How do you introduce invoice automation if you’re a manufacturing company? Are you leaving important accounting functions vulnerable to mistakes and even fraud? These are the key questions for manufacturing companies as they approach digitizing their back-office operations, as well as how to scale a solution across subsidiaries.
Managing accounts payable for manufacturing companies is increasingly challenging in an era of new regulations and the everyday issues caused by the global pandemic and other disruptions to business continuity that are affecting supply chains. This complexity increases for companies that manage multiple subsidiaries, perform mergers and acquisitions, intend to expand operations to new markets, and so forth. Subsidiary management is a huge part of the value proposition for some of the largest enterprise resource planning (ERP) solutions like Oracle NetSuite, SAP, Sage Intacct, and Microsoft Dynamics 365.
But here we will concern ourselves with the specifics of enterprise strategies surrounding invoice automation across subsidiaries and business units.
The multi-subsidiary manufacturer
Business models can vary a great deal, so let’s start by looking at an organization with this structure:
A single U.S. manufacturing company, a paper mill, opened a second U.S. location before adding a new location in Chile. It then purchased three additional companies, integrated them as subsidiaries, and put a parent/holding company over the four entities. Accounts payable illustrates the complexity of this hierarchy.
In this example, we expect to see suppliers billing in different currencies depending on which office they have contracted. Multiple payment options also exist based on the locality and suppliers’ levels of digitization and sophistication. Lastly, it’s very likely that invoice approval is handled at the subsidiary level before the payment is made.
This use case depicts invoices as processed locally at the various offices, whereas payments might be processed centrally, locally, or a combination of the two. There potentially could be significant manual entry of the invoices from dozens of accounts payable team members across the company, which creates headaches, errors, and risks that are often not anticipated. The above scenario is common in many industries.
Your invoice automation roadmap
Solving for invoice-to-pay efficiency and scalability is something AP automation should do for a company structured with multiple subsidiaries, like our manufacturing example. The benefits of true invoice automation, which is increasingly being adopted as a best practice for accounts payable teams, include:
- Elimination of paper invoices and manual processes
- Maximized straight-through processing
- Flexible approval workflows
- Reduction in costs, errors, and risks
- Improved visibility and control
- Leveraging purchasing and receipt controls invoice matching
Planning a roadmap allows you to realize all these benefits sooner. Assuming you haven’t already built an invoice automation solution in-house, this is a perfect opportunity to partner with an external accounts payable solution provider. Your invoice automation solution candidates should be evaluated for their functionality, flexibility, technology, maturity, implementation time, B2B payment solutions, supplier footprint, and expertise in your setup and ERP investment. That last point is especially important if your parent company and subsidiaries all use the same ERP, as the efficiency gains can be massive.
If invoice automation is going to scale across your organization, it is wise to consider whether 3-way purchase order matching, line-item capture, and other controls are required. You will be evaluating for the broader organization. So, it’s important to document these requirements in your selection of a solution and to talk openly about your goals and selection process with potential providers. They, in turn, should be able to give you an indication of your return on investment.
By choosing the right solution, you’ll standardize processes, replacing the various solutions seen across the subsidiaries. Various business units may even have invoice automation in place already that will need to be migrated. It will be worth the efficiencies you’ll create by doing so.
When your manufacturing organization is globalized and complex, sweeping changes need to be carefully planned and iterated. It’s important to ask yourself a few questions about your organization before determining how an invoice automation solution could be introduced across your organization:
- Is there any part of the organization that is not leveraging payments automation via the AP solution provider I intend to use?
- Do my suppliers “cross-pollinate” across my subsidiaries?
- Is there a particular subsidiary or business unit that is set up particularly well to start using the intended invoice automation solution?
- Does any subsidiary or business unit already have an invoice automation solution in place?
- Is there a particular subsidiary or business unit that is feeling more “invoice pain” than the others?
- Can I establish a proof-of-concept at one or more subsidiaries or business units to begin automating invoice processing? Could this be leveraged as a quick win to gain momentum?
- If so, how would I envision the rest of the subsidiaries or business units getting started with the new solution?
- Should my organization implement my provider’s payment solutions first to help fund my invoice automation solution?
When you have an organization with multiple subsidiaries or business units, it is important to do a thorough analysis of where your organization would see the greatest gains for implementing an invoice automation solution. The benefits of an invoice automation solution to large, complex manufacturers are clear. These companies also need a best-in-class invoice-to-pay solution partner to continue the scalability and standardization through the entire process. As is the case with most enterprise IT projects, it’s important to make the purchase decision that will scale to your organization’s needs and equally important to define the most effective way to roll it out.