This strategic move not only aligns with the global trend toward digital transformation but also promises numerous benefits, including streamlined workflows, faster processing times, and heightened data security.

Understanding the Need for Change

Before delving into the implementation process, it’s crucial to understand why a shift toward paperless accounts payable is necessary. Traditional accounts payable processes, reliant on paper invoices, manual data entry, and physical approvals, are prone to errors, delays, and increased operational costs.

Adopting a paperless approach not only addresses these challenges but also positions businesses to thrive in an increasingly digital landscape.

Assessing and Planning

The first step in transitioning to a paperless accounts payable process involves a comprehensive assessment of the current workflow.

Identify pain points, bottlenecks, and areas where automation can bring about substantial improvements. Set clear objectives, such as reducing processing time, minimizing errors, and optimizing resource utilization. Allocate a budget and gather the necessary resources for a smooth implementation.

Accounts Payable Automation

AP Automation Software streamlines the entire AP process – from invoice capture and coding to approvals and payments. Look for features like automated workflows, data extraction, and integrations with your existing accounting system.

Selecting the right accounts payable automation software is pivotal to the success of the paperless transition.

Look for features that align with your business needs, such as invoice scanning, Optical Character Recognition (OCR), workflow automation, and compatibility with your existing accounting system. Cloud-based solutions offer scalability, accessibility, and the advantage of easy integration.

Document Digitization

To pave the way for a paperless future, it’s essential to digitize existing paper documents. Utilize scanning technology to convert paper invoices and supporting documents into digital formats. Optical Character Recognition (OCR) technology can assist in extracting data from scanned documents accurately.

Establish a centralized digital repository or document management system to securely store and organize electronic documents.

Workflow Automation

Manual approval processes can be time-consuming and error-prone. Implement workflow automation to streamline the approval process.

Configure the system to automatically route invoices through the approval hierarchy, and set up notifications to ensure timely approvals. Replace manual routing of physical documents with electronic routing, significantly reducing processing times.

Automated Approvals & E-Invoicing

Encourage suppliers to submit electronic invoices to further eliminate paper from the accounts payable process. Work with suppliers to transition from traditional paper invoices to electronic formats.

Electronic Data Interchange (EDI) and e-invoicing platforms can facilitate seamless electronic invoicing, improving the overall efficiency of the accounts payable process.

Customize your AP automation software to automate repetitive tasks like data entry and routing for approvals.

Integration with Accounting Systems

Seamless integration between the accounts payable system and your Enterprise Resource Planning (ERP) or accounting software is crucial.

Real-time data synchronization reduces the risk of data entry errors and ensures that financial information is up-to-date. Verify that the selected software is compatible with your existing systems and can facilitate smooth integration.

Security & Fraud Measures

With the digitalization of financial processes comes the need for robust security measures. Implement data encryption protocols to safeguard sensitive financial information.

Define user roles and permissions to control access, ensuring that only authorized personnel can access critical data. Establish a comprehensive security framework to protect against potential cyber threats.

Using AI based automation allows detection of fraudulent supplier messages, the AI software can detect the anomalies in vendor accounts, locations etc. The intelligence can prevent organisations from making any unwanted or incorrect payments.

Implementation Considerations

Before a full-scale implementation, conduct thorough testing of the paperless system. Identify and rectify any issues that may arise during testing. Consider implementing the paperless accounts payable process on a smaller scale as a pilot phase to address unforeseen challenges before a complete rollout.

Transitioning to a paperless accounts payable process necessitates the proper training of employees. Develop comprehensive training programs to familiarize staff with the new system and its functionalities.

Address any concerns or resistance through effective change management strategies. Communicate the benefits of the paperless approach to create a positive attitude toward the transition.

Post-implementation, monitor the performance of the paperless accounts payable process regularly.

Gather feedback from users and stakeholders to identify areas for improvement. Utilize data analytics to gain insights into the efficiency of the process and continuously optimize workflows for enhanced performance.

Conclusion

Implementing a paperless accounts payable automation is a strategic move toward modernizing financial operations, reducing costs, and improving overall efficiency.

By following these comprehensive steps, businesses can navigate the transition successfully, unlocking the full potential of a digitalized accounts payable system.

Embracing the paperless future not only streamlines financial processes but also positions organizations to thrive in an increasingly digital and competitive business environment.

Kreyon Systems accounting solutions are employed by businesses with global operations. If you need any support for accounts payable automation or have queries, please get in touch with us.

The post How to implement Accounts Payable Automation appeared first on Kreyon Systems | Blog | Software Company | Software Development | Software Design.

Management accounting techniques help a business understand its patterns like no other tool. The deep analysis of numbers for activities, revenue generated, cost of goods sold and other operational aspects is often an eye opener for management. The increasing use of machine learning and AI for management accounting is helping businesses turn a new leaf in their business.

1. Activity Based Costing

The ABC costing model is an accounting method that assigns costs to activities based on the resources used. The direct and indirect costs are calculated based on activities. The activity costs are analysed for various projects, products and services to understand their profitability etc. 

For product development, the ABC model would work in the following manner:
i) Identify all activities related for the product.

ii) Create various activities for the product costs. For  e.g. Development, Testing, Design, Marketing, Sales, Advertisements, Promotion, Support & Infrastructure, Customer Helpdesk etc.

iii) The overall costs above are divided by the resources spent. For e.g. total development costs $250,000. The total number of hours spent for development are 1250, then the development cost would be $20 per hour. Now, if a project requires 500 development hours, then the cost for the project would be $20*500=$10,000

iv) For any product or service, the overall costing can be arrived at and the total revenue can then be used for estimating the profitability.

2. Time Value of Money

The time value of money can be utilised for improving its cashflows. When you send an invoice to a customer, businesses can offer discounts for making yearly payments. The time value of money received in the present is worth more than the same amount received in the future.

The time value of money is also known as the net present value of money. Companies that understand the impact of time value can use it for launching discounts, yearly payment offerings, and prepayment offers to their customers. The invoicing system, vendor contracts and other suppliers etc. can be offered incentives which help the company maximise its current cashflow.

The software algorithms can offer insights to management based on the payments owed and due for its business. The optimum discount rates can be provided after drilling into the numbers.

It turns out that $1,000 now or $1,100 after one year have the same value at 10% interest rate compounded annually. So, a business can offer discounts of upto $100, when it is able to earn more than 10% interest.

FV = future value of money
PV = present value of money
i = interest rate or return rate earned on money
t = number of years to get the return
n = number of compounding periods of interest per year

FV = $1,000 x (1 + (10% / 1) ^ (1 x 1) = $1,100

3. Rate of Return

The rate of return is an effective tool for spending resources of an organisation with efficiency. It evaluates the return of a business from its investments for a period of time. The net gain or loss is expressed as a percentage of the initial cost of investment. The percent change from beginning if the investment to the current time is noted for calculating the rate of return.

The rate of return can be analysed for various projects, asset investments and products/services in a business. All activities can be ranked according to the ROR. For e.g. consider a business spends $100,000 for a buying an asset. If the value of the asset after 3 years turns out to be $150,000 then the rate of return will be 50% in 3 years. Organisations can rank various activities and track their rate of returns with respect to their business.

Some projects, assets investments and other developments may lose money for a business. In that case, the rate of return will be negative for them. With automation, companies can get detailed forecasting on the expected returns from various activities for their business. 

4. Theory of Constraints

Theory of constraints is a management accounting technique that examines the constraints that hold an organisation back. It helps a company understand the constraints that hold an organisation from reaching its goal. The constraint is the limiting factors that is also referred to as a bottleneck.

The five steps involved in TOC are as follows:

i) Identify: Identify the most important constraint that limits the goal.

ii) Exploit: Make quick improvements and changes to overcome the constraint for reaching your goal.

iii) Subordinate: Review the activities and processes to ensure they are aligned with & support the constraint.

iv) Elevate: If the constraint still persists or has not moved, consider what needs to be changed. What should it be changed to and what actions will cause the change. In some cases, it could involve additional capital/resources.

v) Repeat: Implementation of TOC is an ongoing and continuous improvement cycle. When one constraint is eliminated, the next one should be addressed. Organisations that value continual improvement can adopt this system to successfully keep reinventing themselves.

When it comes to accounting goals, whether it is related to revenue, expenses, profitability, sales, payables, receivables etc. TOC can be used for identifying constraints. It can provide systematic evaluation of the most prominent constraints that prevent the organisation from reaching its goals. It could also look at the processes, identify the bottlenecks and work to mitigate them continuously.

5. Throughput Accounting 

Throughput accounting is used by organisations to eliminate the traditional accounting hurdles for reaching long-term profitability. For e.g. in traditional accounting inventory is an asset. It could be converted to cash equivalent, however reality may be different. The inventory value may have declined overtime & it may not be converted easily to cash when the organisation needs it.

Also, consider the fact that expenses are needed for long term income and profitability. These expenses could be related to employees, assets or office. In the traditional sense, expense is considered as a constraint and should be reduced as much as possible. But practically, it should be used for increasing the revenue & profitability. In other words, the throughput accounting measures things based on the output also known as the throughput. It takes the following into consideration:

Throughput : The rate at which sales are generated after deducting the variable costs(raw materials, commissions, freight etc.)  

Investment: Money that is spent on things like physical things like inventory, machinery and equipment, fixed assets, etc. 

Expenses: Money spent to generate the throughput. This doesn’t include the variable costs. It includes payroll, employee expenses, utilities, taxes etc. 

Net Profit = Throughput − Operating Expenses

Return on Investment = Net Profit / Investment

Productivity = Throughput / Operating Expenses

Investment Turns = Throughput / Investment

The throughput accounting method focuses more on generating higher throughput than cutting expenses. It relies more on building sales and throughput for an organisation.

These management accounting techniques can help companies to analyse their data & get insights to improve their operations.

The post 5 Powerful Management Accounting Techniques for Improved Business Insights appeared first on Kreyon Systems | Blog | Software Company | Software Development | Software Design.

The PWC finance Effectiveness report found that upto 40% of the time in finance functions can be reduced with automation. Finance & accounting automation can bring about radical changes in a business by creating centralised processes, evaluating tax structuring and smoother regulatory reporting.

A digital mindset to finance and accounting helps companies keep a tab on business driving metrics. Financial automation creates a balance between people and their performance goals in line with organisational core objectives. It is estimated that 75% of the time in top finance functions is devoted to data and analysis. Automation can effectively handle these tasks and improve financial reporting with data driven insights for business.

The key element of finance and accounting automation is driven by core business needs. Businesses can focus more time & resources on solving problems for their customers by saving time with financial automation. Here’s a look at some of the key aspects of finance and accounting that can create a competitive advantage, value efficiency and growth for businesses:

1. Management & Financial Reporting

Management reporting has the highest automational potential as per PWC report. Businesses can create Profit & Loss, Balance Sheet, Trial Balance, Inventory & Cash flow reports etc using automation.

Use of an integrated accounting system can help organisations create management reports which are generated realtime. It helps effectively track inventory, assets, cash flow and resources for an organisation. These reports can be sent to management at specified intervals as per their requirements.

2. Tax Accounting

Tax accounting as per the local regulatory authorities is an important aspect of business automation. Penalties, delays and improper tax accounting can be very costly for a business. Many times, the tax accounting needs to comply with local regulations and cater to multiple compliance authorities.

Automation can help businesses streamline their taxes & also optimise on business value. For e.g. tax accounting automation can help businesses with their cash flow needs. Tax structuring can be done with professional expertise and automation to meet cashflow needs of a business.

3. Credit Management

Credits for a customer or a vendor are part and parcel of a business. Sometimes, customers with long standing track records are given leeway for credits. However, automation helps a business automate policy decisions for customer and vendor credits.

When a customer or vendor reaches their credit limit, further business with them can be put on hold until payments are processed. The automation can create an automated credit management system for a business to minimise risk.

4. General Accounting

Accounting automation introduces elements which help an organisation to track its spending, revenue, assets, liabilities, cash reserves and retained earnings in real time. Finance and accounting automation helps an organisation keep track of the business metrics like revenue, cost of goods sold, profitability etc. without additional manual efforts.

Businesses with multiple locations and regions can create a structured system to operate these with automation. All accounting functions can be automated leading to increased transparency, efficiency and integrated system for business.

5. Billing 

Customer Invoicing and billing accounts for 19% of wasted time. It takes more time than any other finance function. All businesses need to have an integrated system for their revenue. They need to be able to set-up their inventory, goods or services, create invoices, send them to customers and receive payments. Accounting automation can create an integrated and efficient system for all these tasks.

You can stay on top of your customer invoices, send them reminders and even receive payments using automation. The online billing makes collecting payments easy and efficient.

6. Budget & Forecasting 

Automation can help companies create budgets with greater accuracy. The past data and the financial metrics are taken as a reference for forecasting the needs. The cashflow and capital needs are assessed based on the expenses for the previous years. The income, expense & cash flow reports are analysed to understand the capital needs for the organisation.

7. Business Analysis

Business analysis requires an integrated view of the data. An integrated system can collect data from all aspects of a business and analyse it with respect to organisational goals. Automation leads to an integrated view of information, centralised systems and data driven insights for business.

Organisations can assess the impact of automation by measuring average annual cost savings, workload of employees, sales revenue impact, cost of goods sold etc. In general, the business analysis should be able to zone into areas for improving the capital and operational efficiency for a business.

8. Accounts Payable

As per PWC report, almost 12% time is wasted on accounts payables. Billing for companies can be quite tedious, leading to wastage of man hours. Automation of accounts payables & vendor bills helps organisations know their spending in real time. They can assess their cash outflow and plan accordingly.

The automation of billing can be used for online payments settlements. By integrating payment gateways and digital wallets, organisations can settle payments with their online business management or accounting softwares. Vendor payments and all employee refunds can be done using these online payments.

9. Payroll

Payroll is complex and requires several statutory compliances. Many of the countries follow a separate state regulation & federal rules for reporting. Automation of payroll can save businesses a lot of time and money in the long run. 

Automation of payroll can help organisations deduct taxes automatically, file regulatory reports and maintain compliance with law of the land. An online software can create a globalised payroll system, cater to multiple locations and regulatory guidelines too.

10. Accounts Receivables

Accounts receivables is the process for following up on due customer invoice payments and following up on pending revenue receivables. Automation of accounts receivables can set-up tracking systems for sending notifications when invoices are due, send reminders and collect payments online. Using an online system helps you see your customers with highest receivables & follow-up with them.

The receivables automation leads to reduced delays in payments from customers. The receivables are also linked to customer credits. Customer receivables automation leads to improved cash flows, reduced bad debts & increased cash collections.

11. Finance Strategy & Planning

The financial strategy and planning helps an organisation measure and track its organisational objectives. By creating a centralised financial strategy, an organisation can analyse, automate & optimise some of these activities: 

Finances: 

Acquiring funds and sourcing capital
Developing financial statements and budgets
Allocation & usage of funds
Working Capital for Inventory, Fixed Assets, Employees & Taxes
Buying or leasing capital assets
Corporate tax planning

Business Operations
Process efficiencies in terms of man hours spent
Revenue Efficiencies in terms of revenue per employee
Time spent on compliance & regulatory reports
Quality efficiency in terms of customer complaints

Workforce
Number of employees for projects needed
Number of manual hours saved per person with automation
Employee payroll, labour laws and compliances
Succession planning for management

Kreyon Systems has in-depth expertise in automation of finance and accounting of organisations, which leads to improved employee productivity, financial reporting accuracy, compliance and reliability. If you need any assistance in implementation or have queries for us, please get in touch.

The post How Finance & Accounting Automation Can Empower Your Business appeared first on Kreyon Systems | Blog | Software Company | Software Development | Software Design.