Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Welcome to the latest installment of our interview series, where we delve into the intersection of finance and technology. Today, we are privileged to host Bimal Shah, an esteemed finance professional with extensive experience in the pharmaceutical industry, including serving as a CFO. Our focus for this session is on understanding the return on investment (ROI) of AI-led automation initiatives in finance. Let’s dive in!
Emily: Hello everyone, and welcome! I’m Emily, a digital transformation consultant at Hyperbots, and I’m thrilled to have Bimal joining us today. Bimal, before we jump into the details, could you please share a bit about your background?
Bimal Shah: Certainly, Emily. Thank you for having me. I’ve spent over a decade in senior financial roles within the life sciences industry, ranging from privately held firms to publicly traded companies. My expertise lies in navigating the complexities of finance in the pharmaceutical sector.
Emily: Thank you, Bimal, for that introduction. Let’s structure our discussion today into three key areas: understanding ROI methods, AI adoption in finance, and challenges and recommendations. Starting with ROI methods, Bimal, as a seasoned CFO, what frameworks have you employed to evaluate ROI?
Bimal: ROI, or return on investment, is paramount in financial decision-making. It can be measured through metrics such as internal rate of return, payback period, or simply as a ratio of investment returns. Assessing ROI involves considering factors like technology costs, implementation expenses, and potential cost savings or efficiency gains.
Emily: Fascinating insights, Bimal. Moving on to AI adoption in finance, which processes do you see as ripe for AI integration?
Bimal: Invoice processing, accounts payable, and accounts receivable management are prime candidates for AI adoption. These areas involve repetitive tasks that can benefit from automation, leading to cost savings and improved accuracy.
Emily: That’s insightful. And how would you prioritize AI adoption within the finance function?
Bimal: I would start with areas like accounts payable and receivable, where the tasks are relatively straightforward but labor-intensive. Demonstrating the benefits of AI in these areas can pave the way for adoption in more complex functions like financial planning and analysis.
Emily: Excellent advice, Bimal. Now, let’s delve into the nitty-gritty of calculating ROI. Could you elaborate on the quantitative and qualitative gains of AI-led automation?
Bimal: Quantitative gains include cost savings from reduced headcount and improved payment processing efficiency. On the qualitative side, benefits such as enhanced decision-making and employee satisfaction are harder to measure but equally valuable.
Emily: That’s a comprehensive overview. Bimal, how would you recommend measuring ROI for automation initiatives, considering both direct and indirect costs?
Bimal: Direct costs, such as technology investments and labor expenses, are relatively straightforward to quantify. However, capturing indirect costs and intangible benefits requires a more holistic approach. It’s essential to focus on measurable metrics while acknowledging qualitative gains.
Emily: Thank you for clarifying that, Bimal. As we near the end of our discussion, how would you suggest CFOs and controllers approach ROI measurement and publication for automation initiatives?
Bimal: I advocate for a balanced approach, emphasizing quantifiable benefits while acknowledging qualitative gains. Attempting to overly quantify intangible benefits may dilute the credibility of ROI calculations. Transparency and clarity are key when communicating the value of automation initiatives.
Emily: Wise counsel, Bimal. Finally, in terms of risk assessment, how do you recommend quantifying potential risks associated with AI implementation?
Bimal: While risks such as damaged relationships or employee concerns are challenging to quantify, they must be acknowledged and managed. Mitigating risks requires proactive communication, stakeholder engagement, and a focus on seamless implementation.
Emily: Thank you, Bimal, for your invaluable insights into maximizing ROI on AI-led automation initiatives in finance. It’s been a pleasure discussing these critical topics with you.
Bimal: Likewise, Emily. Thank you for hosting me, and I look forward to future conversations on the evolving landscape of finance and technology and there you have it, folks! A deep dive into the ROI of AI-led automation initiatives in finance, featuring insights from Bimal Shah, a seasoned CFO. Stay tuned for more enriching discussions on the intersection of finance and technology.
Moderated by Emily Digital Transformation Consultant at Hyperbots
Emily: Hello everyone! Good morning, good evening, or good afternoon, depending on where you are. Today on the call, I’m very pleased to have John with me. John is a CEO at LivData LLC. And today we’ll be talking about emerging new class of payments like VCP or virtual card payments for vendors. But before we dive into it, John, would you like to introduce yourself and give us a little more background?
John: Sure, thank you, Emily, for having me again. So my background is in finance automation, which is a big part of what I do. I go in, do assessments for companies, and figure out how to meet their strategic goals and objectives through people, process, and technology.
Emily: Thank you so much, John, for that introduction. So let’s actually, you know, begin with the basics. Can you explain what the emerging new class of payments such as virtual card payments entail and how it differs from the traditional payment methods?
John: Yeah, so there’s a lot loaded into that question because there’s different reasons to use virtual card payments. It can be budgetary for a business, allowing them to control the expense for a specific purpose that ties to an account. You can set up a virtual card payment for a specific purpose. There are two types of virtual card payments: single-use, where the card can only be used once for a specific approved PO, and multi-use, which can be set up for a specific category like fuel or a merchant-specific category, controlling how and where the card is used.
Emily: Got it. And John, what are the key features and benefits of virtual card payments for vendors, and how does it impact financial operations?
John: Yeah, it can make things more complex because there are more payment methods, which can lead to more manual processes than having all your ACHs regularly scheduled. If you don’t have the right tools and systems for the FinTech part of the payments process, it can be challenging. However, there are benefits such as participating in interchanging rebates, limiting single-use for security, and proper approvals to prevent unauthorized use. These controls enhance cybersecurity and overall financial operations.
Emily: Got it, got it. So moving to adoption and implementation, how widespread is the adoption of VCP among vendors, and what factors influence their willingness to accept such payment methods?
John: Currently, adoption is growing, especially among larger organizations that want the rebates and controls. Some vendors are reluctant due to the complexities and additional labor required. As FinTech solutions improve, making the process easier and more secure, adoption will likely increase. Understanding the cost of processing different payment methods also influences the decision, as some companies might switch back to ACH or checks due to perceived cost savings.
Emily: Got it, got it. So John, can you share any experiences or challenges encountered during the implementation of virtual card payments or VCP within your organization or even among other vendors?
John: The biggest challenges are getting vendors used to single-use cards, as they might prefer electronic methods or ACHs. Ensuring the process is automated and integrated with portals can ease this transition. The key is to make the system as seamless and secure as possible, similar to how ACH schedules work.
Emily: Got it, got it. So then, we go a little deeper into benefits and challenges. What are the primary benefits that VCP offers to organizations in terms of cost savings, efficiency, and security?
John: The cost savings from cash back and tying expenses to budgeted items with proper approvals are significant. It enhances efficiency by ensuring transactions match and are categorized correctly. The biggest benefit is improved security, as single-use cards reduce fraud risks compared to traditional methods like checks or ACHs.
Emily: Got it, got it. Conversely, what challenges or drawbacks might organizations face when transitioning to VCP for vendor payments in particular?
John: Not all vendors accept credit cards, and there’s resistance due to the interchange costs and manual processes involved in taking new cards regularly. The transition can be labor-intensive and requires significant effort to educate and integrate vendors into the new system.
Emily: Got it, got it. How does VCP impact vendor relationships, and have you noticed any changes in vendor behavior or preferences since implementing VCP?
John: Some vendors push back due to interchange costs and manual processing requirements. They may prefer ACH or direct payments for ease. However, as automation and ease of use improve, these relationships can become more streamlined and mutually beneficial.
Emily: Speaking about security and compliance, how do VCP solutions ensure security and compliance with regulatory requirements, particularly in terms of data protection and fraud prevention?
John: VCP solutions offer enhanced fraud protection through single-use cards, reducing the risk of misuse. They also eliminate the need to store sensitive information like bank details, which can be a compliance risk. This makes VCP a more secure option overall.
Emily: Can you discuss the integrations of virtual card payment systems with existing financial systems and workflows and elaborate on how scalable these solutions are to accommodate growth and changes in payment volumes?
John: Integration capabilities are robust, with APIs allowing connections to various ERPs. When set up correctly, VCP systems are very scalable, benefiting large organizations with established portals and workflows. For smaller companies, the initial setup cost can be a barrier, but overall, scalability is high as technology advances.
Emily: From a future outlook standpoint, what do you foresee as the future of emerging payment methods like VCP, and are there any emerging trends or advancements that you believe will shape the landscape?
John: I believe the future will see a shift away from checks towards more secure and efficient methods like VCP. Emerging trends include the use of cryptocurrencies for global payments, which could further revolutionize the payment landscape. Enhanced fraud protection and ease of use will drive adoption.
Emily: Based on your experience and insights, do you have any additional advice or recommendations for finance professionals considering the adoption of emerging payment methods like VCP?
John: Be aware of the implications and understand the true costs of different payment methods. Stay informed about the tools and technologies that make these processes easier. Embrace innovation and don’t get frustrated with initial challenges. The benefits of security, efficiency, and cost savings will be substantial in the long run.
Emily: Thank you so much, John, for sharing your expertise on the topic of emerging payments. The discussion was truly fruitful, and it was great having you here.
John: Thank you.
Emily: All right, thank you, John.
In today’s rapidly evolving business landscape, efficiency and cost optimization are not just goals but necessities. AI-driven Accounts Payable (AP) automation stands out as a transformative solution, driving significant improvements in financial operations, but how do you build a compelling business case for AI-driven automation? Let’s dive into the data and insights that underscore its value.
Traditionally, AP processes have been manual, time-consuming, and error-prone. According to a report by the American Productivity & Quality Center (APQC), companies that operate with manual AP processes can see processing costs as high as $10 per invoice. Furthermore, the Institute of Finance and Management (IOFM) states that manual invoice processing can take up to 8.6 days. This inefficiency not only drains resources but also hampers business scalability.
AI revolutionizes this scenario by digitizing invoices and streamlining approvals. A pivotal study by Ardent Partners found that automated AP solutions can slash invoice processing costs by up to 80%, reducing the expense to as little as $2 per invoice. Additionally, automation can cut processing times to just 3.3 days on average, enhancing operational efficiency.
Processing cost savings:
Consider the direct cost reductions from AI-driven automated invoice processing. For a business processing 1,000 invoices monthly, transitioning from a manual process costing $10 to an automated process at $2 per invoice saves $8,000 monthlytranslating to annual savings of $96,000.
Early payment discount opportunity :
AI aggregates and recommends to CFOs/Finance controllers the vendor invoices where it makes economic sense to avail early payment discounts. It is usually done by comparing the annualized discount rate with the cost of capital. In the above example considering the average invoice value to be $500, there would be a total accounts payable to be $400,000 per month. Let us take a typical case of 25% of vendor payments having an early discount payment term of 2/10 net 30. It means 2% of 25% of $400,000 = $2,000 per month can be saved translating to annual savings of $24,000.
AI frees staff from manual data entry, allowing them to focus on higher-value tasks. As highlighted above, the AP clerks have been seen processing 300-400 invoices a day as against the 30-40 invoices per day, pre-automation. This efficiency not only accelerates the payment cycle but also improves staff satisfaction and retention.
Manual processes are susceptible to human error. AP automation significantly reduces these errors, ensuring data accuracy. Compliance is another critical consideration. Automated systems maintain detailed audit trails, simplifying compliance with regulations and standards, which is a non-negotiable aspect of modern business practices.
When building your business case for AI-led AP automation, consider the following steps:
The data is clear: AI-led AP automation offers a path to significant cost savings, efficiency improvements, and enhanced financial controls. By carefully constructing a business case that highlights these benefits, supported by solid statistics and data, you can make a compelling argument for adopting AP automation in your organization.
Embracing AI-led AP automation is not just about keeping pace with technology it’s about seizing an opportunity to transform your financial operations fundamentally. The time to act is now.
Are you ready to explore how AI-led AP automation can benefit your business? Contact us for a personalized assessment and take the first step towards transforming your accounts payable process today.