How AP Automation Speeds Invoices, Payments, and Month-End Closing

In the first installment of this blog series, Ben Spiegel, Ottimate’s growth product manager, shared how AI-driven cost validation helps grocers and retailers avoid misspend, protect profit margins, and improve inventory control. Now Ben’s back to discuss the impact of AP automation on invoice processing, payment workflows, month-end closing, and other key financial activities in the grocery industry. 

What are some of the main challenges grocery stores face with their AP processes? 

For many grocery operators, there needs to be more education around the value of AP automation compared to in hospitality, where there’s been increasing knowledge about this kind of technology over the past decade. Speaking with grocers feels like a huge opportunity to help both larger businesses and independent grocers and retailers. Restaurants often receive goods daily, whereas in grocery stores, there could be tens of thousands of items received weekly to stock the shelves, which are tied to invoices.

Grocers traditionally use legacy ERP systems and do simpler account splits and allocations into those. Still, they rely on physical paper, manual stamps, signatures for goods received, and disjointed validations before payments for their goods. One of the things we’re seeing – and this is one of the reasons we’ve developed our validation solutions for direct store delivery invoices – is that the financial team will often pay an invoice. Then, asynchronously, the procurement team will double-check the invoice to see correct costs. 

Even the operators reconciling a receipt against an invoice are not doing so at the line-item level. They’re setting a threshold of, say, 50 or 100 dollars for an acceptable loss or variance on items because of the manual labor required to identify the mismatches and research the reasons. 

How does manual invoice processing hurt grocers, and how does Ottimate help?

The challenges of manually processing invoices and payments are relevant for small and midsize grocers and acute for larger multi-units and regional businesses that are scaling up. For example, stores often receive goods daily from DSD vendors, and the records of those deliveries are managed on slips of paper. Many grocers utilize rudimentary stamps that apply to invoices, with accounting dimensions and approval signatures from the receiver or department teams. This is cumbersome and labor-intensive, but it also extends the time before an invoice is processed and payment can be posted into an ERP system. 

There’s fallibility in terms of manual labor and potential data entry errors. Someone has to sit down, work through a stack of invoices, review, and sign off on them, and then there’s more work for the financial team. Grocery stores often send large totes full of invoices to the head office several times a week, which can take days to arrive, further delaying processing and payment. Each one has a receipt appended to it if they’re doing traditional scan receiving. Cost validation is performed manually by flipping between the invoice and the receipt. 

For customers like Heritage Grocers Group, Ottimate creates a digital image of every invoice, making it available on the day of delivery. Electronic workflows allow department managers to approve invoices from their desktops or cell phones on the fly. Instead of staff members spending time splitting invoices, Ottimate does it automatically through dimension mapping. Automated cost validation allows grocers to set increasingly low thresholds for review, so they can scrutinize even the most minor invoice amounts that are out of sync. 

Besides time savings, how else do grocers and retailers benefit from AP automation?

Many customers process an invoice in Ottimate, send it through an approval flow, move it into their payables workflow, and facilitate an early payment discount for that invoice. Then they can work the invoice to expose any potential cost errors or exceptions and follow up with the vendor to get any credits owed for misbilling.

If you have a data entry worker, like an AP clerk at the store level, they can manage a finite number of units, so labor costs go up linearly as you expand. Ottimate empowers you to cut those costs in half and reallocate human resources into more fruitful endeavors, even as you scale your business.

What other invoice types does AP automation handle beyond paper and email?

Ottimate can capture EDI – electronic data interchange – feeds, flat files from the vendor’s ERP system, into an FTP folder. Ottimate then picks up and ingests this data and generates a readable PDF. EDI is a great tool from a data accuracy standpoint. It helps resolve data entry errors from poor image or scanner quality with a regular paper invoice. We encourage as many customers as possible to use EDI invoices from a data accuracy and speed standpoint.

How can Ottimate VendorPay help grocery companies improve their payment process?

As profit margins are so narrow for grocers, achieving early pay discounts is very important. Minimizing the time between when an invoice is dropped off at the store, delivered to the head office, processed, and paid ensures you’re capturing those discounts. 

VendorPay also gives the CFO visibility into all payables related to each check run in a single, cloud-based platform. They can drill down through the approvals before facilitating payments for non-COGS vendors, and there are cashback opportunities for payments made through virtual credit cards. Grocers have a lot of cash moving in and out, so having a single solution like VendorPay to manage that cash flow, streamline the payables process, and facilitate multi-step approvals is useful.

Tell us more about how grocers benefit from advanced payment approval workflows.

Grocers have to deal with many different types of expenses. A lot of the profit margin goes toward store improvement or CapEx infrastructure. With that, you want to have granular approval rules that allow you to allocate store-level expenses, based on CapEx GL or dollar spend, for example, to the right internal team members for visibility and approval. Multi-store operators can work across significant distances, so having the accountability and visibility of a unified platform with sequential and hierarchical approval policies gives grocers confidence that when they go to pay a bill, they know it’s been seen by the right people and approved accordingly.

How might VendorPay help grocery companies compensate vendors with checks more easily? 

A grocery company can easily create a check run based on vendor and due dates, and then drill down in that check run into the individual invoices. Ottimate populates the image, audit, and approval history, and any additional notes or designations on that invoice, which is useful. 

In addition to the approvals feature within our core product, Ottimate offers advanced approvals within VendorPay, allowing check runs to be escalated to specific finance leaders based on dollar amounts or other relevant parameters. Once payment is complete, you have a copy of the remittance, payment stub, and the check that was sent to the vendor available on the dashboard. There’s also a vendor portal where a supplier can see their payment status. 

What makes month-end closing tough for grocers, and how does Ottimate solve it?

In the grocery and retail industries, getting invoices booked into closing periods in a timely fashion and accurately accounting for costs for month-end, quarter-end, and year-end is a real challenge, especially when you’re chasing down multiple stores and vendors for invoices that don’t appear within those statements. 

The statements module in Ottimate is a powerful and unique solution for grocery and retail companies. It allows you to upload a vendor statement and then do a lookup against all the invoices in our system to expose invoices that may have different pricing, missing invoices, or credits that might not have been uploaded into Ottimate. From a month-end reconciliation standpoint, it’s a great way to implement another check on unit operators and vendors. 

Without this solution, you’d receive a statement and go through your ledger for that vendor to make sure you have every invoice accounted for in your ERP system. If you were missing several, you’d follow up with the vendor to understand the missing invoices and then contact the store. The statements module automatically identifies those invoice exceptions, and if one is missing, you can request a new copy directly from the vendor via email. Once that’s uploaded, it hits an approval queue, and you can prompt the end user at the store level to review it for approval.

Why does it help a grocery company to have an electronic document repository rather than physical file storage? 

One of the significant benefits is that digital files are indexable. A large grocery company the size of HGG has hundreds of thousands of invoices in the system. Let’s say they wanted to review how the cost of apples has changed. They can search for that keyword, and within milliseconds, Ottimate will retrieve every invoice that contains apples going back four or five years. There’s a digital copy of each file; every item in it is searchable based on SKU, invoice number, vendor name, etc. And that search function is only getting better. So, from an auditing standpoint, ease of lookup and quality assurance, that digital filing cabinet is compelling. 

What advantages does integrating an AI-driven automation system, like Ottimate, with existing systems provide in the grocery space? 

Most grocers do not use any type of AP automation—they manually key in header information and split it directly into the ERP application. The number of touches required for a single invoice is significantly less for those using an AP automation platform, like Ottimate, that integrates with their POS and/or ERP systems. These API integrations deliver many other benefits, too, including vendor dimension syncing, posting of payment status back to an invoice, validations, exception handling for closing periods, and catching invalid data.

Want to see how Ottimate’s AI-driven technology can streamline your AP processes? Schedule a personalized demo today!