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Payables Guy

Perspective, strategies, and vision for the Payables Community.


Who is The Payables Guy?
And Why Listen?

A 30-year financial technology veteran and passionate thought leader for the Payables Community. He’s helped bring SaaS apps to this business segment, led product design for the world’s leading expense management company, and is co-founder of his third software company focused on solutions for the Payables Community. He’s continuously gaining insight and forming strategies relevant to the Payables Community and he wants to tell you about it.

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Don’t Use a Wrench
to Hammer a Nail

Working in the Payables Community provides the opportunity to witness a wide range of challenges organizations face in their financial operations.  Many are looking to streamline processes allowing them to grow faster and improve efficiency.

Regardless of whether they are looking to improve purchasing, billing, or processing payables, it’s interesting to note that, when faced with challenges, how often people in these various disciplines or departments look to using existing tools, even when they are ill-suited to overcome the challenges.

It’s human nature to turn to familiar tools when faced with fixing problems. 

Finding Wrenches in the Payables Community

AP and AR are distinct functions but companies often try and use the toolsets interchangeably or perhaps worse, view Accounting generically and invest in only wrenches thinking the same tool can be used by both sides.

I work with AP departments that are trying to streamline the process of billing their clients for reimbursable expenses and many use AP workflow automation applications targeting the problem from the AP side through expense capture reporting when in fact, billing is an AR process.

I will use reimbursing travel expenses such as lodging to illustrate this.

From an AP perspective, the organization is willing to reimburse its employees up to $250 per night for lodging.  When employees travel, provided they spend under this amount, the company will reimburse employees the full amount.  This policy applies regardless of whether the travel is for a billable expense, and if billable, regardless of whom the client is.

From an AR perspective, it’s common for different clients to allow different rates or costs for certain types of billable expenses.  One may allow up to a maximum of $200 per night for lodging, while another only $150 per night.

Missing the Nail

Now, to solve this problem, the AP department uses the AP workflow application.  When employees file their expense reports, this application applies rules to the lodging expenses that determine how much of these are billable.  The application then routes these expenses for approval including sending it to the people responsible for the client to validate the billable expenses.

While this approach can work, it’s not a direct hit on the nail for example:

  • Some organizations don’t reimburse employees until the clients reimburse the expense
  • There can be delays reimbursing employees because of routing the expense reports to the people responsible for the client
  • It’s complicated and time consuming to convert expense reports, an AP document, into billing statements, an AR document

Instead, employees should be reimbursed promptly without regard to AR issues and AR shouldn’t be using an expense report for billing clients.

Wrenches Make Bad Hammers and Vice Versa

The solution is simple and straightforward.  A better approach is to invest in and use the correct tool for the task at hand. In my example this means using an AR application dedicated to billing reimbursable expenses.

Why People Use Wrenches

There are a variety of reasons why people use tools that are ill-suited for the challenge they face.  Two common reasons why people use a tool they have already invested are,

  • they already know how to use the tool, AND
  • the tool can get the job done

Often, the reason why they don’t use a tool that is well-suited for the challenge is one of these,

  • Not aware a better tool is available
  • Don’t believe it’s practical to obtain a better tool

This is where the Networked Business can help.  One aspect of the Networked Business is cloud applications.

Hammers Readily Available

Cloud applications offer a wide variety of tools allowing companies to access specifically what is needed. Among the values of cloud applications:

  • optimized for a specific purpose
  • easy to obtain and use

Cloud applications are designed for configurability and flexibility so there’s nearly 100% chance you’ll find exactly what’s needed to face your challenge.

Treasure Hunting

Finding cloud applications optimized for the Payables Community can be easy to do and rewarding.  The key is to know where to look.

Most ERP suppliers have a marketplace where you can search for cloud applications optimized for a specific purpose.  This is a great place to start.

Some of the larger enterprise application providers such as Salesforce and Concur also have marketplaces.

These marketplaces make it easy to find cloud applications for the challenges you face.  These also facilitate obtaining these applications.  It’s like having a treasure map on a treasure hunt!

I’ve only scratched the surface on this topic so please stay tuned to the Payables Guy!



Spend Management brings Insight to the Payables Community

Recently I have been helping organizations optimize their usage of AP automation.  One area centers on relating their accounting practices, policies, and culture represented in the design of their Chart of Accounts along with how AP automation solutions collect and present financial activity.  An idea I share is being aware of different perspectives found for recording, viewing, and interpreting financial activity.  An important perspective AP automation brings that many in the Payables Community are unaware is “spend management”.

I mention this in my post about Workflow Engineering – understanding the underlying business objectives surrounding payables, and how these fit into organizations’ missions and cultures can identify areas to apply data analytics that provide insight in how to better achieve these objectives.  Spend Management is an example of such data analytics.

Financial Reporting is Only One Perspective

Financial Reporting is the formal reporting of an organizations financial activity with the Balance Sheet and Income Statement being the most well-known examples.  The perspective is one from a high level where the people reading it want to monitor and analyze the overall financial success of the organization.  Its nature is delivering information at a summary level suitable for investors, owners, executives, and other stakeholders to easily and quickly grasp.

Chart of Accounts Provide Strategic Perspective

The summary level information found in Financial Reporting tracks only the most essential aspects of financial activity.  Financial executives identify what are these essential aspects and design the Chart of Account with these in mind to ensure they record all relevant financial activity appropriately.   This design also relates to recording financial activity so that it will appear on the appropriate report in Financial Reporting such as the Balance Sheet or Income Statement.

Spend Management Provides Operational Perspective

Spend Management is another perspective of financial activity.  Here the viewpoint is from an operational or tactical side in contrast to the more strategic Financial Reporting standpoint. Here the focus is more about operational efficiency and effectiveness.

The financial activity in Spend Management is at the heart of the issues in the Payables Community because it includes only financial activity related to buying and purchasing the goods and services organizations need to operate.

These are a subset of the financial activities found in Financial Reporting.  More importantly, because Spend Management has a tactical perspective, it uses detail level information that isn’t necessary or useful in Financial Reporting.

Detail Allows Better Insight

Deeper granularity allows insight into how effective an organization’s spending is through Spend Management reporting and business intelligence.  Spend Management uses this level of detail to identify patterns of spending that may indicate opportunities to improve how well this spending contributes to the organization’s business objectives.  Management uses this insight to change spending behavior to take advantage of these opportunities.

Employee Spend Management

Spend Management is especially useful for areas of spending that are controllable, and where the employees purchasing goods and services aren’t Procurement professionals.  Here the people making these purchases have a primary job function outside optimizing purchasing.  So, they rarely have the training, tools, or motivation to make better purchasing decisions for the organization.  Often, this is called, Employee Spend Management.

Expense Types Provide Tactical Perspective

If the Chart of Accounts is at the center of recording financial activity for Financial Reporting then Expense Types are at the heart of recording financial activity for Spend Management.  Like a natural account in the Chart of Accounts, an expense type notes the nature of a purchase that is an expense to the organization.  The expense type provides more detail about this nature that is the case in the Chart of Accounts.

A simple example is recording spending related to travel and entertainment.  A standard Chart of Accounts will have one or two natural accounts for travel and one for entertainment.  With Spend Management there can easily be more than a dozen expense types that more precisely measure the travel related purchase.  Consider just covering the basics, there are expense types for airfare or train, communication, entertainment, ground transportation, lodging, and meals.

Accounting and AP Automation Applications

Most organizations use an accounting application to track the financial activity for their Financial Reporting.  For Spend Management, organizations must turn to Accounts Payable automation solutions.  This is because AP automation applications record financial activity to the detail level necessary for Spend Management.

Travel Spending Illustrates the Power of Spend Management

A great example of Spend Management is managing travel spending which for many organizations represents a large percentage of their controllable spending.  By its nature, the people buying travel services are rarely Procurement professionals.  So, there is a lot of opportunity for improvement.

AP automation applications designed specifically for tracking travel-spend capture travel related purchases noting expense types, merchants or vendors, locations, and other aspects.  Armed with detail, these applications provide Spend Management reporting and business intelligence that uncover opportunities.

Perhaps there are discounts from hotel properties located near where employees routinely travel?  Or, what is the most effective form of ground transportation (car rental, shared ride service, public transportation)? Or, how much are we spending on mobile communications?

Workflow Engineering is the Key

These are just a few of the opportunities that Spend Management provides.  The key to success to finding these opportunities is using Workflow Engineering to understand the underlying business objectives. Armed with this, it’s possible to identify the parts of the business where operational efficiency and effectiveness is impactful to these objectives.  This is where applying Spend Management including collecting the essential details of purchases employees make yields the insight necessary for identifying the opportunities.


The Networked Business

I read a lot about the “digital transformation”.

What I see is often the writer presumes everyone is born knowing what digital transformation means. However, in my experience very few people grasp the idea behind this phrase, especially in the context of the Business World.

One of my goals for the Payables Guy is helping the Payables Community understand the idea behind the digital transformation. More importantly, I want to provide practical examples that illustrate the power the digital transformation delivers to the Payables Community. The “Networked Business” is one such example shared by visionaries in Payables Community.

What Exactly Is the Digital Transformation?

Since the introduction of computers and the information age, we have been exposed to ever more digital experiences. The word digital simply refers to how computers store and process information: binary values of either zero or one.

Over the decades these experiences have grown in both in the number of ways they impact us as well as in how well they hide the underlying technology so that people with little or no technical background can use them. The result is much of modern life relies upon these digital experiences.

So, one way to think of the digital transformation is exactly this – the extent digital experiences have become imbedded in modern life.

We have seen the digital transformation the most in the Consumer World. Perhaps the most stunning examples are the combinations of these digital experiences:

  • Social Media
  • Mobile Devices
  • Cloud
  • Data Analysis

Each of the digital experiences have been around for decades. It’s the combination of these experiences that illustrate the power of the digital transformation.

Let’s Go See a Movie

Let’s consider the digital transformation impact on the way that many people decide something as simple as going to the movies.

For many the process begins with their mobile device – more specifically, opening an application on their smartphone. Often the first type of application is a “recommender”; in this case a movie recommender such as the Internet Movie Database. Recommender applications use data analytics to arrive at suggestions based on the combination of this person’s past behavior, preferences, and activities with movie information, attributes, and descriptions.

From the recommendation application someone might open a social media application such as Rotten Tomatoes where they see the ratings from both movie critics as well as movie goers. Social media applications can provide powerful, real-time aggregation of the people’s experiences that is not practical using a traditional, non-digital approach such as printed movie reviews.

From the social media application someone might open a show time application such as Flixster to learn where the movie is playing and when. Lastly, they may open an online ticket service such as Fandango to purchase a ticket to the movie. Fandango uses a Cloud technology called “web services” that combine information and functions from multiple applications such as Rotten Tomatoes and Flixster to deliver a very specific result – a purchase of a movie ticket that the consumer is very likely to enjoy!

Bringing Digital Transformation to the Business World

The vision of the Networked Business is bringing the digital transformation to the Business World in a way we have come to expect in the Consumer World. See, as consumers, many of us take for granted that multiple applications created by different publishers work together in concert to make our everyday lives better. There is a ways to go to arrive at a similar level of integration in the Business World.

Consider examples of how well applications such email, calendar, search, and map applications collaborate both on your smartphone and your desktop device. A couple years ago I learned exactly how much I take this for granted.

My family took a vacation to Italy where we decided to not connect our smartphones to the local cellular network. It can get expensive so, we left them home. The result is we lost the digital experiences we came to rely. We had to use traditional approaches. We had to carry paper and lots of it in the way of maps, diaries to record events, calendars to remember when to go to destinations, and books and brochures often with pages tagged with sticky notes for information. We had to make calls on a pay phone. Naturally, it worked, just with a lot more effort and in many cases with a poorer quality experience than would have been using the digital experiences we use when touring back home.

This story helped me realize that in many ways the Business World is like my family’s trip to Italy. Of course, business can collaborate without using digital transformation and it will work. But, if you measure the true cost of the digital versus non-digital processes using the Italy trip as an example, the money I saved by leaving our smartphones behind was eclipsed by the time and effort required to organize the events during the vacation.

The promise of the Networked Business is working with a lot less effort (and, associated cost) and with a much higher quality experience for all participants.



User Experience vs Users Experience

A goal in the workflow engineering of the payables process is delivering an efficient, effective user experience for everyone.  That means the experience is unique to the functional role; not the same for everyone.

Roles and Tasks in the Payables Process

There are several people from the Payables Community who are part of the payables process.  At a minimum, there is one person from the seller and one from the buyer.  Typically, there are others on both the seller and buyer side involved.

Regardless of how many people, each plays a different role in the process, each with a set of tasks to accomplish.

For example, a role on the seller side is to review the payable before sending to the buyer to ensure it has the correct items, at the correct price and terms.  On the buyer side, a role to review the tax related issues in the payable.  Yet another for the buyer is to ensure the prices the seller charge match the agreed prices in an associated purchase order, or procurement contract.

While some of the tasks between the roles are similar, many of the tasks are unique to its associated role.  The uniqueness of theses tasks often requires a different perspective of the information found within a payable.

Considering the examples, the person who is reviewing tax related issues in the payables needs different information than the person reviewing pricing, which is entirely different than the person on the buyer side ensuring the payable is correct.

Paper Ensures a Bad Experience

Among the challenges of paper-based payables or paper equivalents such as PDF files, is every person in the payables process is using the same piece of paper; they have the same user experience.  This means the payable, in its one and only view of information, must include the information that covers every role and task.  It must also be organize using a “lowest common denominator” approach.

The result is everyone must filter through the same information in the payable to find the portion that is relevant to his or her tasks. Most times the pertinent data is a fraction of what’s included on the paper.  Often, people must reorganize the information so that it aligns with their tasks.

The consequence is a bad user experience for nearly everyone since at best, the paper version can only represent the data efficiently for one user role.

Human Centered Design to the Rescue

Delivering a great user experience begins with applying the principals of Workflow Engineering.  In particular, applying the practices found in Human Centered Design to design great user experiences.

Here, Workflow Engineers consider each person in the payables process, and evaluates his or her tasks to complete.  Using the practice of Human Centered Design, they design user experiences optimized for every task.   These designs allow improvements both in efficiency and effectiveness by the people performing them.  While there may be some similarities, each role’s user experience will be unique to the role because its design is optimized for the role’s tasks.

Eliminating Paper

While Workflow Engineering and Human Centered Design are the beginning, the ending to delivering a great user experience for everyone requires eliminating paper.

Delivering a great user experience for everyone requires providing each role a user experience optimized for that purpose.  Each role is unique so it’s not possible to deliver a different user experience for each role when everyone in the payables process is using the same piece of paper!

Move Data — Not Paper

The way to eliminate paper is to move only the payable’s data through the process, and have computer applications render this data.  Armed with the optimized, human centered design for a role, these applications can render the payable’s data displaying only the data relevant to the role, and organized in fashion optimized for the role’s tasks.

The Networked Business Takes Shape

The idea of human centered design is new to the Payables Community.  Unfortunately, most computer applications don’t use this approach.  Instead, they render a payable mimicking a traditional paper metaphor. They deliver the same user experience to everyone in the payables process.

Computer applications that deliver user experiences with human centered design are a key part of the Networked Business.  Over the next several years, I expect to see ever more examples of computer applications that apply these principals.



Eliminating Paper from the Payables Workflow

With the payables process, especially in the United States, paper remains the center of the payables workflow.  At the root of the problem? Paper invoices, sales orders, check requests, statements, and other payment demand documents that sellers in the Payables Community send to buyers.

Further, even where paper has been replaced with “paper equivalents” there still remains problems and dissatisfaction because of its limitations.

Problems Scale Quickly.

Paper presents many issues in the workflow, especially where multiple people must review the payable.

It starts with the seller, who suffers the cost of printing or writing the paper documents, and of delivering these to the buyer. Because delivery must be physical – postal or interoffice transmittal –  there are costs as well as delays, often measured in days.  There is also the chance documents get lost during on their journey.

The problems continue for the buyer.  At a minimum, the buyer’s AP department must enter the data from the paper document over into their payables system.  This takes time, has potential for error, and it a flat out duplication of effort.

Many workflows require people outside the AP department to review or approve the document.  Once again, this requires physical delivery, with the same problems with cost, time, and potential to lose documents.

Then there is the problem of recording the review and approval results from those who review the document.  With paper documents, often reviewers record this by writing on the document, the envelope  or attaching a separate note.  This results in inconsistent, and often missing, review that makes the approval process difficult.

Lastly, while the document is out for review, it’s difficult for the AP department to track where the document is within the approval routing.

Paper Equivalents? Not So Fast!

Over the years automated systems introduced paper equivalents such as the Adobe Portable Document Format or “PDF” files, or electronic image files created from scanning paper.  While paper equivalents reduce the amount of paper and solved some of the problems of paper, they leave unaddressed most of the problems of paper.

Move Data. Not Paper.

A better approach is moving data through the workflow – never converting it into paper or paper equivalents.  Applications throughout the workflow can render this data so people can view it in practical manner.

Consider that virtually all payment demands or “payables” begin as a transaction in the seller’s receivables system; the payable begins its life as data.  Next, consider that the payables ends as a transaction in buyer’s payables system; it ends its life as data.

So, it’s unfortunate that a payable ever becomes paper or a paper equivalent.

Moving the payable as data means there is no cost or time for delivering it to the people in the workflow.  Through its journey, it can be tracked, so there is no longer a mystery where the payable is within its approval.  It’s virtually impossible to be lost; it can be replaced instantly.  Reviewers record their approval feedback as data that becomes part of the payable.

A Better Experience for Each Person in the Workflow.

An advantage of moving a payable through its workflow as data is this allows various applications in the workflow render this data in a fashion optimized for the task.  By applying workflow engineering principals, the application can present to the reviewer the data organized in a way to make this person’s task easier, faster, and more effective.  My post on Human Centered Design and User Experience delves more into this idea to illustrate the advantage of payables as data instead of paper.




Smooth Sailing
in the Payables Community

The Networked Business is mostly about ensuring smooth sailing among the various people
and applications in the Payables Community.  Critical to an efficient journey is the discipline
of workflow engineering.

workflow engineering (n.) – the application of engineering principles and practices to workflow resulting in inventing, innovating, designing, and improving business systems and processes.

Workflow Engineering in Payables

In the case of processing payables, Workflow Engineering uses the practice of thoroughly understanding the problems people in the Payables Community experience, then applies technology creating innovative and often transformative solutions.  Considering the variety of people, disciplines, tasks, and applications involved in the Payables Community, doing this well is challenging, but when successful, delivers the promise of the Networked Business.

Delivering the Networked Business Promise

In upcoming posts I will illustrate how Workflow Engineering helps deliver this promise.
Among the aspects:

  • User Experience – each person in the Payables Community has tasks to complete. Workflow Engineers evaluate these tasks, and using the practice of Human Centered Design, design user environments that streamline activities optimizing the processes and the effectiveness of the people performing the tasks.
  • Enterprise Application Integration – both sellers and buyers use a variety of applications from numerous providers. Workflow Engineers evaluate these applications looking for opportunities to share information and functions in ways that complement the user experiences of those in the payables process often delivering results beyond the scope and capabilities of the individual application. Perhaps the most important innovation to help the Networked Business is the emergence of web service application programming interfaces, and their impact on enterprise application integration.
  • Insight and Decision Support – Workflow Engineers work hard at understanding the underlying business objectives surrounding payables, and how these fit into organizations’ missions and cultures. Armed with this, they can identify areas to apply data analytics that provide the insight necessary for executives and managers to make decisions that result in shortest-term measurable improvements that align within the context of their overall business strategies.
  • Transformative Technology – using what I call the “Self-Cleaning Oven Principal”, Workflow Engineers skillfully apply transformative technology in solving problems within the community in ways often not expected, or predictable at first blush. The technologies at the heart of the Networked Business such as smartphones, cloud, and data analytics are inherently transformative.  Other technologies such as blockchain and Internet of Things (IoT) present the opportunity to make transformative change in the Payables Community.





Cloud Applications
Next Step
In Productivity Evolution

A key aspect of the Networked Business is the idea of a “cloud application”.  There’s a lot of buzz around the word cloud and cloud applications.  In fact, nearly every day I hear a CEO or spokesperson for an enterprise software provider mention their move to the cloud, or quest to become a leader in the cloud.

What I don’t hear a lot about is what exactly is a cloud application, or software as a service (SAAS), as it is sometimes called, or more importantly, how this is helpful to the Payables Community.  Just the other day my brother who is very tech savvy stopped me because I was using the phrase software as a service as if everybody knows what this means.  He didn’t know and suggested that many in the business world don’t either.  So, I too am guilty of assuming people just know what you mean when you say cloud or SaaS.

What is a Cloud Application?

The simplest definition is an application installed and maintained on servers in a data center that: a) your company doesn’t own, and b) you access using the Internet.  Cloud is a reference to the Internet which many refer simply to as The Cloud.  The advent of the web browser was the key enabler for cloud applications because it provides a universal platform to access applications installed on a server not within you company’s data network.  Smartphones added another universal platform to access such applications.

A key innovation cloud applications bring is a huge reduction in the use of very scarce, information technology resources – namely, a reduction in your company’s IT staff’s time spent on installing and maintaining business applications.  While this innovation is somewhat helpful to all, there are other innovations found in cloud applications that are especially helpful to the Payables Community.

Productivity Evolution

So, why are cloud applications important to the Payables Community?  A way to understand this is to consider the evolution of productivity in the community over the past few decades.

Let’s begin by considering how business approached payables prior to the 1990s.  Virtually all payables processes relied almost exclusively on paper business forms using a workflow where these forms or documents were routed externally using the postal system and internally using interoffice transmittal.  Just consider the expense reporting process where virtually every organization used a paper expense report form routed for approval using an interoffice transmittal envelope.

The 1990s was the era when the personal productivity tools of spreadsheets and email became popular in the Payables Community.  Organizations replaced business forms with spreadsheets and routed these using email which provided for both external and internal delivery.  This approach was among the reasons for the huge productivity gains enjoyed in the 1990s.

By the 2000s the vast majority of organizations in the Payables Community were using some type of electronic document for their payables including spreadsheets, portable document format (PDF), or scanned images of paper documents.

A New Era of Productivity

Cloud applications were first introduced in the late 1990s.  By the early 2010s they became popular in the Payables Community because of a few important reasons.

First, unlike general purpose tools like spreadsheets or email, cloud applications are optimized for a specific purpose such as processing expense reports or invoices.  They address the nuances and idiosyncrasies of the payables process in ways that result in vastly improved efficiency and effectiveness when compared to using older productivity tools.  In upcoming posts I will describe in detail some examples to illustrate this.

Second, the Payables Community consumes cloud applications as a service, thus the name software as a service.  SaaS requires you to have only a web browser or smart device to use it.  As mentioned earlier, this means it takes little or no help from your IT staff to use these applications.  That in turn opens the possibility for members of the Payables Community to select applications they want without having to wait in the “IT Project Queue” line.

SaaS also means paying a subscription instead of purchasing a software license.  Paying a subscription, often monthly, makes it affordable.  This is especially the case where the efficiency gained by SaaS results in a reduction in cost that exceeds the subscription.  I call this ‘instant hard dollar saving’ because as soon as you begin using the SaaS, your monthly costs decrease and continue to do so over time.  This in combination with little or no need for IT makes it very practical for the Payables Community to enjoy the benefit of SaaS.

Lastly, most SaaS uses an approach where it is easy to integrate other SaaS applications.  This includes situations where there is a development platform that makes it easy for developers to write applications that extend the functions of the SaaS.  It also includes practical ways to share information and functions between SaaS applications.  Either way, these approaches deliver even greater efficiency and effectiveness. It’s this last reason that makes cloud applications such an important aspect of the Networked Business.

Please watch for my continued posts on how technology advancements can benefit the Payables Community and enable it as a critically important aspect of the Networked Business.






Q.  Outgrow Spreadsheets Yet?
A.  Probably.

Spreadsheets are widely used in business but have outgrown their original benefit – increasing an individual’s productivity.

Their use has crossed over to become the de facto financial tool for ‘all things numbers’ including expense reporting and invoicing including billing clients for services and project expenses. A major challenge is the spreadsheet no longer represents an isolated tool but rather is shared and moves through an entire workflow involving multiple business units, processes, and often used to bill the client. The Professional Services and Consulting industries rely heavily on spreadsheets – perhaps more so than other types of business. Every aspect of the project is tracked incrementally including client-project associations, hours, travel expenses, and project supplies and materials.

Cloud applications on the other hand optimize specific processes including expense reports, invoicing, and many others. This blog explores the use of spreadsheets in Professional Services, Consulting, and similar types of organizations and why cloud applications are exponentially better suited.

Cloud Applications Optimized for Purpose.

Cloud applications are designed inherently to automate aspects of a process that are either manual or error prone.  Two processes often improved in accounts payable (AP) are data entry and workflow.  Let’s compare each of using a typical consulting company to illustrate.

Spreadsheet Data Entry is Brutal.
For Everyone.

There is no getting around the volume of data required for tracking billable expenses and if it’s manual, it’s time-consuming for everyone; not just the consultant; not just the accounting group; everyone.

Consider that every purchase related to the client and project requires tracking. At a minimum, the consultant must enter the expense type, date, amount, and payment type such as cash or company paid credit card, and then associate to a client and project. Often there are other details such as a description of the purchase, the merchant, and purchase location.  This is a significant amount of manual data entry that takes time and is prone to error. The expense report –  in this case the spreadsheet – is a source of truth for the spending process.  Mistakes here are often missed later and magnified throughout the workflow.

In contrast, cloud applications offer several ways to automate data entry so there is little, or no, data entry necessary.  For example, these applications use the data found in travel bookings, credit card transactions, and, via optical character recognition (OCR), paper receipts to automatically create expenses with this data.  This not only eliminates manual entry, but also improves the data integrity by reducing errors related to the manual process.

Who to Bill?
And How?

Central to this process is associating an expense to the client and activity or project. Spreadsheets address this by requiring consultants to organize expenses into piles of receipts by client activity, then create a spreadsheet for each pile.  Consultants then enter the expenses from each pile into its spreadsheet.

Organizing expenses can take a lot of time, especially for consultants who regularly visit multiple clients during one trip – a common practice to leverage time and travel expenses. Splitting an expense across multiple clients or projects adds manual steps including copying the receipt and often creating a separate spreadsheet dedicated to the other client and activity.

Cloud applications offer both automation and flexibility for this task often connecting directly with the Project Accounting application that is the source for client activity records.  Consultants select from these records to associate one or more expenses to a client activity.  This takes only moments, and avoids the need to first organize expenses by client or project.  Further, cloud applications make it easy to split one or more express across multiple clients or projects.

Required Receipts.
Multiplied By …

Most clients require receipts as the backup documentation that proves the expense. Most organizations using spreadsheets handle this by having consultants send the paper receipts for their expense reports to Accounting.  In turn, Accounting copies or scans the paper receipts and organizes these into groups by client to bill or expects the consultant to perform the tasks. Either way, that’s additional time spent on data entry.

Cloud applications can automatically create receipt images, and attach these to their associated expense.  This not only saves data entry time, but also ensures each billable expense has a receipt image.

Approval Routing.
Ideally Happens Once.

With spreadsheets, the approval routing happens via email, where each person in the workflow must decide who to email the spreadsheet next for approval.  This relies upon approvers to monitor their email inbox, remember to review reports pending their approval, and – in the case of policy enforcement – knowing who the next approver should be if the expense is out of compliance.

Because it’s manual, the integrity of the approval process relies upon people to correctly include all the approvers required to properly review the expense report.  It’s easy to miss an approval, or to select the wrong person for an approval.

As such, the last person in the workflow – the auditor – must carefully review the email thread to ensure all the necessary approvals are in place, and if correct, manually record this thread in some system of record.  If not, the auditor reroutes to get the required steps completed and documented.

Cloud applications route approvals automatically based on business rules that look to any number of criteria including the expense type, amount, and policy determining who needs to approve the report.  Approvals are tracked, reminders sent, and an audit trail is dynamically created.

Productivity Equals Profitability.
Especially for Professional Services and Consulting.

Cloud applications – like spreadsheets at the time of their introduction – enable productivity gains not possible with the earlier methods.

While all organizations crave such productivity gains, Professional Services and Consulting organizations have a heightened reason to trade in older disparate processes in favor of cloud offerings.  Their cost of doing business and thus their profitability is tied heavily to expense management from spend to client billing.

The decision to trade in spreadsheets for cloud applications is an easy one when considering the time savings, reduction in errors, and cash flow improvements.





Two Sides of the Same Coin

With 20+ years in automating financial operations, it continues to strike me funny that people often approach payables from only the perspective of either:

1      the seller – the Receivable

2      the buyer – the Payable

Taking this stance in software design shortchanges both parties.

My observation is these are actually two sides of the same coin.  After all, there can’t be a payer without a seller and vice versa.  A solution that works well will recognize each side has its unique and special requirements distinct from the other. And just as important, appropriately integrating these two practices is the key to strengthening the individual processes and the overall financial workflow.

Heads or Tails – It’s Complicated

Both sides have several disciplines that need to come together to make things happen.

Consider the case with a consulting firm where the Payable is a bill for time and expenses related to a project for a client.  Here in addition to the AR Department who is responsible for creating and delivering the bill to the client there is also the project manager or bill owner as I call it who is responsible for reviewing the bill to ensure it includes everything that should be billed and nothing that shouldn’t.

On the client or buyer’s side there is the AP Department who receives the bill that they call an Invoice, and forward it to the invoice owner.  This is the person who can confirm the seller delivered the services in the invoice, and the amounts are as agreed.  Once the invoice owner approves the invoice, the AP Department enters the invoice into their AP application noting the liability due the seller.  Treasury then controls when to settle the invoice.

The Payables Community

There is then a community of a sort that surrounds every payable.  This community includes all the disciplines and their associated business applications from both the seller and buyer.
Among these disciplines are:

  • Accounts Receivable – Seller
  • Accounts Payable – Buyer
  • Treasury – both Seller and Buyer
  • Accounting – both Seller and Buyer
  • Procurement - Buyer
  • Tax – both Seller and Buyer
  • Audit - Buyer

The Networked Business and the Community

A key aspect of the power behind the Networked Business is recognizing groups such as the Payables Community, and coordinating the flow of information to its members.  The Networked Business not only enables sharing of information between disciplines and the applications used, but perhaps more importantly delivers user experiences optimized for the requirements of each discipline’s task within the community.

Payables Guy Audience

The purpose of the Payables Guy is to help the Payables Community understand and ultimately implement the power of the Networked Business. My goal is to use concrete examples that the community can learn from and apply – strategically and tactically – the two new sides to the coin.