AP automation helps supply chain and distribution companies cope with disruption

Usually when you read about supply chain and distribution issues in the macroeconomy, there’s a negative association. Witness the last few years with COVID lockdowns, trade disputes and shipping canals being blocked. When something in the supply chain is disrupted, its ripples can go around the world.

“Higher inflation (in 2023) reflected a restricted supply of goods at the same time that there was strong demand for many of those same goods,” says Tom Hainlin, national investment strategist at U.S. Bank. The bank’s report goes on to say that energy and food products were leading drivers as inflation soared during the past two years. The war between Russia and Ukraine, for a time, interrupted some shipments of energy and agricultural commodities from both countries. China's COVID-19 lockdown policies, which were in place until late 2022, hampered manufacturing and shipment of goods as well. I still think we are recovering from this with the labor shortage in many industries reducing production output.

The companies who play in this space face a unique set of business payments challenges that can impact operations, cash flow, and relationships with partners. These challenges are faced in other sectors, but not at the scale defined by the global nature of supply chains. They rely on a network of suppliers and distributors, and the need for automated payment processes. According to an article in Forbes, supply chain and distribution companies can have tens of thousands of vendors and most of them simply guess at the amount of companies in their system.

But let’s bring it down to a more manageable scale, as seen through the lens of VSE Corporation. It is a leading provider of aftermarket distribution and repair services operating in highly specialized segments, including aviation and fleet services. VSE’s operational scope necessitates managing a vast number of business payments, putting significant pressure on people and processes. With an aim to navigate these complexities efficiently, VSE turned to Bottomline AP automation as a strategic solution.

“We see automation is a value-added tool that will help us reduce some basic errors,” says Shaun Eaves, assistant treasurer at VSE. “But it will also speed up the process and accuracy of our cash forecasting, which is near and dear to my heart. With automation we’re hoping to avoid blind spots such as an invoice sitting in someone’s email account. Automation will help us focus on the fundamentals and give us a comfort level that we have experts behind us.”

Eaves highlighted the ways VSE leverages automation to enhance productivity, focusing on the crucial role of solutions that not only mitigate basic keystroke errors but also expedite cash forecasting and eliminate invoice processing delays. All are key factors in maintaining a healthy cash flow and avoiding financial blind spots.

One of the many benefits vendors talk about in the AP tech space is moving from mundane manual tasks to more strategic initiatives. Eaves agreed with this and he has seen the workload in his team shift from those admin, repetitive tasks to strategic activities. With automation, VSE's AP staff can concentrate more on analyzing and processing invoices rather than getting bogged down by vendor information updates or navigating various payment channels. This shift enables a more strategic deployment of talent, allowing staff to contribute more significantly to the company's goals. Beyond the dollars and cents, this makes for a better work environment for the team!

Perhaps most importantly Eaves sees AP automation as an effective solution for managing diverse payment methods, including checks, ACH transfers, wires, real-time payments, and credit cards. Each of these channels comes with its specific set of rules and approval processes, which can hobble manual processes. By adopting a comprehensive AP automation tool, companies can simplify these complexities, making payment processes more agnostic and easing the workload on AP clerks.

Eaves touched on the impact of automation on reducing the reliance on paper checks. With the advent of automation and the business payment networks built by vendors like Bottomline, he sees a clear pathway toward increasing the use of more efficient payment methods like ACH, which is both cheaper and faster.

Eaves also addressed the issue of fraud, which comes in many varieties when a company deals with the scale of VSE. Having an automation tool that offers comprehensive fraud defense mechanisms is critical in the context of a business payments network, which should ensure rigorous vetting of vendors and banking information, significantly reducing the risk of fraudulent transactions and enhancing the overall security of the payment process.

“Like many businesses we see a lot of different types of fraud,” Eaves said. “Happens with checks as well as ACH. Our banks do a good job at preventing that with tools like Positive Pay. But we also know that criminals are just smart and technically savvy. We see all the alerts about how hackers have compromised a company or had their email platforms compromised. It puts us on the defensive. We need to be diligent about who we’re transacting with, and sometimes that means more work for our staff.” That work is not necessary with the authentication and validation that Bottomline has built into Paymode-X, our business payments network.

AP Automation generally comes under the heading of efficiency, but it also illustrates the way companies like VSE can focus on growth and innovation.  For organizations like VSE, embracing AP automation is a step towards a more agile, secure, and strategic approach to financial management.