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!