AP Automation & the Cost of Waiting
A return on investment analysis will help you to see the feasibility of AP Automation. When you know when the break-even on any investment will occur, it tends to help the decision makers to make those choices. But of course, any analysis can be shifted to aid the individual attempting to sell their product or service. But what if there is proven, hard data around an ROI analysis?
From data gathered at our User Conference every year, along with conversations of current and past clients, we know almost exactly where and how much we are able to reduce manual efforts around Accounts Payable.
Let’s break it down. What are the primary manual tasks AP clerks and managers spend most of their time doing? Generally speaking, we have found that organizations in the mid-market to enterprise level spend a lot of time on:
- Data entry
- Dispute resolution with suppliers
- Status inquiries from suppliers or internal
- Validating approval controls
Now that we have identified the primary manual areas in AP, the next questions is: If we break them up, how much time is spent in these individual manual tasks? Let’s start with the biggest time consumer: data entry. We have found that the average AP clerk spends about HALF of their time on data entry alone. E-invoicing can take that 50% and bring it to nearly 0%.
Dispute Resolution with Suppliers and Status Inquiries from Suppliers.
These two areas of effort are separate, but combined making up about 35% of the average AP person’s time. If you’re an AP Manager in a manual AP department you’ll certainly agree that vendors calling in, inquiring about invoice status, payment information, etc… is quite time consuming. Taking it a few steps further, connecting internally with purchasing to get a correct PO number or making a small change to a PO can be even more nonproductive. It seems to never end.
When you have a self-service vendor portal implemented as part of your AP Automation solution you will never need to take those calls again or have to chase down who ever issued the PO to get something done. It’s all automatic and highly controllable with Accounts Payable Automation. E-invoicing/ AP Automation even has in-portal dispute resolution. Accounts Payable departments function a lot easier when you have an Electronic Invoicing solution sitting on top of your ERP. Realistically, in regards to decreasing manual efforts, E-invoicing will improve Status Inquiries from 15% to 5% and dispute resolution from 20% to 10%.
Validating approval controls
AP Automation does the 2 and 3-way matching automatically with all kinds of bells and whistles around this functionality. Taking what was 10% of someone’s day spent matching invoices to PO’s down to less than 5%. With that in mind, visibility, control, and analytics go through the roof. This 5% remaining is because (in reality) there will always be a few exceptions to deal with.
Validating approval controls is a more variable field from AP department to AP department. That’s precisely why an integrated AP Workflow feature is so important. With this feature implemented it includes a few thousand rules already in place to make the routing of invoices completely effortless, controlled and visible. Now with electronic invoicing it also has features that allows AP to control the making of new rules! That’s right, AP has the control.
Moreover, AP doesn’t have to inquire with IT about some new workflow rule to be made for a situation that’s perhaps infrequent. They simply jump into their portal and within 15 seconds they can have a rule made. For example, every time a FedEx bill over $2,000 comes in from x suppliers in x region between x dates…those will be routed to the VP of Finance for initial or final approval. Automating workflow with Electronic Invoicing will take your team from 5% of their time to practically 0%.
Adding up the percentages, you will find that with AP Automation it automates about 80% of what the average manual AP department is spending their time on today. Now that you have the data, plug in the numbers and you can really see what “the cost of waiting” can be. The second part of the formula now is for to you to determine, whether to wait or to reap the benefits of AP automation.