After years of false starts, accounts payable departments are making transformation a top priority.
Accounts payable departments say that standardizing invoice approval and posting and deploying new technologies are their top budgetary priorities for the next three years – topping labor-intensive approaches to process improvement such as hiring additional staff and upskilling existing personnel.
That’s according to the Institute of Finance and Management’s (IOFM) 2017 Future of AP Study.
Don’t risk falling behind your peers and putting your business at a disadvantage to its competitors.
Here are five tell-signs that it’s time to automate your accounts payable process:
1. Long invoice approval cycles.
Only 4 percent of businesses surveyed by IOFM pay all their invoices on time. Worse, 6 percent of businesses pay less than half their supplier invoices on time. Long approval cycles result in late-payment penalties, supplier inquiries regarding invoice status, strained supplier relationships and missed early payment discounts. A big reason that most accounts payable departments cannot pay more of the invoices they receive from suppliers on-time is the manual and semi-automated invoice processes on which they rely. Automation eliminates many of the time-consuming tasks associated with approving and posting invoices. Invoices from any delivery channel, and in any format, are received, digitized and aggregated into single platform. Intelligent data capture technology automatically extracts and validates supplier, header and line-item data (such as amounts) from invoices that are received as paper or electronically. Invoices then are matched with purchase orders. Invoices that require approval or exceptions handling are digitally routed based on pre-configured business workflows, with no chance of invoices becoming lost, misfiled or “stuck” on the desk of an approver who is out of the office. Top-performing accounts payable departments process PO-based invoices 29 percent faster than their peers, and non-PO-based invoices 33 percent faster than their peers, The Hackett Group says.
2. High invoice processing costs.
Manual tasks drive up the cost of any task, and processing invoices is no exception. Automation eliminates the manual processes that make accounts payable processing one of the most expensive finance and administration functions, including keying, matching invoices with purchase orders, tracking down purchasers, routing invoices for approval, making back-and-forth phone calls and e-mails to resolve exceptions, filing and retrieving invoices, preparing reports and gathering information for auditors. That’s why accounts payable departments with a high level of automation spend less than one-fourth as much as their peers with little or no automation to process a single invoice, per IOFM.
3. Too many duplicate invoices/payments.
Thirty-nine percent of businesses report that duplicate payments and over-payments represent more than 1 percent of their payments. A good rule of thumb is that a duplicate payment rate over 0.5 percent indicates weak controls, or that the master vendor file needs a good weeding out, per IOFM’s AP Department Benchmark and Analysis. Manual invoice processes increase the chance of errors because of mis-keyed information, and no validation of invoices or invoice data. Automation improves accuracy by validating invoice data early in the process against information in downstream systems, providing fast online access to supporting data, detecting duplicate invoices, facilitating collaboration between suppliers and internal stakeholders and identifying problem suppliers.
4. Low staff productivity.
Manually processing invoices is labor-intensive work. Invoice data must be manually keyed and validated, invoices must be matched with purchase orders, purchasers must be tracked down, invoices must be physically routed or mailed for approval, purchasers often have to be reminded to approve invoices, exceptions require back-and-forth e-mails and phone calls, invoice data must be keyed into an ERP platform, invoices must be filed, and invoices must be reconciled with payments. Some businesses even hand stamp or photocopy invoices as they are processed. All these manual tasks consume staff time and keep them from high-value activities such as data analysis, supplier management and vendor master cleanup. Automation eliminates many of these manual tasks. Accounts payable departments with a high level of automation process more than 11 times as many invoices per full-time equivalent (FTE) as their peers with little or no automation, per IOFM.
5. Missed early payment discounts.
Most accounts payable departments capture less than 21 percent of all early payment discount offers, IOFM reports. The root of the problem at most businesses is that it takes so long to approve an invoice that the window has slammed shut on any meaningful early payment discount. Don’t leave money on the table. Automation speeds invoice approval and exceptions workflows. Businesses that take advantage of just a discount term of 1/10 net 30 earn an annualized 18 percent return. IOFM’s AP Department Benchmarking & Analysis finds that moving to higher levels of automation clears the way for businesses to pay more of the supplier invoices they receive within the discount period.
Is your accounts payable department experiencing any of these issues?
If so, IPS can help with Productivity Wrx℠, an advanced accounts payable automation solution, delivered as a service.
Contact IPS today to arrange a free, no-obligation consultation with one of our automation experts!