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Digital transformation has overtaken the corporate world. While all areas of the business structure have shifted and evolved with the implementation of new technology, one sector that has yet to be a target for transformation is the accounting workflow. Accounts receivable (AR) and accounts payable (AP) are two areas that are ripe for a digital makeover. AR and AP are inextricably linked and their ability to communicate and collaborate is the cornerstone of an efficient finance department. This process of invoicing and payment has a long history of exchanging documents that are hand-translated by staff into the financial system and then filed for record-keeping. This antiquated manual process is often a roadblock for visibility into the company’s finances and is in desperate need of a modern update.
Many finance departments will claim to be 100 percent digital. However, this definition is misleading. While most finance departments process invoices electronically, this only indicates that the front door of the department is digital and doesn’t speak to any of the internal processes. The world behind this “digital front door” is still largely shackled by old-school processes and procedures.
As recently as 2000, it was common to invoice customers on paper. That invoice would arrive at the customer’s place of business, and then be opened and routed internally for processing. Each step was manual. Today, while most organizations are sending PDFs via email rather than paper invoices, the back-office processes are largely the same. The sender still needs to manually create the invoice, attach it as a PDF to an email, and send it to the receiving department to be opened and processed. The transportation method has been digitized, but the invoicing framework itself has yet to be transformed. Keeping books synchronized between vendors and customers is still largely a manual process where staff is responsible for sending and receiving documents and keying in information to the financial system.
Even more surprising, the software used to send and receive invoices has barely changed in those twenty years. Of course, Outlook is now available through a browser, and Gmail is an alternative, but these tools do not provide any automation for accounts receivable and accounts payable to process invoices. Finance departments can learn from their peers across the company about transformation.
Other departments use advanced automation behind their digital front doors. Customer service uses support software to help customers. Human resources use HR automation to work with candidates. IT uses help desk software to serve employees. Finance should do the same and abandon personal inboxes in lieu of an accounting inbox that is integrated with the existing ERP or financial software.
Taking a play from support software, an accounting inbox provides for a shared workspace with assignments. As emails come in from customers and vendors, the emails are assigned to a member of the team. With clear ownership and transparency, responses are easier to track, and nothing is lost. The performance of the team towards meeting response times is also easily managed. The shared workspace is critical to teams that are remote and need to coordinate work.
Similar to marketing automation, an accounting inbox provides automated mail merging. From here, email templates can automate remittance advice, dunning, statements, and receipt notification to name a few. This saves a massive amount of time that can be used for other activities such as calling customers or negotiating early payment discounts with vendors.
The traditional finance process involves a large amount of tracking and follow-up. Approvals for invoices, disputes, and early payment discount offers to require tracking and follow-up to ensure timely payment and collection. An accounting inbox automates approval management and accelerates the approval cycle, allowing the business to collect incoming payments faster and avoid the payment bottleneck often driven by manual processes.
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Across finance departments at organizations large and small, security is of the utmost importance as fraudsters become more sophisticated. The accounting inbox can help monitor for abnormalities by flagging any incoming unknown email addresses, helping to determine if they are from an unknown sender, match with an existing customer in the financial system, and weed out phishing attempts.
The pandemic has underscored the need for a real digital transformation across finance departments. Legacy solutions like corporate email systems are not designed for finance departments to coordinate work and automate communications. Increasing efficiency and optimizing cash flow is a top priority for companies of all sizes and while establishing a digital front door is a step forward, it is simply not enough. Accounting departments need to invest in technology behind the front door to reap the full benefits of the transformation process.
Are the combination of spreadsheets, aging reports, and personal emails slowing your accounting workflow? If so, join Lockstep for an interactive demo showcasing three ways to improve collections performance and increase flow
Matthew Shanahan is the chief strategy officer and co-founder of award-winning Lockstep.