What is Accounts Payable? All you need to know about the AP process!

Welcome to the "Mining Your Business" podcast. They'll show all about process-mining data science and advanced business analytics. With me, as always, my colleague Jakub, how are you doing? Hi, Patrick. Today's a special episode. Jakub is going to give us a piece of his mind about the AP process, the accounts payable process. I'm excited. Let's get into it. Patrick, was that a pun? Yeah, one piece. Let's go. Welcome to the next episode, Patrick, how's it going? Going well. Going fantastic. Tired? But, you know, how it is? Yeah. What time is it in your north in right now? 7 a.m.? 7 a.m.? 7 a.m.? 7 a.m.? 7 a.m.? Yeah. Wonderful time to start recording. I'll be honest. Usually, when I start the episodes, I write down a lot of stuff what I want to say so that it's kind of organized and, you know, trimmed and I don't go around in circles, but I didn't do it this time because I just wanted to talk to you, Patrick. Oh, that's so nice. Are we recording a personal phone call? Is that what it is? No, we're not. We're not recording a personal phone call, but we are still recording. So I kind of want to use our episode also to a little promo of our own company. So Patrick is in Austin. I'm in Prague and we are really, really searching for talent for our offices for our data science team. Guys, if you're listening to a podcast and you really want to work with us, well, you have an opportunity to go on our website or LinkedIn pages, drop us and email and let's hit it off. Yeah. I was just about to say, if you've ever listened to the show and wondering, ah, you know, I wonder what it would be like to work with these guys. You can find out. Go to our website and apply. But applications open. You can 100% apply and I have to say Patrick is very strict when it comes to applicants. So, excuse me, that's very remotely true. No, no, of course not. So yeah, we would be very happy if you apply it and yeah, we've got a lot of data science and process mining job to be executed. So looking forward to hear from you. And what I also want to know to mention is that, you know, in our podcast, process mining field is not as large as you've probably already noticed and I am more than happy to hear from you who you would like to hear in the podcast. If you know about someone who would be inspirational, interesting or has just a very interesting experience in process mining field, just again, text us and we would be more than happy to reach out to the person and invite the person on the podcast. How would people go about contacting us? Yeah, good. Well, we are always available on LinkedIn page. So either you go to mining your business podcast or, you know, we are also people on the LinkedIn by itself. So we are, Patrick Bognore, you can always find us there. Or maybe even the easier ways to drop us an email on mining your business podcast at gmail.com. Exactly. We don't accept mail or facts. So if you're hoping to get in touch with us that way, sorry, to disappoint. Yeah, well, paper, paper, and now we will talk about paper today as well. Because, you know, today's episode will be about accounts payable process and believe it or not, a lot of companies are still processing a lot of paper invoices. Oh, I can believe it if I've seen a lot from from the processes that I've been involved in the companies that I've worked at, yeah, paper still plays a huge part. Right. So as I already mentioned, today will be about accounts payable process. If you are with us and you've been listening to us for a long, long time, you know, we go back almost two years now, we are, I mean, we are on episode 42, 43. So if you tuned the, if you tuned in on the, the later ones, I think the third and fifth episodes or something like that, we did a little introduction into a, not accounts payable purchase to pay process and order to cash because at that time, those were the processes that we knew or we thought we did, we could do another, we could do a redo of those two episodes right now. Yeah, let's see how that would go. However, we did, we did think since it was actually those episodes are ranking pretty well. People are interested. People are listening to it. Maybe they just want to get a little more exposure before, you know, they go on to their own implementation projects to understand what you can focus on, what KPIs to measure, what are generally the problems that companies are trying to solve. And I was thinking since I gained over the last couple of years, a lot of experience actually in accounts payable processes, I did implement it with three different companies in last two years and had had been exposed to this very same topic multiple different times with other projects. I was thinking, you know what, let's do a accounts payable process. Patrick, do you have an experience with accounts payable process? So believe it or not, I have not implemented accounts payable in the last year with three different companies. So I feel like I'm on the back foot here. So for the, not only our listeners benefit, but also my benefit, I think this is a really good topic. So if you don't mind, do you mind just taking us, I'm going to be on the side of the audience. Now do you mind just taking us through the general context about what AP is and where it sits in enterprises? I will do that under one condition and that is that next time I will put myself in the, you know, shoes of our listeners and I will interview you, Patrick, about process that you've implemented three times in last year. Is there any process like that? Yeah, I'll send you a list after. Okay, good. I've heard that you're a big fan of manufacturing. Oh, yeah. It's my friend Butter. Cool. But not to go in circles anymore, accounts payable. One of the core business processes, you know, if you're talking, I always love saying big four, you know, we have accounts receivable, accounts payable and then what precedes it, which is, you know, order to cash purchase to pay. So accounts payable is really the part when you are buying something for your company. When you need to order stuff for your office, you know, screens, laptops, when you need to buy materials for your production, doesn't matter whether you are an automotive company or a chemical company or where you need to buy some services, you know, if you need to hire process and to do your process mining implementation, you are buying services. And hence you will have to pay for this at some point, hopefully, and and what happens is that you buy all this stuff and at some point you will start receiving invoices through different channels. You know, there can be so many channels in which companies are receiving these and what happens then is that you have your own department, accounts payable department or finance that's also what it's usually called or you know, it's also sometimes processed in these shared service centers, these large buildings of or corporations that are kind of working only on these invoice processing and also, you know, whatever they need to pay. And they make sure that these invoices are processed, are correct, are approved and eventually paid at time. And as you can imagine, if you are a corporation that is processing hundreds of thousands or millions of millions of invoices per year, this process can get pretty complex. And if you remember the spaghetti, the spaghetti spaghetti quote from Eric Fernandez Linden, an accounts payable process, which is basically handling money, you can see a lot of spaghetti. Yeah, I can see that for sure happening. So let me get this straight. A company receives an invoice and why not just, okay, I've gotten invoice, I'm going to pay it, boom, done, two-step process, invoice, pay, done, same day, easy peasy, no fuss. Why is that bad? Or why aren't people doing that? I'm not going to say it's bad or wrong. I don't think we can talk into absolutes here in this context. What you need to do is make sure that the invoice you actually received is correct one. And you probably know something that's called two-way match or three-way match, which is basically comparing your documents, whether what you ordered is actually what you received and is actually what you pay for. Because if you are a large organization and you have a plant somewhere in Brazil and you purchase 20 tons of wood or something, the person who's probably processing the invoice doesn't even have a clue that there is a plant in Brazil and then they order 20 tons of wood or some other material. And what the person will see is, okay, here's an invoice for 20 kilograms of wood and they are building us or 200 tons of wood instead of 20 tons of wood and they are paying or building us this much and that much. And you know, you could say, okay, screw this, let's just pay for it. I don't really care. It's an invoice. We need to pay for it anyway. But that's not always the case, right? Because you need to make sure that the service provider or material provider, the vendor that sent you something is actually charging you for the same thing. And this is the moment where things are starting to get a little bleak and murky because you need to have a very lean process on actually having these checks in place, these approval workflows, making sure that not only it's technically correct that you can actually find out when an invoice has different quantity or different amount than it should have, but also that once this is actually exploited and you know, you find this in efficiency or inaccuracy in the invoice, that you can go down the stream in the process and have a lean approval process to either done, create some dynamic activity of the vendor okay guy. We didn't receive the goods yet. We cannot pay for the invoice or the invoice is actually incorrect. And create this very efficient system around that so that you don't spend too much effort, time and to human activity on getting rid of these problems. And that's just the beginning of the process. I'm starting to notice. Okay, so invoice comes in and first thing we must do is actually verify that this is an accurate invoice, but accurate invoice. You mean, okay, did we order or did we receive the stuff that's on the invoice? Did we actually order it in the first place and did we actually receive it in the warehouse? Like, if I paid for 10 pipes or something, can I go down to the warehouse find that? Actually, Patrick, actually, if you really want to go from the very beginning, it's not the verification of the invoice, it's the processing of the invoice in the first place. Now this is that for me, what does that mean processing of the invoice? Well, you know, I told you at the beginning that there are still companies that are processing invoices from paper. Oh, no, does that mean someone's job is to just read an invoice and type it in hand by hand? Well, hopefully, hopefully, we are a little further away from that. But I don't think that or, you know, 10 years back, probably there were people whose only job was to type stuff down into SAP and, you know, put their mounds and quantities and payment terms and boy, can you imagine how many mistakes there must have been done at that point if you put them manually? Yeah, however, luckily, we are living in 21st century and we have something that's called optical character recognition, also called, or, you know, abbreviation of OCR, which are these very cool systems. I can name one that I remember specifically from my projects, it's called them. It's called the vendor invoice. Right. The vendor invoice management and it's basically like a scanning of invoices. So you really have tools which work in the way that you can read through the invoice. There's still probably some manual approval at the end, or again, depends on the setting of the system. But the system does the heavy lifting for you. And even Salonis, who we recently or we, who we implement a lot, they also have this feature where you can actually start with this OCR thing and actually insert documents through Salonis and through this machine learning algorithm that is implemented in there and really work with what do you see on the invoice and then just push it into the system. Oh, well, okay. So even before I get the invoice, I must make sure that the whatever format the invoices sent in, whether that be paper, PDF, or even EDI electronic data into it, right? So it essentially just comes. Or fucks. Or facts. Yeah. I mean, screw it. Why not? It just facts. I must make sure that it's also in the system and, I mean, more importantly, and I think this is the real crux here. If it were just to scan it and stuff that be fine, but it also must link to what you have inside your system, right? Because if you have a vendor from vendor A, how do you know what purchase order that belongs to or the goods receipt that that belongs to? Right? So how do you do that? Exactly. And that's whether it starts getting interesting. So you can either handle everything in one system or you can have a different systems for just the scanning and then you somehow push it into different either SAP modules or some other alienated or external systems. There's really a lot of solutions. And I've been exposed to a couple, obviously, not all of them. But the principle, they kind of work very similarly. And what happens is then that you have your document in the system. And then if it's well, you know, set up in ideal scenario, it just automatically checks for all the all the important stuff is, as you mentioned, is there a link to PO or is there even supposed to be a link to PO? Do we have a good receipt? Do the quantities match? Do the does everything that is supposed to match match? And if that actually falls through, then, you know, the invoice in ideal scenario would be automatically posted. Depending on the quality of the scanning, on the quality of the vendors that are providing you with with the goods, because, you know, they're also different. I guess every vendor works a bit differently. And I assume that there will be vendors who are always, you know, up to date or really on time with their delivery, there are vendors who have supply chain issues and they're the good delivery probably will be a little problematic. Depending on all of this, either your invoice processes or is processed through the system, affordlessly without any problem and just gets to the end or gets posted to the system, or, you know, it's stuck somewhere. And when it's stuck somewhere in most cases, it actually requires manual intervention. And that's where people, the finance people who are working with these systems actually have to step in. Right. So there's always some sort of manual review. Hey, there's an exception here. This document doesn't look right. Something doesn't match. Someone must review it so they can maybe there's a smudge on the paper that it was printed on and it just doesn't recognize the characters or, I don't know, something or it was just misprinted or the vendor doesn't have the right information, something like that person comes in checks it with the system and makes sure that then it actually gets posted. The accurate information gets posted to the system. Okay. So because in theory, you shouldn't even be allowed to post something that's fundamentally wrong because once it's posted, you are supposed to pay for it. Right. And I guess at that point, if you're past the checking process, it's a lot harder to catch. Yeah. Kind of. So, okay. So say we have all that. Say we have, we check that the invoice and the paper gets put into the system properly. We check that all these things are there, the things that we ordered. We know exactly why we have the stuff, why we have this invoice. Okay, cool. Now, can I just pay it now or how does that work? That's another interesting problem, which I can truly answer for you because and I have to say when I was preparing for the episode, I came across some interesting articles and there was this very beautiful sentence that I'm going to now quote, which is that at any given time, you can trade off between profitability by capturing cash discounts, which you can have in the new voices and liquidity through extended payment terms, depending on what your business needs are. And this is a beautiful sentence because if you are looking at the way that you're paying for the company, there's really no way for an external at least to tell should we pay in, you know, in time or early to get a better price or should we wait and to keep on the money as long as possible because imagine, Patrick, imagine that you are a person who let's say that you are doing some your own shopping and then you get the opportunity to pay a little ahead of the time and get let's say 5% off or you can just wait with the money for like, I don't know, 60 days and pay later. And in the meanwhile, you might find an opportunity where you can invest this money that you have saved and held for 60 days and eventually get a bigger return on your money while just keeping the cash a little longer, investing it, getting your return back and then paying at the very last moment so that you have your more cash on hand. And this is really something that, you know, you cannot say or, you know, sometimes nobody can really say what the company's priorities are, but are the two different things that the company can really look into either really optimizing the capital that they have at hand at any given time for a lot of companies that the more is better because then they can exploit these opportunities that they are given or they just say, okay, we want to reduce the cost as much as possible and hence they focus on capturing these discounts because usually if you, you know, if you have a 30 day payment term that means that within 30 days, you should pay for good, you might have an agreement with your vendor that if you pay within 10 days, you know, you will get 5% or 10% off, which is a standard approach and then it's really up to you to decide what do you want. Right. Okay, so I heard a lot of terms being thrown around cash discounts, payment terms and all these things. Let's get into that. So what we're saying is that vendors are provide some sort of payment terms saying like the example you put, if you pay within 30 days, let's say I buy something for 100 bucks, somebody says, okay, if you pay this within 30 days, we'll give you 5% off. So you only have to pay 95 euros, right? Exactly. We go to 60 days and then you pay the full amount, right? Yes. Obviously the vendors themselves have an incentive to get the cash from the invoice quicker because, you know, obviously the quicker you have your cash, the happier you are. Yeah. And they are facing then the same kind of problems, right? Also, like, do we want to get paid in time because if we get paid early, we will have more cash now. We can extend and so on and so forth. Exactly. So there's more like the accounts receivable apart, which probably you know more than I do. I've dabbled. Essentially what you're saying is that we have the opportunity now to choose, right? Either we can pay 95, but lose that 95 within 30 days and not have that after that, that I could potentially do something with, you know, like invested somewhere and maybe get higher return or I could just, you know, okay, I can actually do that strategy. I can actually take my money, have more cash on hand for a longer period of time, but eventually pay more for the invoice. And so I guess this kind of dwells deeper into company strategy. Really like how, like optimizing cashful, maybe there's like maybe I'm running short on cash at this particular moment. So I'm going to prioritize paying later because I want more cash on hand for the time. Yeah. And I'm not going to say that these are the only reasons why you should choose the other or the later because again, the companies and the business owners might have different initiatives, different incentives to run and to decide by. And, you know, having cash as long as possible has to do a lot of with liquidity, but not maybe exclusively only with liquidity. There might be also other goals that the companies might have to choose one or another. Okay. So what you're saying is that there's definitely strategies involved here. But is it okay if some people or in the organization just pay with for the cash discount and others are just waiting as long as possible? Could it be that there's like regional differences and things like that? 100% or what you could do, you could even go as simple as just decide by what the amount of cash discount is, but it's even worth the money and effort you put into paying early, you know, just to pay and get to yours off. It probably doesn't make sense. And, you know, that when either BI reports or process mining really comes in that can create some prioritization system that you can imagine as a basically a Kanban board or just some board where you prioritize the invoices that are due a day or tomorrow with the highest amounts and you say, okay, this is really helpful because in order I, you know, I can either leave this and be paid on time or I can really pick this invoice up because I can and we can get, we can get 1000 euros back by just paying this in time. So then it's really up to strategy decision on which way you want to really go. And I also like this use case because it's one of the easiest one to realize some value realize some savings if it is in the interest of company to do so. Right. So you, you could say, well, in the last year, if you would have prioritized cash discounts, you would have probably saved this much and if you prioritize holding on to your capital, that was, there's an opportunity cost if I don't know so much. Yeah, exactly. And I like this use case especially because first of all, it's super easy to implement. And second of all, it's also very easy to quantify on the value is. Yeah, that's really good. So, okay, I feel like I'm getting my head around the the whole process, right? Good. But I feel like there's something missing, right? Because I, you know, sometimes invoices slip through. And sometimes, you know, you just don't pay them on time. And what happens in those cases? Yeah. So once the invoice is posted, there are still a lot of things that you can do, you know, you still find out that there is a mistake and you can actually block the invoice for payment, something that happens very often. It's called the payment block for various reasons, you know, the payment books usually have some reasoning behind them, why they're a corbic of you want to then maybe explore why you are blocking certain types of invoices after they are deposited into the system. Or you can also reverse the invoices, should you find out that this is actually incorrect, you know, you probably want to get the money back or prevent it from the paying in the first place. And then you can reverse it. Happens all the time, you know, you pay for something and then you actually realize that you paid twice the amount or that you should have paid less or something. So you just reach out to the company and they either reverse it, you know, cancel it, cancel the invoice, cancel the payment and send you the money back. It can be something as banal and then it is as, you know, ordering a train ticket can can happen. Or what happens is also that they can give you credit memo. Basically, they say, okay, we already paid for it. It costed 200 euros, but you know, we kind of want you to stay with us and instead of giving you our money back, which we probably already spent elsewhere or haven't even processed it. Here's here's a credit memo, which means that with your next purchase, you can save 200 euros and you can just use it as I don't know, as a coupon for something more. Right. So it's essentially saying, okay, we're just going to hold your cash because we know you're going to buy from us again. And you can just use that cash you have with us on as credit to. Exactly. Exactly. But in your, in the accounts payable process is actually the credit that you are getting from the other company. So it's, I would even say, and I'm going to use a term that one of my clients always use is basically free cash because once you get a credit, the most from the companies that are supplying you that you already paid, that usually means that you are getting money from them that you can just collect each or from new purchases or actually as a form of really a real cash. Okay. Interesting. But again, what happens when I don't pay my invoice? Well, what happens if you don't pay your invoice? I would say if you are, if you don't pay your invoice, you're a big, big travel Patrick because nobody cares about Patrick Wagner. And if you don't pay for your, for your cell phone or for your rent, you're probably going to live on this street without a cell phone. That's not going to happen. However, if you are a large corporation that is important, important customer for someone who's supplying them with goods, if you don't pay your invoice on time, well, your vendor will probably not like you, but it's not like they're going to stop supplying you, but you are making their life incredibly difficult, which can result in multiple negative, negative, what's the word? No, no, no, it can result in multiple negative, let's just use things, right? One, first of all, your vendor is not going to like you, and you don't want to have a reputation of a poor customer who pays late or doesn't pay in at all. Second of all, if it reaches a certain threshold, they will probably stop supplying you. And you know, there's a competition, we are a free market, but sometimes you are in such a business where you cannot afford to lose your best vendor to stop supplying you things. Or they just give you worse conditions, you know, they give you higher prices, they give you shorter payment terms, they give you different kinds of, you know, you just become a worse customer of theirs in a way that they just don't prioritize you anymore, and it just a lot of things can unfold just by this simple fact. Right. So essentially what you're saying is that if we have a customer or a vendor, let's say, that gives us some sort of rates, and these rates aren't really like fixed for every single one person they support or company they supply, it's kind of by company, company, pays is depending on what you negotiate with this vendor, right. 100%. So this relationship that you have with them is incredibly important because it can affect the rates that you're getting from them, right, because they could say so, you know, we like you, we give you a 5% discount on everything, and if you become a worse client for them for them, right, they might not be inclined to give you that discount. Exactly. And that's maybe something where there is a lot of friction between departments, especially when we were talking about the constable process and about finance, they always complain about purchasers, about buyers, and vice versa. You know, finance is complaining about purchasing departments that they are sending them crap, really, that the purchases are not maintained properly, and that the information that they get are poor, and hence it results in their late payments. On the other hand, purchasers are then complaining to finance that, listen guys, you didn't pay for our invoice in time again, and because of that we are getting worse rates. And this is actually a very good point that you just brought up, and that's the interconnection between processes. And I think we had a guest on our podcast in one of the previous episodes, and I just cannot recall who exactly said that. But he said that he knows that organization is not working as a one unit. The moment he asks them about whether they separate purchase to pay and accounts payable departments. I think those are a lot of them. I think so too. So it's a second quote from him already. And this is a very, very interesting and big thought to be honest, because these departments should work as one system, because you know, it doesn't end the moment you create a purchase order. It should actually end the minute where you pay for the invoice. And if you are a large organization, these tasks are separated. And then you create a lot of unnecessary friction by these constant conflicts about one department complaining to the other one, while they don't really have any, a lot of times they have very little platforms on or very few platforms where they can actually cooperate in, and you know, insert process mining. And while you can't really merge the processes into one, which are one of the reasons which actually will fund that else set in one of our previous episode, because, you know, in purchasing, you would be following a purchase order while in invoicing or accounts payable, you would be following an invoice. However, in process money, you can kind of create this platform where you have a clear clarity on when the AP ends or where the AP to be ends and starts the AP. And even track the purchases then later in a accounts payable process and just create this user interface where the teams can come together and work together as a team and, you know, work on resolving different items one at a time. So essentially, what you're saying is that we have two sides of the same coin, right? One on the purchasing side and once on the on the finance side here on the accounts payable side. And I'm glad you bring this up because listening to this, I'm sure a lot of you listening also have the same question. When we start talking about, you know, getting invoices, paying invoices, making sure we got the right orders and things like that, this is starting to sound like purchase to pay, right? A lot of these activities are very, very similar. So you already mentioned that we have a difference of case, right? In the purchase to pay, we look at the purchase order item, right? That's the thing that we track. And on the other side, we have the invoice that we track. Now, why aren't these interchangeable? Can you talk a little bit about the main differences between the two and why they don't always cover the same topics? Yeah. So if you follow us for a while, you already know that in a process meeting, you really need something that's called a case ID. That's a unique identifier to, you know, to follow certain item within your process. That's interchangeable and every activity can be somehow linked and track down to this single item. If we're talking about purchase to pay an accounts payable process, what happens is that in purchase to pay process, you're really interested into your purchases. That means, what do you buy? And, you know, how is it delivered? How is it invoiced? What are the buying channels? What was the purchase requisition that actually requested you to buy something? Do you have a contract existing in place to actually create a purchase order out of and, you know, do you actually follow the prices that you have in contract? Did you consume the contract order and so on so far? So many, so many things that you can track there. However, once you get into accounting, you don't necessarily care about these things, although it really depends because it's still, as you mentioned, it's two coins, two two sides of the same coin. But accounting, you really care about a single invoice and single invoice item and how is it processed and how is it paid? And the reason why these things are different is that if you order, let's say, 50 screens and your vendor only has 20 of them in stock. He will, the vendor will send you 20 screens. You know, you will have a good delivery for 20 screens. You will get an invoice for 20 screens and the vendor will tell you, okay, the remaining 30 screens will be delivered next month. And the next month, you get another 30 screens, another delivery and another invoice. And this is the problem, which suddenly happens is that for one purchase order, you will have two different invoices. And that's, you know, a normal, normal state, but what can also happen is that in one invoice, you would have two different purchases from, you know, with different, different history, different kind of buying channels, different vendors, because you can unite multiple items, multiple purchase order items into one invoice, then pay for it all together. And, you know, in process mining, this is kind of a problem, because then you are getting this problem of tracking things at the same time, which have multiple relationships to one another. And you create this complexity that so far, the process mining tools are not really able to handle in a way that would be consumable further for the end users. So what you're saying is, or what I'm getting here is that we look from the purchasing side, we receive multiple, we could receive, as you've just described from multiple invoices, which means we would see in the purchasing process, multiple receive invoice and clear invoice activities, right? Which could happen after each other, right? And if you're looking for throughput time, you know, this would kind of be one of those outliers or weird variant of your process, where, you know, it doesn't follow the traditional purchase to pay process, as in create PO, you know, send PO, receive goods, get invoice, pay invoice done, right? So it would follow like a weird variant, even though it would be completely legitimate, right? So, and since we're looking at the AP process this time, we would have individual cases for all these three invoices. Yes. And as a project mining architect, you kind of have to ask yourself a question, do I actually, let's say that you have one invoice? Do I actually want to see that this invoice is actually consisting or, you know, covering 100 POs? And at the same time, it's also covering 100 purchase requisitions, because you just pay for it all at once, which is fine. But then if you insert it into your process mining tool or into your process explorer, you would see that when this one invoice would have at least 201 activities, which would be like, you know, 100 purchase requisitions created, 100 purchase orders created, and one invoice created. And does this information actually help you or would you rather see it from the other way that you have your 200 purchase or 100 purchase orders and always the same invoice created at the end. And this is something, and I've seen this before where companies are speaking about end to end process, which I 100% understand why they want to do it. But it's not as simple as just joining things together, which is definitely possible, but reading and interpreting the data after you have it all at one, one, you know, pool is just difficult. Yeah. And you also, you bring up a really good point, because we do see this a lot where a lot of people have the opinion that we can just shove as many activities and as much data into these tools as we humanly can. And you, like you said, you really have to ask the question, is this information useful, right? If we do see all of a sudden this end to end approach, we would see so much random stuff where the big picture this end to end process is completely mangled and honestly hard to look at and almost, and I can guarantee you impossible to interpret, right? Yeah. So, and that's the, that's the shortcomings of looking at the this one process, right? Essentially, this AP and P2P is like one process, you buy stuff, you pay for stuff, right? But just shifting the focus from the purchasing side to the accounts payable side has significant differences in the way that the overall process performs, right? Exactly. Exactly. And yeah, what then happens is that you are, you know, if you introduce just one extractivity to your process, which is maybe frequent enough, you get just so many variants of your process. And it's not linear, it's really exponential because every activity creates a significant larger number of different variants in your process. And if your, if let's say, conformance of your process is your priority, the more activities you introduce, the bigger, well, the bigger headache you will have to actually make it conformant. Especially when you were talking about activities that are concurrent in nature, not sequential, right? If they're sequential, your like A follows B every time, right? That's super simple. But if A can happen before B and B can happen before A, and that across multiple activities, there's so many variances of how that could occur, especially when those activities have nothing to do with each other, right? So the less and less you have activities that are dependent on each other, they're more messy that your process graphical. And that actually brings me back to what you were saying at the beginning, you know, you received the invoice space for it and you're done. Well, if you have a process where you have, let's say, 30 or 40 activities and with various complexity, I've seen, I've seen numbers that are pretty starting like you are looking at it and you're wondering, how is it possible that you can execute your process in so many ways? And I think I've seen a very different number of variants that was a lot over 50,000 for one process. So you have, let's say, five million invoices or even less, two million invoices that are processed in 50,000 different ways. Oh, well, that seems like a lot, but we know we have to keep in mind, even though there's 50,000 different ways to process in invoice, it doesn't mean that one of them is good and the rest are bad, right? Yeah, exactly. Exactly. And that's why the business process management, so called the BPM plays such a vital role as well, because you really have to design and think about all these variants and what does it actually mean for you? Is the is the fact that you create and purchase orders for one invoice, actually a problem or is it not? And then, you know, feed your conformance checker with this data to actually be able to tell, okay, so it's actually not that bad because we don't even we black, we whitelist this activity doesn't mean anything to us. And we actually see that it has a very little impact, even though it raises our variant number, you know, it doubles it or triples it or something. Now, you've already spoken a little bit about your favorite use case, right? That's some, the cash discount. Do you take it? Do you not take it? Do you optimize cash flow? Things like that. But if I were in charge of accounts payable and I went to you and said, hey, I want to optimize my process. What would be like the first things you would look at in order to in order to do that? Well, I would ask the company, what is the biggest problem that they have for what is there? Okay, let's say we have all the problems. We have every single problem, you could possibly conceive. Where do you see the biggest advantage in using process mind to fix some of these issues? Patrick, you know me, when you say everything is priority, I said nothing is priority and you should probably do process mining and focus on actually exploring your processes first, but I understand where you're going with it. And I would probably, I would still probably look at this cash collection site. It's quite easy, you know, pinpointing when an invoice is due and when it's not due, and then actually going into the routes and observing the behavior while you can just simply play with your process explorer because in usual implementations, what happens when you're implementing accounts payable is that you have these activities of clearing the invoice and also creating this artificial activity on when the invoice is due and you can really, in a simple way, just play with the process flow is the clearing date before or after the due date. And in this way, you can simply say, okay, these are the late ones, these are the early ones or on time and have a use case. Or you can just say I want to see invoices that are not paid or that are not paid, what so at all. And again, create a very simple use case of your open invoices and then you can just build up on that. So that's an easy way, making sure that you pay in time, making sure that you collect your cache discounts because cache discounts is calculated very similarly to your standard payment. And if you build a process mining data model in accounts payable, these are usually the first things that you could observe without really, really little of knowledge or really effort. And it seems like a perfect use case because for one specific thing that I want to mention, if we have a list of all our invoices, we see all the open ones, we see all the close ones, and we can see the ones that are still eligible for cache discount. And with this up-to-date view, sometimes real-time view, we can alert the responsible people, hey, there's an invoice here where we could get a fat cache discount. But there's still a payment block on this. So this is probably priority number one that we should look into, remove the payment block, pay the invoice so we can collect on this fat cache discount because we're set to lose a lot here, right? Isn't that some sort of use case that we do? It is. It is 100% because you can then create this notification or alerting systems on top of this. But I think a lot of people, a lot of companies would argue that you don't really need to process mining capabilities to do that. And that's why I'm saying like it's a very easy use case to build once you have the data in. But might not necessarily be the most powerful one or the one that leverages the process mining technology the best. What I would say actually leverages is the best are the standard things, are the standard approaches that you use when you're analyzing your processes. And that's actually, you know, throughput times. I talked about the approvals, approval processes and the ingestions of the invoices. This is actually where basically no company that I ever worked with had any clarity on. They just had some invoice processing system and that was it. They didn't know what was happening. They had no clue about what invoices are stuck, how they're processed. And I give you one example, we implemented it with one of the companies and then they were actually chasing these exceptions, these errors that are coming from the system. And there was one that they noticed that kept repeating over and over and over again. It was something like a change bank account or change a payment room or something. And what they said, well, you know, when you once you are in process mining, you select all the cases that go through this activity. And they noticed that the root cause was, or they actually narrowed it down to, and I don't know whether it was a vendor or a document type, but they're narrowed it down pretty significantly. And what they found out is that they were actually using this template in the system. And they had a typo in a template and whenever they post it and invoice, you know, every time they had to change, every time the person had to log in into the system, change one number to the one that is actually used and you know, save it and exit the system. If this takes you two, three minutes a day, you probably don't even complain because you don't mind that much. But if you then see the scale at which it's extremely operated and how many people have to do the same thing over and over again, just suddenly realize, I just, you know, by fixing this template, which is a five minute work, I have saved one FDE, which is, you know, full time and bleed for a year just because this little change. Oh, wow. So it's really just the smallest things that, you know, the context of process mining, not just, hey, let's, no, because no one ever says, hey, let's review all our templates in our system. Exactly. Right. So it's really getting all the steps, all the manual steps that are involved here, we could theoretically, with process mining, help narrow down to figure out what the root causes of these, of these issues are and that that's, that's really interesting. So did you end up, did you end up fixing the template? Do you still see the, yes, yes, they ended up fixing it and they do have a significant saving in a human power in this one. And it's also saves a little, I guess, I guess, a curse words and so on. But this is the point. You mind the logs of your systems, what is happening, and especially what shouldn't be happening, you can either then set up some alerts, or actually, I think the first thing that you should do as a process analysis is actually, you know, go into these activities and find out why they are happening. Why do you keep having this issue, this error, be it approval problem, you know, I also see news cases where you have this multi level approvals when one person approves the invoice and then it's actually just pushed to another person to, to, to, to approve it again. For various reasons, maybe there are some compliance problems or maybe it because of the invoice value, but it just increases the complexity significantly. And if you have three or four people in such a chain and, you know, you have one on on a vacation that is responsible for that, you will create these very weird chains that seem to take forever. And by just measuring this, you can say, well, maybe, maybe these invoices that are worth five euros don't need approval in the first place. And you can't be bad at it. Exactly. And you can create this easy change, this easy transition in a way that, you know, in order for our processes to run more efficiently, let's just forget approvals until five euros or ten euros because it's just not worth the time of the people that work on that. That's so interesting. So we could really see the employee costs and the manual work that's involved in all these steps. And then essentially, we can calculate per invoice how much it took to process it. And with that, we can say, okay, well, maybe we can cut some of these steps out if the value of the invoice actually doesn't even come close to the employee costs that it would take to process this, right? Exactly. Exactly. And, you know, in AP process, almost every activity that you do outside of the standard ones are usually manual. And there are teams that consist of tens or, you know, dozens of employees, dozens of workers that work only on AP process that are basically putting fires away just to make sure that their company is solvent and base for the invoices at some point. That's really interesting. I mean, so if we think about the AP process as a whole, and I know we just mentioned, hey, we just managed to fix a template somewhere. But, you know, that's not the one thing. There's so many different things that you could look at in the AP process that in, like, together in, like, accumulated all these problems can lead to real gigantic inefficiencies. And how do you best set up a company to go about tackling these, like one by one? And that's a million dollar question, Patrick. And I don't think there is an easy way out of this because, again, there will be a lot of initiatives running in every organization to improve this. And that part of the process, you know, new systems being implemented, new measures being taken out so that it's ran sufficiently. So there's really no golden, or as it called, silver bullet, to just save it all. I guess the most important thing is just to establish a strategic goal, strategic indicator for you to say, but you're doing a good job or not. And this can be either, you know, that you pay everything on time. And then you just proceed or go from there, you have this goal in mind. And you, everything that you do outside of that, be it, you know, the conformance, be it the automation rate is revolving around that. Or you actually say that, you know, on-time payment is not such a big problem for you. And you are the focus on manual touches, so that you don't want your invoices to end up in these exceptions where a person has to log in and change something. And then you exactly go for these things. You go into your process, understand what you are actually visualizing, what you're showing, and really narrow it down to the problem that are happening and shouldn't be happening. And you might be actually just, you might be surprised that it actually, the problem that is happening over and over again leads you to incorrect master data, or just some disrepancies between one source of master data and the other. And those are very often easy changes, easy fixes, but not necessarily. You can also find out that all your setup or earlier flow is just faulty, and you will have to redesign it altogether. So you can essentially pin point or set specific goals that you have in mind, for example, we want to pay 99% of our invoices on time, right, and make these goals for all the different approaches and use cases that we have, these KPIs, and we can then see whenever something goes completely right. Because like you said, there's essentially just teams out there like setting out fires, you know, putting out fires. So what we're doing here is essentially benchmarking how good we are at containing these fires to, and I would call an acceptable level. Exactly. And that's what it is about. And process mining as a tool can help you pin point the pain areas and, you know, drill down into the root causes, look under the hood, understand what is happening, where is it happening, and then it's up to you and your team to kind of find out the actual reason and why is that happening? Because very often it's really something simple, something I want to say dumb, even where you can. Like fixing a template, something stupid. Like fixing a template, exactly. And so before you, you know, before you go about, let's automate everything, let's put these problems away. You should really extra your process for these type of exceptions, these type of problems, and understand why they are happening and whether they can be prevented in the first place. Because, you know, what you ultimately do is that you take your subset of your invoices that are going through this through this exception. What you do then is that you look, OK, is there some, some dimension be it a vendor, be it a document type, be it some amount where this is happening the most. So you kind of narrow down the problem to a certain area. And then you can actually go into single documents and like find out in the system what happened? Did the vendor deliver the goods to light? If so, why is that the case? Is this happening over and over again? Is it a repeated pattern? If so, what can we do to actually prevent it or to improve it? And this is exactly the mindset that you should bring on the table working on accounts pebble, but actually on any other process as well that you accept the fact that it takes some analytical effort from your site that it's not just given that you will see all the problems once you feed your process or for your data model with the data and just accept that there is still a lot of work to be done. Yeah, so I mean, I keep going back to this template because I think it's a really good idea, um, good, um, good example. And also you wrote in your, in, in the notes say, you know, um, process mining won't automate or like you don't automate all the jobs away specifically because, you know, if you see this error popping up that there's something that there's a mismatch, you know, the automation response as well, you know, let's just automate so that inputs the right stuff. Whereas, and if you just look a little bit closer, you say, or, or, or, you know, we could just fix the template, you know, and then this, you know, then we don't have to automate anything. You know, so it's like really thinking about, um, the proper solution to these inherent fundamental problems inside this process and not just to put band-aids on it with automating, automating the mistakes away. The Kaspar, uh, Kasparians will be super happy to hear this, uh, again. Yeah. Yeah. I'm sure. We just keep repeating, uh, repeating this, this, this word over and over again. But you're absolutely right. Uh, understand your processes first bit, bit before, uh, thinking about automating issues away and taking the time and efforts to actually really analyze it and not just say, okay, uh, we have this problem. Let's get rid of it. Um, by setting up automation or some action flow or whatnot or RPA. Mm hmm. Well, Jacob, I've, I've, I feel like, um, I have learned a lot from, from this episode, um, deal listeners. I, I hope that if you're still with us at this point, you have, you have to, um, any other, um, final thoughts on the AP process from your side, Jacob? Well, my final thought is that if you asked me a year ago or two years ago, if I was able to speak so long about the Kasparibl process, I would probably laugh at you. But, uh, here I am speaking. That's what we don't do this episode. Speaking for almost an hour about the Kasparibl, and, uh, yeah, it's, it's super interesting process. There are a lot of different things and focus areas that you can really go into, uh, be it at the invoice, ingestion, be it at the workflows, approvals, which can get very complex and complicated, not to analyze and read, but also to recreate in process mining because very few people actually understand them usually. All the way to, you know, the invoice postings and then, uh, how do you pay for it? And I didn't even go into the topic of actually payments and payment runs because there's one thing is, uh, to clear the invoice in the accounting, but the other thing is to actually pay it. And there are some other procedures and some other parts of your, of your modules where somebody's actually triggering a program in SAP or in some other system, which then triggers some payments from your bank. And then you have another set of problems and another set of use case that you could really focus on. So it sounds to me, the AP process. And I mean, we've seen this happen as well with a lot of clients. It's a very popular thing to implement because there are, you're very, very close to changing your behavior that directly affects your, your cash, right? And how good you are, right? And in your savings, right? It's a very, I'm very good use case to get immediate results because the, the change in behavior that you do in the AP will have direct results fairly quickly, depending, of course, on the use case, but, you know, you get what I mean. Exactly. Because if you, if you think about it, if you work in a process, such as supply chain or something else, it's not always, you don't have it as strongly in your hands as your own accounts payable. And that's why it's probably one of the use cases that a lot of companies start with. It's fairly standardized, fairly easy to implement, and you can get some fruit out of it pretty soon. And I can tell you that sometimes it's very juicy and very sweet. And I didn't even cover the duplicate payment checker that we also, I think we covered in one of the previous episodes when we were discussing the personal success stories. And that's a whole and other topic. And that's actually checking for compliance, you know, on continuous basis. Yeah, yeah. That's the topic we should cover in another episode of the money that this has podcasted. Cool. Patrick, do you have any further questions about the accounts payable? I have three, three Pajillion other questions, but we can do that after the call. Yeah, we can do that through the call. Cool. Then I guess that will be it from our episode about what is accounts payable. And I hope that now you know everything you need to actually start with the implementation. You know, we, we are always to help. So if you have any questions or if you're looking at skilled partner to actually help you with the implementation, reach out. If not, well, we are still happy that you listened all the way through and that you are here with us. And we will be looking forward to hear from you and you know, talk to you in our next release of my new business podcast. Patrick, thank you very much, dear listeners. Thank you for listening. Yeah. If you like us, leave us a review on any platform that you usually listen to podcasts and bye bye, enjoy your day. Adios.