Automating the International AP Payment Process – What’s the Payoff?

The globalization of the legal market is still growing, as law firms of all sizes continue to follow their clients and tap into the potential that cross-border markets offer for expansion. However, AP professionals in firms venturing into international opportunities, who also face cost control challenges, will soon discover that making foreign payments involves significant risks and more work compared to domestic payments; increasing operating costs and demands on staff time.  And, those professionals still relying on a paper-based AP process will need to understand—and minimize—the risks of operating in a global market.

Risks and Challenges of Operating Globally

Law firms establishing a presence in other countries will find that international markets represent a new financial backdrop, one which holds real challenges for the back office accounts payable team. While globalization brings new opportunities to expand a firm’s service to its legal clients, it also impacts internal resources that may already have too many projects and too little time. These challenges are outlined below.

Foreign Exchange

What many firms fail to realize is that currency risk and unpredictability are embedded in every cross-border payment. Foreign exchange fluctuations, arising from the volatility in the currency markets, can be significant when you’re suddenly moving money from one country to another and between currencies. Doing business internationally means either finding the most favorable exchange rates or risking loss, an effort that is both time-consuming and challenging. The foreign exchange (FX) market, accessible 24 hours a day, five days a week and spanning multiple time zones, exposes you continually to the FX market’s currency fluctuations and changes. In addition, many cross-border suppliers pad their prices, or shorten their payment terms, to reduce the risk of their currency depreciating against the dollar. To mitigate the likelihood of loss, you have a couple of options. You can:

  • Monitor the changes manually. Depending on the transaction volume, this may not be a workable solution. The amount of effort required to keep current on rate changes is significant, resulting in new demands on AP staff time and costs. AP departments are not usually equipped to deal with the workings of foreign exchange and international payments, which impinges on the time and personnel necessary to maintain core departmental functions.
  • Develop a foreign exchange management strategy. Typically, this would involve identifying and analyzing the risk and coming up with ways to minimize it. A typical initiative for developing a strategy should include the following steps:
    • Identify your risks and analyze the impact of rate fluctuations on cash flow based on transaction exposure (by tracking rate fluctuations and their impact on payments or receipts)
    • Measure exposure at both the parent firm and the cross-border office locations
    • Establish your risk tolerances and limits
  • If warranted, identify alternatives to mitigate exposure through automation.


Payments to vendors, entities, or individuals not in the United States are governed by compliance requirements and various regulatory agencies, including Homeland Security, the IRS, and the Office of Foreign Asset Control. According to a Gatepoint Research study published in March 2015, 66% of companies surveyed admitted that they do not, or are not sure if they screen payees in accordance with anti-terrorism, money-laundering, and drug-trafficking requirements. Added to the burden of finding the most favorable exchange rates for your international transactions, ensuring compliance further erodes employee time, takes resources away from essential department functions, and drives costs up.

AP departments typically face operational challenges without the added weight of international payment processing. Often, the AP business process is paper-intensive and complicated, with workflows that are clumsy and hard to track. Maintaining accurate paper trails, tracking down critical documents, and handling exceptions all consume time and resources, slow down processing, and increase the risk of errors, which can affect your ability to project and manage cash outflow accurately. Expanding internationally is a good time to stop and evaluate the current AP business process for ways to make it more efficient, less people-and-paper bound, and less costly.

What’s the Solution?

If your analysis of the costs and risks of international AP processing warrant investigating alternatives, there are several approaches you can take to mitigate the risk. Many cross-border firms have turned to automating with AP business process management software and international payment providers. The Gatepoint Research study (March 2015) cited earlier showed that firms with a payment automation solution in place realized significantly higher levels of satisfaction across every area of the payment management operation. The right automation solution can improve AP workflow, help AP departments handle international and domestic payments more efficiently, and reduce operational costs and risks.

The market offers several options to address the AP business process and workflow automation – options that include features like integration with your financial management or ERP systems, “touchless” processing direct from your supplier, document recognition and scanning, e-invoicing, and approval routing and notification via desktop, tablet, or mobile devices. 

You can select full-service automation solutions in a variety of forms: by implementing an in-house financial or ERP software system, by working with an outsource partner for AP and integrated online international payments processing, or through an arrangement with a Software-as-a-Service (SAAS) provider. Some firms have adopted an integrated approach with a workflow-driven financial or ERP system and an online international payments provider. Whatever your approach, the result should be an end-to-end solution with a single workflow that processes the invoice from initial request to payment, and sorts, extracts, and stores multiple fields in your firm’s internal data repositories as needed.

The Payoff

AP automation, combined with an online international payments provider, has many benefits for the law firm doing business internationally. You’ll realize improvements in the control and visibility of the entire payment process, and you will see faster, more accurate payments, transparency into all transactions and their cost and status, single-entry data that is integrated at all common points, and increased capture rates for early payment discounts and favorable currency conversions.  For your international payments, you’ll know exactly when they are executed, at what price, and how they are transmitted, eliminating fluctuations in the final cost to your firm and improving your ability to forecast your financial position accurately. Other benefits include:

  • Reduced labor and processing costs
  • Better cost management
  • Reduction in errors, duplicates, and time to correct
  • Reduction in paper and storage requirements

An Aberdeen study, “From the Shadows to the Forefront: AP Automation and the Strategic Vision,” in October 2013, shows that Best-in-Class adopters of AP automation technology were able to process invoices at 17% of the cost of Laggards (bottom 30 of survey respondents). In addition, they were 7.4 times as likely to capture early payment discounts, an incremental savings that contributes directly to cash flow. As the life line of cash flow, superior performance in the payables (A/R and AP) business process has a clear impact on the firm’s bottom line. For firms looking to minimize the impact of going global, and at the same time, enhance financial forecasting integrity and attain their strategic goals, payables is one of the best places to start.


Global Exchange

Global Exchange is a foreign exchange and international payment solutions company offering law firms the ability to execute their foreign payables while simultaneously integrating cost recovery data into Elite and ProLaw solutions. Click here for more information.

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