Traditionally, finance and accounting teams live in a world of numbers, overseeing spend management and aiming to keep every department on budget. Basically, they do what it takes to manage the bottom line. And while they might do this extremely well, finance departments are actually capable of doing so much more. Today, they can become real business partners invested in the long-term success of the organisation and do more than manage the bottom line – they can help improve it.
There are several paths finance departments can take to accomplish this transformation, but all roads start with intelligent automation. Going after low-hanging fruit first in the form of AP automation delivers quick wins that have an immediate impact and sell the value of larger automation efforts.
Thanks to automation, finance departments are slashing invoice processing times and reducing expenses in significant ways – think tens to even hundreds of thousands of dollars per year. A strategic implementation elevates the role of AP departments from cost centres to automation powerhouses that deliver tangible results and a rapid ROI.
9 ways AP automation puts you in the black
AP teams work tirelessly to make sure payments are made on time, every time, without mistakes. But the reality is companies often lose money due to errors associated with manual invoice processing, inefficient workflows and duplicate invoices. Fortunately, these unnecessary expenses are preventable, and invoice processing is an ideal candidate for automation. Organisations that make this move can see quick wins and fast gains. Additionally, reducing the cost to process each invoice creates a tangible ROI for automation investments and creates a significant cost savings that impacts the broader organisation’s bottom line.
If you’re wondering exactly how AP automation can financially benefit organisations, take a look:
- Reduced costs per invoice: Automation lowers the average cost to process an invoice by as much as 80 percent. Specifically, the cost per invoice has the potential to decrease from $5 to less than $1. For a company that processes 5,000 invoices per month, the savings add up very quickly, generating an annual savings of $256,000. Talk about a substantial impact that’s sure to catch the eye of the C-suite.
- Faster invoice processing times: Best-in-class organisations that have adopted automation are processing invoices in less than 30 seconds, according to the 2020 Shared Services Organisation Network AP Automation Maturity Study. Comparatively, organisations that haven’t automated are reporting invoice processing times of 20 minutes or more. End-to-end AP automation has also been shown to lower the days outstanding for invoices by 50 percent. Longer processing times simply cost more, in terms of labor and hardware. For organisations with multiple sites, the costs go up even more.
- Fewer errors: Companies that properly automate can reduce costs and errors by 70-85 percent during primary invoice processing tasks, according to the SSON study. Mistakes such as duplicate invoices result in delays and have a negative impact on cash flow if payments go out in error.
- Faster invoice reconciliation: Vendor payments are one of the biggest outflows of cash for companies. Automation speeds up the reconciliation process against POs and packing slips, while reducing errors.
- Decreased number of exceptions: Exceptions can result in blocked payments. Best-in-class organisations that have leveraged AP automation benefit from invoice exception rates that are 57 percent lower than companies that aren’t automating (10.1 percent versus 23.3 percent), according to research from Ardent Partners. Fewer late payment fees and penalties: Faster invoice processing times directly translate into fewer late payment penalties. Automation also provides a mechanism for audit controls to ensure policies, procedures and regulations are enforced. This helps to prevent fraudulent payments and compliance violations that can result in fines or, worse yet, lawsuits. The avoidance of late fees and penalties is a “no brainer” way to contribute to the bottom line and prevent the company from giving money away.
- Early payment discounts: Automation enables companies to take advantage of early payment discounts and puts businesses in a better position to negotiate for additional discounts as invoices continue to be processed quickly and without error. Companies can even use automation to identify which vendors have the highest invoices and focus on them for a renegotiation of terms.
- Better supplier relationships: Suppliers get paid faster and with fewer errors, increasing the confidence vendors have in your ability to pay. Your company is viewed and trusted as a reliable organisation with a strong financial reputation among vendors and suppliers.
- Improved cash flow: With AP automation, companies know exactly which payments are due and can maximise the cash position accordingly. AP managers can identify the number of high, mid and low-value upcoming invoices for effective cash flow management and compare the forecasted cash outflow for open invoices to the expected inflow of AR funds to improve balance sheet liquidity.
- More time for higher value work: AP automation creates a much simpler process that requires fewer human resources. An improved user experience enables staff to easily track and monitor the progress of invoices in real time. Rather than spending time sending reminder letters and invoice matching, AP staff can focus on higher value tasks that improve customer and supplier relations and the overall financial strength of the company.
Get a rapid ROI with a SaaS solution
Contrary to what you might be thinking, organisations don’t have to invest huge sums of money into a technology solution to start reaping the benefits of AP automation. A software-as-a-service (SaaS) solution delivers invoice processing agility out-of-the-box for fast deployment. It works around the clock and has a lower total cost of ownership (TCO) as it doesn’t require any investment in hardware or software.
Companies can see a return on the investment in less than one year. In order to realise a rapid return, look for a system with the following features and functionality:
- Ease of use
- Integration with enterprise resource planning (ERP) systems
- Ability to capture all invoice formats (TIF, PDF, XML, EDI, etc.)
- Mobile support
- Innovative technology
- Ease of adding features as your business grows
- Competitive pricing
Forward-thinking accounting teams are taking the initiative to move beyond just managing the bottom line – they’re using intelligent automation to make significant contributions to it. The best way to get started is to look within at your own department. AP automation transforms invoice processing into a cost-cutting, time-saving machine that pads the organisation’s bottom line in more ways than one.
Zakir Ahmed, Senior Vice President & GM – Asia Pacific & Japan at Kofax