It used to be enough for a company to succeed with nothing but an innovative product and an intriguing sales pitch. In today’s increasingly competitive market, however, businesses have found that they must optimize their internal workings in order to flourish.
One sector that has shown tremendous potential for improvement is Accounts Payable. Traditionally, AP has been considered a costly, error-prone department. Being necessary, it contributes little to a company’s overall strategy and development. In recent years though, some businesses have captured a vision of their AP departments as integral players in their company’s ability to stay ahead of the game. As AP becomes increasingly efficient, organizations are able to see the positive effects on their bottom lines. Paper is one of the main culprits contributing to AP inefficiencies. Problems caused by paper are numerous and range from wasting money processing and storing paper documents to making late payments to suppliers because of slow approval. Additionally, paper documents do not provide real-time data that can be used in enterprise resource planning (ERP) systems.
Despite the variety of problems paper causes, most companies agree that the biggest challenges caused by paper invoices are the time required to process paper invoices, invoice routing for approvals, and finding lost or misplaced invoices. The effects of these problems span everything from using up valuable department resources to missing out on potential early-payment discounts. One startling illustration of these negative facts is the statistic from the Association of Information and Image Management that it costs $120 in labor to find a misplaced document. Clearly, the issues paper causes are not to be taken lightly. If you want to maximize what you get out of your AP department, it is time to begin the switch to an AP Automation system.
According to a study by the Aberdeen Group, the Best-in-Class AP performers process an invoice for one-sixth the cost of the so-called “Laggards.” The Best-in-Class group also processed their invoices in one-fourth the time of the Laggards. These companies have begun to maximize their AP departments’ potentials by freeing them from the tediousness of paper and allowing them to pursue more strategic objectives. As technology has become a more integrated part of other business processes, companies have recognized the importance of maximizing rather than expanding. It is quickly becoming a fact that companies must get the biggest “bang for their buck” out of every facet of their business.
Yet at the same time, AP departments are being asked to do more and more with the limited resources they have. In an effort to optimize the flow of cash and other resources, AP has been assigned a greater role in ERP. This has left some AP departments stretched thin, causing unnecessary errors like late payments and lost documents. E-invoicing offers fixes to most of these problems. Late payments are minimized, even eliminated, as invoices move easily through the approval process. Companies with streamlined AP departments also secure significantly more early payment discounts, with the most efficient companies being 7.4 times more likely to capture discounts than the Laggards. In order to maximize their savings, companies should try to get their suppliers on board as well. The Best-in-Class performers are 1.28 times more likely than other companies to work with their suppliers to digitize the invoicing process. The advantage of having suppliers on board is that there is no need to scan and extract data from invoices; instead, the invoice can flow through the approval process as soon as it is sent, saving both time and labor costs.
Electronic Invoicing documents leave easily-traced trails, making audits astronomically easier. These trails also make it easier to identify bottlenecks in the approval process, which management can then fix. The transparency offered by electronic invoices makes it much harder for employees to commit fraud. The real-time data provided by electronic invoices can be invaluable in making smart business decisions. An effective AP department that is running primarily on Accounts Payable Automation can shed light on how a company’s capital is used. Without this data, a company lacks the necessary insights into their cash flow, limiting their ability to make the best decisions. With so many automated AP products available, it may seem overwhelming to decide on the best solution. Companies must consider a variety of factors, such as:
- Will suppliers get on board? To maximize your ROI, you will need the cooperation of your suppliers.
- How will you submit payments for the invoices you receive? Using electronic invoicing can further increase the efficiency of your AP.
- How many invoices do you process each month? Different providers tailor their solutions to different-sized AP departments
As with all decisions, make sure that the solution you decide on can support the specific needs of your company. AP Automation can have a significant positive effect on your bottom line, but only if care is taken to implement the most appropriate solution. Virtually every organization stands to gain by implementing or improving an automated AP system. Eliminating paper can help drive a company toward success by reducing errors, improving supplier relations, increasing discounts, and enhancing visibility of cash flow. Organizations that implement these solutions will find they have an advantage over their peers in their management of resources and handling of working capital.