People talk about cost reduction in payables automation, electronic invoicing, cloud invoicing, Electronic Invoice Presentment and Payment (EIPP), but where do the savings really come from? I thought it relevant to show where real companies have reduced costs, to show what parts of that payables automation solution are going to have the most impact.

To understand the impact of payables automation, we need a before and after picture. If we create a generic payables department processing 10,000 invoices per month, we would expect to see about 12 people in that payables department (1 manager, 1 supervisor, 10 clerks). If our fictional clerks process more than 1,000 invoices per month, then their pretty efficient or have very simple processes. If they process less than 1,000 invoices per month, they are probably not as efficient or have some complex processes.

Those typical clerks would be involved with opening of mail (invoices), organizing into batches, coding, distributing for approval, purchase order matching, dispute resolution, data entry, filing and responding to queries from both suppliers and buyers from your organization. There are other items such as vendor management and check printing, but most of their time and effort is spent on the previous items.

Before the payables automation solutions of today, imaging and EDI could relieve some of their efforts. Imaging reduced the need for archive and filing, but by itself, it couldn’t do much for the other tasks the clerks were performing. EDI eliminated much of the upfront paper processing, but because most systems had limited controls (either treating EDI as approved, or in more complex systems matching to a purchase order), buyer organizations could not process all invoices via EDI. These tools help with certain invoices or with certain tasks, but overall their impact is very limited.

The main advantage to payables automation.