Find out interesting insights with Kelly O’Neill, CFO, KMONE Ventures
Moderated by Pat, Digital Transformation Consultant at Hyperbots
Dont want to watch a video? Read the interview transcript below.
Pat: Hello, and welcome everyone to CFO Insights by Hyperbots. Today we are joined by Kelly, who is the CEO of KM One Ventures. Welcome, Kelly. Thank you so much for joining us today.
Kelly: It’s great to be here, Pat.
Pat: Alright. So let’s dive straight into it. We’re here today to discuss the complexities of payment instructions and invoices. So to start, can you tell us why payment instructions on invoices can vary so widely between different vendors?
Kelly: Certainly, payment instructions vary significantly because each vendor has unique financial processes, contractual agreements, and business requirements. Factors like company size, industry standards, geographic location, and cash flow needs all influence how a vendor structures their payment, penalties, and discounts. For example, a small supplier might offer early payment discounts to encourage prompt payment, while a larger corporation might impose strict penalties for late payments to maintain its cash flow.
Pat: Alright, that makes sense. So, Can you explain how these variations in payment instructions can impact a company’s accounts payable process?
Kelly: Yes, variations in payment instructions add complexity to the accounts payable process because the AP team must ensure compliance with each vendor’s specific terms. Misinterpreting these instructions can lead to late payments, missed discounts, or even cause disputes. This can strain vendor relationships and impact a company’s financial health. For instance, failing to apply a discount due to misinterpretation can lead to unnecessary costs, while overlooking late fees can lead to accumulating penalties.
Pat: So, what are some of the most common challenges that companies face when processing invoices with complex payment instructions?
Kelly: One common challenge is the manual effort required to decode and comply with different instructions. AP teams often have to carefully read through invoices to extract relevant payment information, which is time-consuming and prone to error. Another challenge is ensuring that payments are made according to the correct terms, especially when dealing with a high volume of invoices from various vendors. Additionally, handling exceptions, such as incorrect or incomplete payment details, adds another layer of complexity.
Pat: Could you elaborate on the financial consequences of not properly adhering to these payment instructions?
Kelly: Yes, the financial consequences can be rather significant. Missing an early payment discount directly increases costs while paying late can lead to penalties that accumulate over time. Consistently late payments can also damage vendor relationships, leading to stricter credit terms or even loss of favorable terms altogether. In some cases, noncompliance with payment instructions can lead to legal disputes, especially if the terms were explicitly outlined in a contract.
Pat: That makes sense. So given these challenges, what role do you see AI playing in understanding and processing varied payment instructions?
Kelly: AI has a crucial role to play in this arena. Advanced AI can automatically extract and interpret payment instructions from invoices, reducing the manual effort involved. It can identify key terms such as payment due dates, discount opportunities, and penalties, and ensure that these are acted upon correctly. However, the complexity and variability of payment instructions mean that simple AI techniques wont suffice, as these methods might struggle with the nuanced language and varied formats used in invoices.
Pat: You just talked about simple AI techniques and how they might not suffice. Why do you think they might fall short when dealing with these varied payment instructions?
Kelly: Simple AI techniques rely on predefined patterns and can only handle what theyve been explicitly programmed to recognize. Invoices often contain diverse and complex language, different formats, and even ambiguities that these systems can’t easily interpret. For instance, the phrasing of payment terms or the placement of banking details can vary widely, and basic AI might miss critical information or misinterpret those instructions.
Pat: How do you see advanced AI overcoming these challenges, and what benefits can companies expect from implementing such solutions?
Kelly: More sophisticated AI, such as deep learning and language models specifically trained on large data sets and payment instructions, is required to accurately understand and act on these variations. These systems can learn from a vast array of invoice formats and adapt to recognize different payment instructions accurately. By continuously improving as they process more data, they can handle the complexity and variability. The benefits for companies include greater accuracy in payment processing, reduced manual effort, and the ability to capitalize on discounts while avoiding penalties. Additionally, by automating these processes, companies can free up their AP teams to focus on higher-value tasks.
Pat: That makes sense. Finally, what advice would you give to companies looking to implement AI in their accounts payable processes to handle these varied payment instructions?
Kelly: My advice would be to start by thoroughly assessing the complexity of current invoice processing and the specific challenges faced with payment instructions. Look for advanced AI solutions that offer the capabilities mentioned earlier rather than relying on simpler systems. It’s also important to pilot the AI solution with a diverse set of invoices to ensure it can handle the variability. Lastly, continue to monitor and refine the system as it processes more data to maximize accuracy and efficiency.
Pat: Thank you so much for your insights on this very important topic, Kelly. AI has the potential to revolutionize how companies manage varied payment instructions and invoices. Thank you so much.
Kelly: You’re welcome. It was a pleasure discussing this with you.