Even the most efficiently run organizations can find its manpower and budget drained due to their accounts payable or AP department. It’s not that their accountants or admin personnel are the problem, it’s the faulty, error prone, manual invoice processing that so many departments still use despite incredible leaps in AP automation. Here are some of the perils of manual invoice processing versus the certitude of accounts payable automation:
1) Disregarding Hidden Costs
The hidden costs to document handling is the handling itself. Manual processing means multiple hands or multiple times a document is dealt with drags out the process. This results in late or missed invoices and lost documents. It was recently estimated that tracking down a lost document could cost up to $120. Replacing that same document may even double.
2) Avoiding Manual Document Prep
Every year, hundreds of man hours (even thousands, depending on the size of the company) are lost just in preparing documents to be processed by the AP department. Envelopes have to be opened and then the documents sent to the correct division or person. This is where businesses first begin to lose money, but with the correct data capture and AP automation can help solve this dilemma.
3) Underestimating Data Capture
Data Capture doesn’t just direct correspondence and bills, it also provides the ability to use the scanned data to generate an EIPP (electronic invoicing payment presentment) document. By turning these paper documents into E-invoices AP departments can improve inefficiencies in a short amount of time.
4) Inefficient Manual Keying of Line Item Details
Because the error rate for manual data entry is so high, many businesses don’t even try to capture past data of an organization including address and simple billing information. Not capturing enough line item details can mean invoicing will be slowed down. Documentation may go to one office rather than directly to the person responsible. Thanks to AP automation software, info is assigned to ledger codes to line-item charges that will default to an established list of vendors or match up PO data already keyed into a company’s financial database. Combined with accounting software, it can provide a ledger that is much more accurate than using manual data entry.
5) Centralized Processing Method
As companies grow, individual regions and offices begin to develop their own rules and procedures. This applies to accounts payable as easily as it does to other departments. Once this begins to happen, changes and improvements to the processes are overlooked and an organization can find itself with as many different AP methods as it has AP office managers. One centralized method ensures a “cleaner” set of books that CIOs and CFOs can easily read and manage.
6) A Paperless Solution
There’s no way to eliminate the paper trail of an invoice and management would not want to; the key is to find a way that compresses or gets rid of the lost time between actions. By adapting an accounts payable automation solution that covers an invoice from “beginning to end” will reduce the processing of invoices from weeks to potentially just a few days.
7) Cash Flow Management
When it comes right down to it, this is all about improving the processes in order to improve cash flow. The closer an AP process can get to “real-time”, the more visibility (and therefore control) a manager has over the cash flow of the organization. One of the benefits of utilizing electronic invoicing is that managers can establish priorities based on a particular customer or the amount of an invoice. Customer A will receive his invoice on the 5th of the month while Customer B receives hers on the 10th to allow for established payment patterns. Invoices for $10,000 will go out sooner than an invoice for $100.
By utilizing the latest in AP automation, organizations can avoid the perils of manual invoice processing. Finding the right accounts payable automation solution can cut their invoice costs by more than half. This means that a company can get its money back sooner and in some cases ROI can be experienced in about a year.