Why are so many businesses still burning cash every day by neglecting to automate one of the most important parts of their infrastructure – the payment system?
Core business elements from the production line to the customer service desk are all being automated to improve efficiency, increase margins and positively impact the bottom line. Yet, half of businesses today still use cumbersome manual processes for accounts payable (AP) and accounts receivable (AR) processes.
Those businesses are leaving money on the table. So, what’s the hold up; where do the problems within these manual processes lie and what can really be achieved by deploying a process automated solution?
In part one of this two-part series, we’ll look at how an automated solution can improve AP for such organizations, helping to reduce business costs, decrease process cycle times, enhance process visibility and, ultimately, improve cash management.
Accounts Payable – Too Many Files, Too Little Time
Accounts payable processes handle a large variety of documentation in a variety of formats. While most think of AP documentation as strictly invoices, it also includes other associated documentation such as contracts, purchase orders and receiving reports; all of which may be received in different locations and format types (paper and/or electronic). What’s more, invoices that are not associated with a purchase order may have a whole new set of documents that need to be identified and associated with the invoice.
All of these documents need to be found, captured, archived and linked to the transaction, and then managed for access and workflow processes. The median time to process a single invoice is seven days, with each payment costing $8 to process. So, if an organization processes 10,000 or more invoices per month, imagine the time, resources and costs that would take with manual procedures and paper-based documents. That would certainly add up fast, especially as 83 percent of invoices still rely on paper. And, with so many steps and documents involved, it’s all too common for documents to go missing and manual errors to occur, causing further delays in processing time.
With these high procedure costs, long AP cycle times and increased risk for human error, it’s amazing that 50 percent of organizations have yet to adopt an automated AP system – not to mention that one third of those receiving more than 25,000 invoices per month, still use paper-based processes. Without automated AP processes, businesses of all sizes lose money and possibly hurt their reputation.
How AP Automation Can Help
Moving to paperless AP processes not only achieves rapid and substantial cost savings, but also significant cash management benefits, increased process visibility and faster AP approval loops. Taking these benefits into account, 50 percent of organizations that moved to an automated AP solution reported a software cost payback period of nine months or less, and 22 percent reported payback in as little as 6 months. Moreover, invoice processing cost reductions averaged close to 30 percent, or $300K for $10 per invoice, and nearly a third reported savings of 50 percent or more.
While already significant, these automation benefits for AP processes are enhanced even further when they’re combined with a robust, fit-for-purpose content management system that can aggregate and integrate content regardless of location, type or size; identify errors prior to processing; and work with a variety of workflow solutions.
90 Percent More Time with AP Automation
To put these benefits in perspective, at a consistently top-10 ranked U.S. university, the AP department was processing 80,000 paper invoices per month manually. After implementing a fit-for-purpose content management system with an automated AP processing software solution, the university was able to make invoicing information available electronically through its existing SAP ERP Financials system – which is used by 4,000 people across the university – both during the payment cycle and on-demand.
This saved its financial community significant time and effort while making the most out of existing investments, supporting compliance requirements, reducing costs and shortening AP cycle times. After the automated system was implemented, it reduced the university’s 10-day invoice backlog to just one day, gaining 90 percent more time back while offering transparency into invoice management, reduced printing and storage costs and a repository of invoice records for regulatory compliance – none of which could’ve been achieved with its previous system or manual processes.
Streamlining Cash Flows
Countless businesses are losing customers, time and money due to slow and inaccurate payment procedures. But, by moving away from paper-based and manual processes for AP, companies can achieve substantial time, resource and cost savings with more streamlined payment processes.
Check back for part two to find out more about the challenges of AR and how, like AP process automation, AR can equally benefit.