- What is AP Automation and why did it come about?
- AP Automation market landscape
- Tips for CFOs to implement AP Automation in their organization
- Dealing with barriers to implementation
This is episode one of the AP Automazing podcast where we talk about all things accounts payable automation. Hi everyone, this is Brent Hametner, your host for the AP Automazing podcast. Today, I'm happy to be joined by Mikko Hytonen, CEO of Dooap, an accounts payable automation company based in Austin, Texas that works specifically with companies using Microsoft Dynamics 365 AX and FO. Mikko Thanks for joining us.
Mikko Hytonen (00:34):
Thanks Brent. Thanks for having me. Glad to join our own broadcast.
Brent Hametner (00:38):
So the topic of today's conversation is on getting started with AP automation and Mikko, you've worked in finance for over 20 years. Could you first tell us what AP automation is and why it came to be?
Mikko Hytonen (00:55):
Yeah, sure. So I think there are many ways to describe the overall concept of AP automation but perhaps I'll start with some examples. So I think the basic problem we're facing is that at least in the past, we used to receive paper invoices. There's some manual processing starting from coding and even stamping the invoices in the background, you're kind of having a workflow where AP first gets the invoice, then you take the paper to the reviewer and from that to the approver eventually. So you can imagine that there are actually quite a lot of manual steps in the process. And of course when we start thinking about automation I think the first thing that comes into my mind is getting rid of the paper and essentially all the manual steps that are at times unnecessary in the process.
Mikko Hytonen (01:59):
And I think the first thing to do is really to make sure that you get everything into digital format. So essentially you don't want to be running around with the paper. And I think essentially when we get rid of the paper, from the first minute your invoice processing becomes digital and you can actually then focus more on the data and you don't really need to worry about the physical paper. I think overall papers tend to get lost. You may not make payments on time because the invoices are lost and essentially it takes a lot of time to process the invoice and I think that all starts from the manual data entry. So somebody actually needs to enter the data into the ERP or financial system.
Mikko Hytonen (03:03):
And I think when you think of all this, accounts payable is by nature a structured process. So there are a lot of repeating invoices, repeating tasks. The same things happen month after month. So that really means that it's quite easy to automate the process because you don't need to have a lot of artificial intelligence or anything like that running through the purchasing invoices but you can actually just in a way make an existing manual process digital. And of course if you think about the systems, you already have a lot of data in there from the history and obviously learning from those historical patterns and using that for your account coding and so forth makes a lot of sense. And I think just to kind of summarize why it makes a lot of sense is that if you look at the business benefits, they are very unquestionable because in the interest of saving time in the process getting rid of the paper, getting everything digital that basically means that you will also be saving quite a lot of cost to process your vendor invoices.
Brent Hametner (04:37):
Gotcha. Yeah. It sounds like, and you were saying that the big thing is just moving from this paper to getting things digital. And I'm curious to know, based on your experience, with automation is this huge, it seems like there's this huge movement particularly in the last few years. I mean, if you look on new sites or LinkedIn, you'll see a lot of articles about automation and AI. Just out of curiosity, I know that based on your experience, I'm wondering when did this kind of all develop and is it a fairly recent development around AP automation? And I guess, what's the experience that you've had with it?
Mikko Hytonen (05:23):
Yeah, I think if you kind of take a look in the past, I'd say that AP automation as we know it today has been around 20, 25 years. I think it depends quite a lot from the different companies, industries and markets. How far different players have it, whereas, with the AP automation. But I think generally it has been around for a long time and I think it's probably what we've seen in other aspects of technology that technology really isn't the thing that's stopping you anymore. It's more like changing the attitudes, and I think everybody realizing that we all need to process our invoices. But I think taking advantage of technology in that area makes a lot of sense as well.
Mikko Hytonen (06:26):
And I think that's what we've seen with our customers and prospects that this is something in terms of the invoices that is now not really driving. So I think folks have just realized that kind of getting rid of the paper, automating a process, which is pretty much in the core of the back offices of finance just makes a lot of sense. And I think it's quite natural that the AP automation follows the other trends of technology which we have seen in other areas already like automated reporting, payments, and so forth.
Brent Hametner (07:06):
Gotcha. Yeah, that makes sense. And, I know, again, kind of sticking on this theme of transitioning from the paper to digital and you kind of walked through the process of just exactly how to go about doing the automation. And it sounds like there's kind of multiple aspects to that type of process that are getting automated. So just out of curiosity what, based on what you've seen, what does that market landscape look like? Are there for each one of these steps, are there various vendors that specialize in certain areas? Are there vendors that are taking more of a holistic approach and automating the entire purchase to pay process? What does that landscape look like?
Mikko Hytonen (07:59):
Yeah, so there are actually a lot of players out there focusing on different areas of AP automation or purchasing. And I think if you just Google AP automation, I don't really know what's the figure for today, but you're actually getting a lot of hits when you search for that. So it's definitely an area that is trending. But I think going back to your question there are multiple areas into that and I, I think obviously if we start from the basics and thinking how can you actually get your paper invoices into digital format there are a lot of scanning and OCR solutions out there. At the same time, you have providers that actually cover that and all the way kind of to the procurement part of their procurement portals systems that actually include payments, AP procurement and all of that.
Mikko Hytonen (09:09):
So I think there are multiple approaches and a lot of players out there. I think that what's probably important for everybody is, really understanding what kind of problem you're trying to solve. And I think our approach has really been focusing on the core AP process and we'll continue doing so. Because I think first of all, it's a very relevant piece of the whole purchase to pay process and at the same time something that is easily integrated into other areas like payments and purchasing. And I think when we look at purchasing, I think that's an area that is pretty complicated by nature and everybody tends to do that a bit differently. So that's why we've decided that we're actually focusing on the core AP process and if we actually look at our solution, we're embedding the scanning and capture service as part of it.
Mikko Hytonen (10:22):
There's always the option to using in-house scanning and OCR, meaning recognizing the content on the invoice. But our recommendation really is that you take the scanning and capture as a service because then it's one less thing to worry about for your finance organization. And at the same time, then it doesn't really matter which format you're receiving your invoices. If it's an email, PDF, e-invoice, paper, or a picture, we'll actually make sure that ends up being in the AP solution, and in our case our Dooap solution. But as said, there are a lot of players out there and I think everybody just needs to find the perfect thing. And I think obviously since we're focusing on the AP part, we think that that's an area that you can pretty easily automate and then it will leave the other areas around kind of something you can even address later if you feel like, and I think from the AP process itself you're going to get the benefits from day one and after you're done with those, then you can focus on the other parts of the process.
Brent Hametner (11:54):
Gotcha. Interesting. Yeah, and just staying on this market landscape topic, you were previously a CFO. So let's say you put your CFO hat back on. How based on all these solutions you mentioned, you Google AP automation and many solutions pop up and there's the scanning and capturing, there's that overall purchase to pay type of process solution. So if you're that CFO, how would you determine then what tool in the ecosystem that you just explained to use and how would you survey the current resources that you have within your organization and come to a decision? How would that work?
Mikko Hytonen (12:47):
Yeah, that's a very good question. And I think what I said earlier is that I don't think technology's necessarily the issue here. So there are a lot of solutions out there. There is Dooap and there are many, many more. But I'd say that the key thing, first of all, I think in any project that you're going through, you actually really need to understand what's the problem you're trying to solve and what are the key outcomes that you want to achieve? And I think for accounts payable, that's kind of very simple by nature, but then we see many processes that are overly complicated when it comes to AP processing. And I'd say that the first thing to figure out is to take a look at your own process.
Mikko Hytonen (13:54):
It's very easy to find from different sources or even asking from us what would be the kind of best practice market standard and establish that and then see what kind of deviations you're having against your current process. Because I think that if you look at your process and find out that there are a lot of steps there which you don't find any in the market standard, then it probably indicates that there are areas there, which you don't necessarily need to do. And I think in my mind an AP process is all about efficiency. So if there are unnecessary things, too many steps, too many checks, which don't add any value, of course we want to retain the controls you need to have. But if there are things just for the sake of it, I think then you really need to go back to the drawing board and see what you can actually change in your process to adopt you to the best practice.
Mikko Hytonen (15:09):
Because I think what we sometimes see happening is that there's quite a complicated process and if you start implementing a standard system into that process, it will mean that there will be a lot of changes to the standard and I don't think that in the end makes too much sense. So I think it's important to really look into your process to see what you actually want to get out of it. Just to check, are all the steps you're currently having necessary or can you just make things simpler? And I think speaking of that, when you do that then it means that the implementation of the new solution and process, it will be very fast and effective. And for example, if I look at how I like to process my invoices I'm getting for approval,
Mikko Hytonen (16:13):
My go to platform is the iPhone and an app there. So I I think for a modern AP process and technology, you should really have a mobile app where all the approvers can do the things and you don't actually need to go into your ERP or anything like that because I think when you have the tools that everybody are comfortable with, they've been using them for other purposes, then obviously the system adoption will be a lot faster and easier because I think in the end, nobody really wants to deal with invoices when they are incoming invoices. So we just need to make it as simple and straight forward as possible.
Brent Hametner (17:09):
Yeah, that makes sense. And I guess in summation the key really is looking at your own process and really doing good analysis on it to be able to figure out, okay, here's the number of invoices that we’re getting in. Here's the amount of time that our AP staff is spending. Maybe we should look into something that could improve this process. I'm curious to know, just based on your experience, is that type of analysis run on a fairly regular basis? Is it something that you as a CFO with maybe a lot of other fires to put out in the day to day, and maybe it's difficult to get to when you get caught up in to the day to day, should take the time and run that analysis and really think I guess proactively of how to innovate some of the processes that they currently have.
Brent Hametner (18:07):
From your experience, is that something and from the organizations that you talk with, is that a challenge that you've heard of? Or do you think that companies right now definitely know they need the analysis but there's other obstacles that might be in the way, things like cost and budget, or getting buy- in, or implementation, change management. What seems to be the barriers in this once they do realize that it might be a good idea to pursue.
Mikko Hytonen (18:46):
Yeah. I think what we've seen a lot of, obviously we hear that we have a lot of other priorities and we'll first sort out those and then we move to the AP part because that is something that is already working. But I've been saying that if you're running a manual AP process with a lot of steps in it, you still have a lot of paper in the process and you don't have the modern tools, then I would say it's not really working. So something needs to be done. And I think what is also important is how we tend to look at things is that we don't like to see that our customers would actually need to invest that much time in the process re-engineering itself.
Mikko Hytonen (19:48):
So we have a very strong standard process which we're actually recommending to our clients. And then it's maybe just a couple of hours in a workshop. We need to go through and then we're kind of done and we know what the outcome should be. And maybe I shouldn't be saying this, but I will say it anyway, there's always the option that if for some reason you don't see the benefits of the new process, you can always go back to the old, but we've never seen that happen. So I don't really see that really being a risk for anybody. I think that if you look at AP automation, there isn't really any risk in doing that. And then when you get to how to get the buy-in from the organization, I think, as with all projects, change management is really the key.
Mikko Hytonen (20:55):
So what our approach is, that I think it should be everybody's approach, whenever you're starting to implement some technology there should always be a demo which you actually present to the folks involved. And that in that demo you need to be able to demonstrate the benefits and what everybody's getting through the technology upgrade because obviously when you see it with your own eyes, for sure, you're getting buy in from everybody in the organization involved in the project. And I think especially in terms of AP automation, the change is quite dramatic. Moving from the paper based workflow or other manual workflow to a system that essentially takes care of all the manual steps for you. And I think obviously we hear many times, “what's the business case?” and “how do you quantify the investment?”, of course we can come up with even more complex calculations.
Mikko Hytonen (22:12):
What does it mean? But I think one simple way of looking at it is really if you think how much time you're spending in your current organization around AP and invoices. And I'm not only talking about the AP clerk, but also the reviewers and approvers because we all know that there are always exceptions and if you need to go back and look at something from the history, it may not be that easily available. With a modern AP automation system, you actually have everything at your finger tips. So it's really easy to go back and even just thinking the approvers because if it's just a complicated thing, it takes time. It tends to be forgotten, then you may lose some cash discounts or whatever you're having, you get a lot of requests from your vendors and with AP automation you'll get rid of all this. And I think just to be on the safe side, when you go from a pure paper-based manual process to the AP automation solution, what Dooap has to offer for example I can easily guarantee that you're gonna save 90% of time in the process when you actually adopt to the market standard and keep it as simple as it should be. And that when you actually realize these benefits, I think the whole thing becomes more and more of a no brainer.
Brent Hametner (24:01):
Gotcha. Awesome. Yeah, that's really helpful to know. We're running out of time right now. But just as a final question, if you had to give one piece of advice or one takeaway for any CFOs or folks on the AP staff, or finance directors that might be listening, what would that lasting thought be?
Mikko Hytonen (24:28):
Well I'd say get rid of the paper and make sure that all your vendor invoices are digital going forward.
Brent Hametner (24:39):
Gotcha. Cool stuff. All right, thanks. I appreciate the information Mikko and thanks again for joining us. This concludes episode one of AP Automazing on getting started with AP automation. If you'd like to learn more about Dooap, visit www.dooap.com. Thanks everyone!
*transcript has been edited to increase accessibility