Process Mining Goes After The B2B Payments Bottlenecks

Data analytics technologies like artificial intelligence and machine learning continue to move swiftly into accounts payable (AP) and accounts receivable (AR) departments. From businesses just beginning their digital transformation journeys, to those more advanced along the path, these tools can be a valuable way to identify bottlenecks and areas for improvement.

While pinpointing the biggest areas of friction is key to optimizing any workflow in the back office, solutions today have the potential to go a step further.

In a recent interview with PYMNTS, Celonis Vice President of Business Models and Enablement Jan Philipp Thomsen explained that IT consultants and other advisory services may stop short of enabling businesses to seamlessly implement solutions to the problems they identify.

There is a difference, he explained, between this analytical approach, and the operational approach that process mining technology can take.

“It’s not only diagnosing the problem, it’s recommending automated actions operational teams can take to fix the issue,” said Thomsen.

Process mining involves a deep dive into companies’ existing workflows to identify bottlenecks, assess workflow alternatives against companies’ goals, and then implement the most optimized workflow to achieve those initiatives. Today, the technology is finding significant opportunity in AP and AR departments, and as Thomsen explained, the impacts of workflow optimization can drive stronger buyer-supplier cooperation and enhance cash flows, even for businesses that had assumed workflows were already top-notch.

Addressing End-To-End Friction

Celonis recently rolled out a process mining operational application designed for the accounts payable department with a focus on enabling businesses to optimize their payment processes. The technology has the ability to affect AP strategies in a variety of ways, Thomsen explained.

Businesses may be struggling to make on-time payments and need to understand where in the AP workflow a bottleneck exists that is limiting their ability to more quickly settle invoices for instance. Duplicate invoices, non-optimal approval routing procedures, and missed early payment discounts are also top friction points for AP departments today.

But process mining has potential on the other end of a B2B transaction as well.

“Accounts payable and accounts receivable are the most in-demand areas within finance that we’re looking at,” said Thomsen. “They’re clear levers for bolstering liquidity, which is very important right now amid COVID-19. Companies were trying to stay competitive [before the pandemic]. Now, they’re trying to stay afloat. So the ability to pivot from one goal to another is key to being resilient.”

On the cash collection side, understanding the friction points that prevent a vendor from receiving payment as quickly as possible is essential today. Excessive credit checks is one potential area that could delay payment, while Thomsen said another common occurrence is the way in which vendors approach late-payers.

This technology can not only identify which businesses may continually pay late, but recommend when a business begins the payment reminder process. Businesses that tend to wait until day 30 of a 30-day payment term agreement to nudge their customer will continue to see longer DSO (days sales outstanding) than a business that begins this reminder process on day 10, for example.

Guiding Digitization Maturation

In addressing key problem areas for both accounts payable and accounts receivable operations, organizations can optimize the way they interact with their business partners. Using technology to strategically set out payment terms, for example, can help a supplier ensure it’s paid on-time while supporting the cash flow needs of buyers.

Whether easing the pain of late payments or capturing early payment discounts, improving AR and AP operations can have knock-on effects through the supply chains. With process mining, technology can not only identify where those improvements should be made, but automatically enable teams to implement those improvements on the spot.

Not every business is at the same point in the digital transformation journey, however.

For companies that are in their earliest stages, accounts payable departments may be struggling as a result of paper invoices coming in through suppliers. In cases like these, Thomsen said it’s important that technology providers work with both an AP department and its supplier partners to enable that digital migration of invoicing to improve workflows for both buyer and vendor.

But even companies that are more digitally mature may be caught off-guard by findings of hidden bottlenecks and unexpected inefficiencies. Thomsen pointed to one client that had achieved nearly 100 percent touchless invoice processing. While that’s undoubtedly an achievement, process mining technology could automatically optimize payment schedules, meaning invoices that were processed could be paid sooner based on whether or not that company could secure an early payment discount, a revenue stream the firm had previously been missing.

According to Thomsen, there is an “evolution” taking place in how organizations implement automated technologies. Particularly in the time of coronavirus, no longer is it sufficient to simply know there are inefficiencies present. Technology must work in lockstep with operations teams to implement changes that will help companies achieve their goals.