The Return on Investment You Can Expect from AP Automation

One oft-cited objection to taking the plunge with AP automation is cost. This is a legitimate consideration. Like the revamping of other systems within a business, going from paper invoicing to automated requires an upfront investment.

And yet, like other investments, the consideration should include return on your investment. Put another way, one must take into account not only what AP automation will cost up front but what it will cost your company over time not to automate.

Let’s first take a look at the ways in which switching from paper invoicing to high-level E-invoicing will pay for itself. Then, we’ll look at some numbers that prove its effectiveness.

No More Wasted Labor – We all know that wasted labor means wasted hours, which leads to wasted money. Forcing staff to do something inefficiently cuts into other, more efficient things they can be doing. It also means a bigger payroll. The difference between paper invoice processing and AP automation is startling. Processing takes days, not weeks, as the steps and the hours to perform them are cut enormously.

Faster Processing = Money Saved – Aside from reducing labor, this happens in two ways. First, you can say goodbye to all those late fees caused by paper-chasing and human error.  Second, you now have the leverage to ask for early pay discounts. Many vendors will consider a 2-3% discount, or whatever you negotiate, because earlier payment means better cashflow for them.

Better Credit with Vendors – Some purchases from outside vendors are made on credit with time payments. A vendor who regularly gets paid on time, even early, will be much more amenable to extending such terms.

Fraud Reduction – Every year, companies of all sizes report staggering losses through fraud, and not just from outside sources. Paper in the form of invoices, checks, purchase orders, ledgers, and the like invite theft by company personnel. Sophisticated AP automation is designed to make it far more difficult to get away with fraud, and to stop it early when it does happen.

So, here’s the bottom line: high-level accounts payable automation should pay for itself within two or three years. How? Look at these numbers:

Through efficiency alone, high-level automation customers have reported average processing costs of less than $3 per invoice compared to around $7.75 per invoice on average among all AP departments industrywide. Not surprisingly, these customers also averaged a 64% reduction in labor.

In a recent iPayables survey, its clients averaged savings of nearly $50,000 a month through discount captures, thanks to faster processing. One reported savings exceeding $115,000. In fact, through dynamic discounting and reduction in labor hours, some iPayables clients were able to transform their AP department from a cost center to a profit center. Imagine that! Once your investment is recaptured, the gains keep on coming. Not just financially but in so many other ways not even mentioned here.

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