How AP Automation supports book closing

March and the end of the first quarter are just a memory, but the chief financial officers (CFOs) are still recovering.

Closing the books can be a monthly ordeal for finance executives, plagued by paper and manual processes. The friction is heightened at the end of the quarter – a double whammy no one wants.

CFOs are tasked with playing the historian, finding out what was paid, when and why, and sifting through spreadsheets. Enterprise payments modernization, and payment automation in particular, can help speed things up, Routable CEO Omri Mor said Karen Webster in an interview.

“Closing the books is a review,” he told Webster, almost like an audit – and that review is made all the easier with the systems in place that set and trace IDs to a payment record associated with an invoice and tie it all together. with no human interaction in the mix.

The more information at your fingertips – upstream, sliced, diced and traceable – in CFO and back-end reports, the better. The less information the CFO has, well, he’s flying blind. Mor said the margin of error in closing the books and capturing all payments can be as high as 10%.

Within companies (regardless of the vertical), silos have developed. Multiple spreadsheets just don’t talk to each other, and a wide variety of information (in CSV files, in emails, everywhere), from invoices to IDs to descriptors to payments themselves, aren’t linked .

If there is no automation around reconciliation, he said, and if these leaders cannot recoup the dozens of hours a month they spend closing the books, the loss of time and money becomes important.

In many cases, paper checks are a bit of a relief, as the “note line” may have been filled in, with enough detail to insert the payment in the correct place in the accounting or enterprise resource planning system. (ERP), with invoice and customer numbers written down, he says.

“Most industries don’t bother to engage in all of these details,” Mor said. Multiply the transactions by a thousand or a million for large companies, and the headaches begin.

Explore Accounts Payable

Key to all of this is the Accounts Payable (AP) process, an essential part of closing the books as it involves tracking money from purchase order to procurement to reconciliation.

Tracking the money is no easy task, as funds move up and down supply chains, finding out if an invoice has been paid, or even submitted first, while looking up dollar amounts in ERP systems. , in accounting software and in files. Partial payments only cloud the picture, he said, as CFOs play detective, finding the “source of truth” until payments are initiated (or authorized).

As for this source of truth, often CFOs in the midst of reconciliation are looking for debits or credits. These debits and credits are just elements of payables and receivables, and they compound the need to look back one step at a time to see what happened.

Headed in the right direction

The trends are going in the right direction, Mor said. Most processors and AP solution providers allow customer forms to store Automated Clearing House (ACH) agenda records – short descriptions of approximately 80 characters that allow businesses to match the debit to the payment record in the ERP and to the invoice.

Real-time payments are also gaining traction and allowing messages longer than 140 characters, which in turn improves visibility in the background. But many platforms lack critical data, like the check number linked to the invoice or the credit card transfer ID.

“Without that level of extra effort, things get tough,” Mor said – and that’s when the double whammy of closing the books at month-end and quarter-end s ‘installed.

It’s no wonder that AP departments are growing and staffing growing, trying to capture all the data streams and make sense of everything.

“In a dream world, you would assume that 99% of your data matched perfectly,” Mor said. But given the 10% error rate, reality sprinkles all of this with cold water.

The need for automation therefore sounds like a siren in B2B payments.

Routable, for its part, has sought to inject short URLs into payment credentials, creating tokenized links that can, when opened, trace the path to a payment. This level of automation would be especially valuable for digital-only FinTechs that are tasked with moving large volumes of money.

Looking ahead, Mor said, over the next decade we’ll see standards emerge with reference to payment data, and maybe a consortium approach can help leaders understand, with a little more details, exactly where the money is going.

To achieve this, he said, partnerships could be made between the main banking networks, combining order form, invoicing, debit and banking data. Blockchain and cryptocurrencies can help advance some of these processes, especially when moving money internationally. But right now, blockchain and crypto are largely the purview of peer-to-peer (P2P) transactions (like paying a contractor or supplier, for example).

It will take some time for banks and other businesses to embrace real-time payments and blockchain, he said. In the meantime, real-time payments and platforms, such as those offered by Routable, can remove dozens of steps from month-end or quarter-end reconciliation and close.

Platforms are proving adept at assembling these external data and ERP-level information packets. ERP systems are no longer separate from AP platforms, which in turn are separate from processors.

“The more services you can provide under one umbrella, the easier it is for businesses to figure out what happened,” Mor said.



Plastiq - The Future Of Business Payables Innovation: How New B2B Payment Options Can Transform The SMB Back Office - April 2022 - Find out how all-in-one payment solutions can help businesses streamline B2B transactions and eliminate transaction friction. AP and AR management

On: While more than half of SMBs believe an all-in-one payment platform can save them time and improve cash flow visibility, 56% believe the solution could be difficult to integrate with AP systems and existing ARs. The Future Of Business Payables innovation report, a collaboration between PYMNTS and Plastiq, surveyed 500 SMBs with revenues between $500,000 and $100 million to explore how all-in-one solutions can exceed customer expectations. SMEs and help sustain their activities.

Colin L. Johnson