It’s time to digitise finance in the retail sector – why automated AP and statement reconciliation are crucial for retailers in 2024

The current speed of digital transformation across businesses globally suggests that those organisations who are yet to make the transition risk being left behind. 2024’s annual report from Billentis predicts a significant increase in adoption of e-invoicing alone, with market value estimated currently at $8.9 billion, anticipated to soar in the next four years to around $23.7 billion.

Regulations are changing too, adding pressure to ensure all digital finance solutions are compliant. In a global supply chain environment, the requirements to comply with specific laws such as SOX, which applies to all publicly traded companies doing business in the US, similar laws in Canada (C-SOX), Japan (J-SOX), and of course the EU’s GDPR, leaves no room for complacency.

Artificial Intelligence is disrupting technologies still further, being increasingly integrated into e-invoicing and other digital trading tools to improve efficiency and escalate capabilities. These rapid developments are taking place within a retail environment already shaken by tensions between online and bricks and mortar trading, as well as on-going workforce shortages, the cost-of-living crisis and its impact on pricing, increasing rents, energy, and running costs, and increasing competition from new online channels.

With tight profit margins, there is little room for error in invoice payment processes – overpayments and duplications could be the final straw for cash-strapped retailers. It isn’t helpful to aggravate relationships with vendors either. In the current economic climate businesses need to cherish their vendors and supply chain. In retail, this is particularly true, as a business can’t sell what it can’t get hold of. Implementing the most effective processes for AP and statement reconciliation is therefore key.

Forward-thinking retailers are increasingly putting their trust in digital systems that speed up, simplify, and optimise many of their business processes. Electronic price tags, automated stock and inventory tracking and more. However, critical back-office processes such as accounts payable (AP) are often the last thing to be invested in. Implementing a best-in-class solution for a function such as AP forms a solid foundation, so that other digital solutions can be added and leveraged. As margins grow tighter, efficient payment processes protect the bottom line while supporting vendor relationships.

Saving costs

A key challenge for retail in 2024 is cutting costs without jeopardising product quality and customer satisfaction. Implementing digital solutions can help drive down costs within the business. For example, implementing an electronic invoicing solution allows vendors to share digital invoices that are automatically input into their own financial system, greatly reducing the risks associated with human error and removing traditional in-tray delays for the AP team. Some can also provide optional 3-way matching and workflow authorisation together with seamless integration into the finance system.

Integration results in the automation of invoices transitioning directly into the ERP, creating a seamless information flow throughout the invoicing process. This single source of truth for invoices ensures accuracy of data for finance teams and the supply chain, delivering a transparent end-to-end process.

Establishing effective processes for statement reconciliation means businesses have much tighter control over their spending, greatly reducing the risk of overpaying invoices or sending duplicated payments. This includes the accurate consideration of credit notes for greater transparency that enables real time understanding of the cash situation at any time. Solutions for automated statement reconciliation can compare invoices and credit notes with relevant statement lines without the need for time-consuming manual processes, saving hours of time and human resources. They can also reduce the risk of underpayment that may cause friction in the vendor relationship as well as undermining opportunities for early payment discounts.

Protecting vendor relationships

The impact from unexpected supply chain disruptions can cause major financial shockwaves for a business. When vendors can count on their customers to pay them accurately, on time, they are more likely to pull out the stops when unexpected problems arise, such as a sudden shortage or supply chain interruption for a key product.

Using an automated, accurate statement reconciliation system demonstrates transparency to vendors – even more so when it is part of an overall digital AP system, making communications around queries much easier.

Integrating systems with suppliers is one of the biggest barriers for retailers seeking to implement new technology. However, solutions such as Open ECX’s AP Automation Invoicing do not require the supplier base to change the way they transmit invoices and credit notes. Solutions like this can support many data formats including .pdf, .csv, XML and EDI, and business rules can be defined to enrich inbound data and add information based upon the requirements of the ERP system or to support line level matching.

The UK Prompt Payment Code (PPC), covers the honouring of supplier payment terms and other payment issues. Although voluntary, it is increasingly important for securing stable, reliable, and consistent vendor relationships and customers who can demonstrate compliant responsible payment processes will benefit from an enhanced supplier base. SOX compliance is also increasingly important and those in retail supply chains can seek best in class digital solutions that ensure this. Currently SOX applies to those doing business with publicly-traded companies in the US, but commentators suggest this could soon apply more broadly, with a possible UK version too.

Better business outcomes

Data is critical for retailers, providing users with accurate, real time information to inform more effective decisions. Accurate and timely statement reconciliation produces accurate financial data, for improved planning, forecasting, and budgeting. Outdated information that is compromised with errors means every decision would be based on unreliable, shifting sands, and the success of key decisions, such as whether to reinvest in bricks and mortar or develop alternative online channels, depend on accurate data. This requirement is driving an increased reliance on Continuous Transaction Control (CTC) models with software that enables real time processing and auditing of transactions, further supporting effective regulatory compliance.

Automated processes remove the risk of human errors, as data is input once, using an automated process.  While some software removes the human component using OCR (optical character recognition), supported by AI to reduce mistakes, the best automated AP solutions are 100% accurate from the start.

Implementing effective AP and invoice reconciliation reduces time-consuming correction processes, where financial teams spend hours reviewing, comparing, and matching invoices manually to identify mistakes or duplications. It is not unheard of for organisations to employ teams of 10 or more professionals solely focused on statement reconciliation, a wholly avoidable and expensive deployment of resource.

The best automated AP solutions may have in-built validation rules that help spot and highlight potentially fraudulent activity, which is a minefield for any business, representing significant financial, reputational, and legislative risk. Some automated AP and statement reconciliation systems include statement health reporting, ensuring that the financial team is alerted to any discrepancies and can work confidently with the statement balance in real time. They can also provide full document history to support external audit requirements.

AP automation software homogenises processes and methods, helping ensure that everyone in the AP function and across the entire organisation is on the same page, referencing the same versions of the same data in real time. Using uniform workflows makes it much easier for tasks to be shared, so that even if the task owner is off sick or leaves the business, it can be picked up by any colleague.

Time to automate

Now is the time to digitise AP processes. Being cloud-based offers enhanced security, real time access to data, and more powerful data analysis. There are a number of solutions available, and the best use unique conversion technology to extract the underlying physical text from the source document, providing the ability to enrich the data and define business rules of how to treat the incoming document and data content. This technology guarantees 100% accuracy, transmitting invoices and credit notes directly into the organisation’s ERP, delivering an efficient, end-to-end digital process that is aligned with net-zero goals and supports Prompt Payment practices.

Managing supply chain and inventory in today’s retail industry is complex – automating AP streamlines and simplifies one of the most important processes within this. Without robust functional invoice management everything else falls down, from effective stock control to sales.

As well as helping businesses build stronger relationships with suppliers, these solutions help optimise efficiencies in payment and finance management, enabling AP teams to achieve more in less time, with automated processes that take a fraction of the time, ensure greater accuracy and fewer errors. 2024 is the year for implementing digital solutions that automate AP with integrated compliance and enhanced transparency.