While most CFO’s are knowledgeable about the major costs of running an organization, they may not be aware of the day-to-day bills that must be paid. Considering CFO’s AP solutions and the volume of payments that go out regularly, it’s understandable that an organization’s higher-level executives don’t know the specific numbers when it comes to paying bills. Understanding the expenses that come with a manual accounts payable system can help many organizations see the benefit of switching to accounts payable automation.
Understanding the Costs of Paying Bills
One easy way to understand the costs associated with bill paying is to consider an individual who has a lot of credit card debt with high interest rate cards. Credit card users will pay interest over time that can greatly increase the purchase price if balances aren’t paid off each month. Just like there are expenses that are associated with using credit cards to make consumer purchases, there are also costs associated with paying bills when it comes to organizations of all sizes. CFO’s likely know these costs exist, but many aren’t aware of precisely how much money is spent on these extra costs.
Understanding Extra Costs
It’s essential for a CFO’s AP solutions that they learn the exact costs associated with their AP department if they wish to reduce those cost. While the CFO certainly has other priorities to deal with not just reducing AP costs by a marginal percent. However, it will be beneficial to understand hidden costs/fees in a manual accounts payable situations even if marginal. Hidden costs like surcharges, for example, don’t show up on invoices which is one of the main reasons that these costs are overlooked. According to an article on Forbes, extra charges from contract leakage can be up to tens or hundreds of millions of dollars annually, depending on the size of the organization.
AP Automation Decreases AP Costs
A manual accounts payable system adds costs associated with data entry, managing paper invoices, dealing with errors or exceptions, and handling customer inquiries. Electronic Invoicing helps to eliminate many of those costs. CFO’s need to know that ap automation can greatly reduce the invoice exception rate and almost eliminate invoice errors. Transforming the AP department from a manual system to an automated one allows staff to be better utilized elsewhere since the system itself does most of the work.
CFO’s AP solutions are often ignored and occupied with the larger picture. They may not feel the need to consider switching from a manual system to accounts payable automation. But once they see the hidden costs associated with a manual system and realize the benefits that go with AP automation such as dynamic discounting and e-invoicing. With this obvious benefits, it can be easier to convince CFO’s that the system needs a change. Electronic Invoicing can greatly reduce costs and make the entire organization run more efficiently.