With the advent of new challenges such as remote working and telehealth, it is more important than ever that accounts payable in healthcare runs smoothly and efficiently in order to help companies stay financially nimble, maintain strong relationships with vendors and suppliers, and of course, improve patient outcomes.
But accounts payable (AP) departments across the country are struggling to stay afloat among the sea of invoices they receive, with many healthcare organisations receiving tens of thousands of invoices each month. Compliance issues may also be adding pressure to AP departments – for example, during the pandemic, the Victorian state government committed to paying all small business suppliers within 10 days of invoice receipt instead of 30 days to help with business cash flow issues. Their decision to continue this after the pandemic increases the pressure on affected AP departments to find innovative solutions that help process invoices in a timely manner.
We spoke to one of Kyocera’s Business Development Managers, Tim Overton, about the current challenges facing accounts payable in healthcare and how automation can help overcome them.
Challenges facing accounts payable in healthcare
1. Labour-intensive manual processes
While using a backend system such as Oracle can bring many benefits to a healthcare organisation, bridging the gap between the physical and digital realms can often add an extra layer of work, particularly when it comes to integrating invoices into the system.
Tim recalls seeing this process in action on a site visit to a healthcare organisation: “They’d get one invoice, go to a second computer, create a barcode, stick that barcode on the invoice, then type everything on that invoice into Oracle, then wand the barcode and link the two.”
“While better than nothing, the process was very labour intensive, slow and prone to mistakes. End-of-month tended to cause a lot of stress and the AP department would need extra people to finish the process each month.”
Considering some larger healthcare organisations might have to process up to 50,000 invoices each month, adding even just 30 seconds to the workflow can lead to huge time losses and labour costs over the course of the year.
2. Greater chance of human errors
As Tim notes, adding this extra layer of human processing also inevitably leads to more human error, such as paying the wrong supplier or using incorrect bank details. While extra steps can be implemented to cross-check details and improve accuracy, this adds yet another step to an already costly and time-consuming process. South West Healthcare (SWH), for example, previously had an independent team verifying data entries, adding yet more time and labour costs to invoice processing.
3. Bottlenecks in the system
Slow and manual processes can quickly lead to bottlenecks in the system as AP staff struggle to keep on top of the thousands of invoices coming in each month. Not only does this lead to a lot of stress on the part of staff, but it also makes it difficult for managers in other departments to maintain visibility and oversight of their processes.
As Tim says, “You can imagine as a manager in a hospital with only 10 AP staff, each with 200 invoices to process, you’d be thinking, ‘Are my invoices going to get processed today, tomorrow or next week? And, therefore, how do I know what my profit and loss is for my department?’”
4. Incompatibility with remote working practices
“COVID added the extra challenge that everyone in accounts payable was sent home,” says Tim. “So that presented a whole other raft of issues, one being how does an AP person get physical invoices to process? Someone has to either post invoices to them, or they have to go into the office, collect invoices and take them back home, which introduces security issues.”
With hybrid workplaces and remote working forecast to be an integral part of the new era of work, finding a long-term solution to enable remote AP staff to do their jobs is essential for every organisation.
5. Inflated costs
As well as the costs associated with labour and errors, there are also printing costs associated with manual AP processes. When you factor in all of these costs, the cost of processing an invoice can be high, with Tim estimating that some organisations may pay up to $20 per invoice.
Benefits of automating accounts payable in healthcare
When South West Healthcare approached Kyocera, outlining many of the challenges presented above and requesting a solution to help resolve them, Kyocera developed Kyocera’s Enhanced Scan To Oracle (KESTO) software, utilising the Kyocera multifunction devices already installed at the organisation.
As Tim describes it, “KESTO utilises artificial intelligence that, whether you scan an invoice or receive it via email, reads critical components of that invoice and then matches the metadata with what’s in the backend system.”
While Oracle is one of the most common finance systems in Australian hospitals, Tim notes that KESTO can also integrate with other backend ERP and finance systems, such as MYOB, Xero, SAP and Epicor.
By implementing an automation solution such as KESTO in their organisation, accounts payable departments in healthcare organisations can gain several benefits, including:
1. Reduced labour time
By automating invoice processing, the workload of AP staff can immediately be reduced and their time directed elsewhere. For example, when SWH introduced KESTO, their workload reduced so much that the accounts payable manager was able to move to a 9-day fortnight. Tim says, “Whereas before he was weeks behind in his work, he told me that he now happily plays golf once a fortnight and looks forward to coming into the office on the other days because he knows he’s on top of things.”
Another benefit of reducing the amount of time spent on processing is that employees can instead spend their time on other tasks that provide much more value to the organisation. SWH were able to realign one of their full-time employees to another role.
Indeed, even as other agencies using Oracle were dealing with increasing workloads due to changes in the system and the impact of COVID-19, SWH was able to avoid this challenge and still reduce their staffing needs thanks to KESTO.
2. Improved accuracy and compliance
By automatically matching data listed on the invoice, such as the vendor name, ABN number, purchase order number and bank details, to the backend system, the invoice can be pushed onto the next stage in the process without requiring any additional handling by AP staff. It is only when there are discrepancies that the automation system will flag the invoice for review by staff.
This layer of verification dramatically cuts down the amount of human error caused by manual processing, and improves accuracy and compliance.
For example, one notable benefit SWH has realised with KESTO has been the correction of a number of previously unidentified ABN verification issues. “We now know that we’re 100 percent compliant with our ABNs and our error rate of paying the wrong supplier has been eliminated. It just can’t happen anymore because we’ve got the right ABN verification in place,” says Liz Bramich, SWH’s regional financial systems manager.
3. Better visibility over profit and loss
With invoices being processed in a timely manner, as well as the ability to flag priority invoices for immediate payment, AP managers can gain much more visibility over their profits and losses, giving them a greater ability to make timely business decisions.
4. Improved remote working capability
Automating accounts payable can facilitate those organisations looking to permanently adopt hybrid working policies to allow employees to continue working remotely.
“Our staff are able to work from home and they’re receiving emailed invoices as normal and pushing them into KESTO through an email workflow,” says Ms Bramich. “We’ve also had a skeleton staff on-site [during covid] opening mail and pushing the invoices through the scanner. Then our remote staff simply log in as they would in the office, and verify and import the invoices into Oracle.”
5. Reduced costs
As demonstrated above, automating accounts payable can help dramatically reduce labour costs – SWH were not only able to avoid taking on extra staff during busy periods, but also reduce the hours for one of their employees who wanted to be part-time.
Automating accounts payable can also help reduce printing costs, as there is much less need for paper handling.
SWH estimates that they’ve reduced their invoice processing time by at least 40 per cent, while still processing over 80,000 invoices annually. In fact, even though the KESTO scanning solution is only used for 35 per cent of their overall purchase order processing (as the remaining 65 per cent is via electronic trading), SWH was still able to see a return on investment in under two years - an achievement that Tim says is possible for most organisations within 18 months of switching to KESTO.
6. Sets up foundation for future automation
The benefits of automation can also extend well beyond accounts payable. Once you have implemented a platform, you can then easily add capability to automate other areas of the business. Implementing KESTO in accounts payable can therefore be viewed as phase one of your digital transformation.
As Tim puts it, “Once you get KESTO phase one, you’ve laid the foundation and built a room on the house. But the software allows you to do so much more automation of other documents within your health service. So once you’ve taken care of AP, you can move on to phase two, building the next room on the house, which might include doing a full approval process of non-purchase orders throughout the hospital. And then you could perhaps move on to HR contracts, digitising medical records, integrating with health information services and so on. It can be as easy as adding another widget.”
Automation: the way of the future
There are myriad benefits that can be gained by automating accounts payable in healthcare. Not only can you reduce labour and associated costs, and improve accuracy, compliance and oversight, but you can also set yourself up for the future by establishing your automation foundation, allowing you to optimise other areas of the business.
Whether you're looking to scale up or diversify your business, automation can help you create efficiencies, support future growth and add value to your organisation. Download our guide, Business Automation: How it generates value and supports growth, to learn more.