Building a Business Case for AP Automation
The evidence in favor of switching to accounts payable automation is pretty overwhelming. As well as being faster and more efficient, automating the process of capturing invoices can save your company money at every stage. But building a business case for AP automation can be daunting; not only does it involve changing the established system, but there are significant upfront and ongoing costs involved.
Successfully convincing your company to automate its invoicing process requires a strategy that allows you to highlight the benefits, especially your return on investment. You can build this strategy by answering four basic questions.
Question #1: What is paper invoicing really costing my company?
No matter how skilled your payables department may be, any system that relies on manually inputting data from paper is slow and subject to human error. Every time a piece of paper changes hands, the opportunity to misread, misplace or misunderstand something is introduced. For a company that handles tens of thousands of invoices per month, even a small margin of error can result in huge losses- for some companies, that could mean millions.
Processing invoices electronically almost completely eliminates the potential for human error and there is no longer a need for lengthy data capture. Authorization can be done with the click of a button rather than by funneling paper from department to department. Automating your accounts payable process not only reduces error but also increases visibility and control.
Question #2: How much time could we save by eliminating manual efforts?
Once the lengthy data capture process has been eliminated, the burden on the accounts payable staff decreases dramatically. Employee hours that were once dedicated to efforts such as manual entry, routing, and filing can be used more efficiently, such as fraud prevention, audit preparation, and greater discount capture.
When building a business case for AP automation, you can highlight the time and money your department will save through redirecting their efforts. This will make information more easily accessible, as it will be stored electronically and invoices will be searchable.
Question #3: How much money are we missing out on with lost discount opportunities?
It is not uncommon for suppliers to offer discounts for early payment – after all, the sooner a supplier is paid the better their own cash flow situation will be. Unfortunately, manual invoice processing takes time, and most departments can’t process invoices fast enough to take advantage of these early-pay discount opportunities. Utlizing an automation solution allows your department to process invoices in a matter of days, rather than weeks. This is possible through the use of tools such as e-invoicing, supplier portals, PO Match/flip, and dynamic discounting.
Dynamic discounting allows your department to not only take advantage of early-pay discounts, but also to negotiate different pay terms with your suppliers. Even small discounts make a difference when multiplied by thousands of invoices, and the ability to capture those discounts consistently can save your company huge amounts of money.
Question #4: Do the benefits of implementing an AP Automation solution outweigh the cost?
Between the increase in department efficiency, a lower error rate thanks to electronic invoices, and earned discounts, along with other benefits, a company’s average cost per invoice after automating can be as low as $2 per invoice. In a large company handling tens of thousands of invoices per month, this equates to millions of dollars saved.
By reducing the potential for human error and automating the authorization process by switching to an automated accounts payable process, your department will be saving time and saving the company money. In the latest Ardent Partners State of ePayables Report, analysts have determined three key performance indicators that define the “Best-in-Class” AP departments are:
1) Percent of invoices processed “straight-through” (meaning AP didn’t have to engage with the invoice),
2) Lower invoice exception rates, and
3) Time to process a single invoice.
These same analysts have determined that these “Best-in-Class” companies have achieved these through utilizing a higher level of automation. While automating does have an upfront cost, choosing the right solution for your department can result in seeing a return on your investment within the first year. Now that’s a business case no department head can ignore.