stakeholder experience. Turn invoice processing into a profit centre with real-time insights to your suppliers.
Read more about accounts payable cloud solutions at Infosys BPM.