Automate AP Processes & Fix These 4 Problems
AP automation speeds up invoice processing and allows companies to handle a higher volume of documents than would otherwise be possible. But beyond speed and volume improvements, accounts payable automation also provides benefits in other areas that positively impact a business’ bottom line.
If your AP department is struggling due to problems like high processing costs, too much human error, and sluggish approval times, read on to see how AP automation could save you time, money, and headaches.
1. High Invoice Processing Costs
The amount of money that AP automation can save your business really can’t be overstated. Mid-sized businesses that use paper-based invoices spend on average $10 to process a single paper invoice. Small businesses spend even more, with costs reaching as high as $15 per invoice.
The single largest cost to any business is staffing, so automating rote tasks required of your accounting staff will lower the cost of processing invoices. This is because with a manual AP process, paper invoices must be opened, sorted, and routed by hand and manually reviewed, approved, validated, and processed. With AP automation, each of these steps is automated.
A smart workflow automation solution can help businesses’ of any size cut down costs significantly. A study by Levvel (formerly PayStream Advisors) showed that companies could lower costs to $6.70 per invoice—or eventually as low as $2.36, depending on the maturity of their automation solution. This is because with automation, the majority of invoices can move through processing automatically, leaving AP staff free to focus their attention on value-added services and exception handling.
2. Long Invoice Processing Time
In addition to being expensive, processing paper invoices takes a significant amount of time, anywhere from 20 to 45 days between invoice receipt to approval. Tack on mailing time and time spent tracking down lost or misplaced invoices and you can say goodbye to early payment discounts.
Think of it this way: an invoice can easily sit for days on an employee’s desk before being noticed or handled. It can get lost in an exchange of emails, significantly delaying approval time. Common scenarios like these increase invoice processing costs even more and put your business at risk of making late payments and having to pay late payment fees.
Manual invoice processing also slows down approval processes because invoices must physically move between approvers. Not only do these transfers between approvers take time due to schedule mismatches, but transporting invoices also requires that an employee serve as courier when that employee’s time could be better spent elsewhere.
Not to mention that when an invoice is lost or misplaced along the way, the process must be started over from the beginning, wasting time and money—according to PriceWaterhouseCoopers, the average company spends $120 in labor to find a misfiled document and $220 to reproduce a lost document—and increasing the likelihood for duplicate billing.
But with AP automation, 62 percent of companies approve invoices more quickly, going from 20-45 days on average to as few as 5 days, according to Levvel. allowing them to take advantage of early payment discounts, and eliminate the risk of souring supplier relationships due to late payments. In fact, businesses can nearly double their processing speeds when they switch to an automated accounts payable process.
3. No Visibility into Accounts Payable or Cash Flow
A paper-based system doesn’t allow you to easily monitor the ins and outs of your accounts payable. Knowing where a given invoice is at a specific moment in the approval process becomes nearly impossible without playing phone and email tag with administrative staff.
The lack of accounts payable visibility also means you have limited purview over the company’s overall financial operations, making reporting a difficult task. On the other hand, according to Levvel, of the companies that adopt AP automation, 40 percent report improved visibility into their unpaid invoices and liabilities. This means they have better control over cash flow and cash management, making it simpler to identify gaps and business opportunities. They are also better able to evaluate internal processes, make quick adjustments to increase productivity, and measure the department’s overall efficiency.
4. Regulatory Compliance Issues
In the digital era, it’s extremely difficult to maintain compliance with taxation and legal standards without implementing automated AP processes. With manual invoice processing, staff must enter and verify financial data into your AP system by hand, which is both time-consuming and can significantly increase the number of data entry errors, resulting in unreliable data.
In addition, working with paper invoices makes audits more challenging. It is difficult for auditors to verify which paper documents have been reviewed and approved by which team members, and paper is very easy to misplace or damage. Lost documents, damaged documents, and documents with review and approval steps that cannot be verified negatively impact the audit and can result in fines and other negative consequences.
AP automation software eliminates incorrect data, untracked documents, manual errors, lost documents, and the risk of failing an audit. With AP automation, access, approvals, changes, and sharing of invoices are automatically logged, and financial data is kept secure thanks to custom access restrictions that you set.
Reduce Unnecessary Issues with AP Automation
Companies that rely on manual accounts payable processes are spending too much money, wasting too much time and effort, and opening themselves up to unnecessary risk. Each of these concerns takes a significant toll on a company’s health and well-being. Luckily, it’s easy to close these gaps by adopting AP automation. There’s simply no better way for a business to keep up with new standards, improve its bottom line, and create a solid foundation for scaling processing in the future.