A lot of that cost is wrapped up in labor, which represents more than 60 percent of the median AP department budget. Consider the amount you spend each month on staff compensation and benefits. Now think about how much of that time goes to manual data entry, pushing paper and emails around, fixing errors and mistakes, resolving invoice exceptions, and responding to supplier calls and emails.
Most AP departments handle most of the invoices they receive from suppliers, the Institute of Finance and Management (IOFM) reports. All that manual handling means that an AP department’s invoice processing costs will likely increase as it adds staff to keep up with business growth.
But labor isn’t the only factor to consider when calculating average invoice processing costs. Direct costs such as software expenses, document storage fees, and allocations for rent, utilities and building maintenance and indirect costs such as missed early payment discounts also should be considered.
Put it all together, and invoice processing is one of the most expensive finance functions.
But it doesn’t have to be this way.
AP automation can help Oracle ERP users reduce the average cost to process an invoice.
What does it cost to process an invoice?
Businesses spend more than $11 on average to process a single invoice, per PYMNTS.com.
But many businesses are spending considerably more to process their invoices.
There are three reasons for sky-high invoice processing costs:
1. Too many manual processes. Wherever there are manual processes, there will be higher costs. Most AP departments rely on human operators to collect invoices from the mail, email boxes, FTP landing sites, web portals, and other spots. Someone must then key the data from invoices, match invoices to POs and shipping docs, track down approvers, route the invoice, resolve any issues, and upload approved invoices to Oracle (e.g., rekeying data or manually uploading a file). Each manual step along the way adds considerable cost to the process.
2. Inadequate invoice processing technology. Many businesses have invested big bucks in a world-class accounting package or ERP application, like Oracle, but have given short shrift to the frontend processes that feed these systems of record. Some Oracle ERP users process invoices using antiquated technology, piecemeal solutions, or systems designed for other business applications such as procurement. As a result, AP departments experience lots of manual processes, clunky invoice routing, and data silos that contribute to higher costs.
3. Fraud and compliance issues. If you are concerned about the way your AP department operates these days, you are not along. Fear of fraud and compliance issues is the top challenge that AP leaders face as their staff works remotely. Without automation, it’s hard to maintain the visibility, tracking, and control that AP departments need to mitigate the risk of fraud and compliance issues. But a single slip-up could result in big losses or fines.
These are three of the reasons that it’s so costly for Oracle users to process supplier invoices.
How automation reduces the cost of invoice processing
Highly automated AP departments spend less than one-fourth as much to process a single invoice as their peers with little or no automation, IOFM reports. Many departments spend even less.
The fewer manual processes involved, the less money that Oracle ERP users and other AP departments can expect to spend processing invoices submitted by suppliers, IOFM notes.
Here’s six ways that AP automation drives down the average cost to process an invoice.
1. Invoice collection. Automated AP software collects invoices submitted via email, File Transfer Protocol (FTP) upload, or through a supplier portal or electronic data interchange (EDI). This means AP staff doesn’t have to waste their time logging into multiple systems to check for invoices and there is no chance of invoices being overlooked and potentially paid late. Some providers of AP automation solutions will even manage a Post Office Box on behalf of an AP department to receive and digitize any invoices submitted via snail mail.
2. Invoice data capture. Keying the data from invoices is extremely time-consuming. But paying the bills requires an AP department to know things like the supplier’s name, invoice number, invoice due date and total, and product amount and quantity. Making matters worse, resolving inevitable keying errors can takes hours or days. Automated AP software extracts the header and line-item data from any paper or electronic invoice with a high degree of accuracy. Any data that doesn’t meet pre-defined confidence levels for automated capture accuracy is reviewed by the AP automation solution provider’s subject matter experts.
3. Invoice matching. Few things consume as much of an AP pro’s day as ensuring that an invoice can be paid. AP automation solutions streamline this process by matching extracted invoice data with purchase order (PO) and proof-of-delivery information residing in the AP department’s Oracle ERP. Seamless integration between the AP system and Oracle makes it possible for matched invoices to be posted to the ERP without anyone having to lift a finger. Unmatched invoices or invoices requiring reviewing (e.g., high-dollar invoices or invoices from new suppliers) are digitally routed for approval based on pre-configured business rules.
4. Exception resolution. It can take weeks of back-and-forth emails and phone calls for an AP professional to resolve a single invoice discrepancy. AP automation systems relieve this burden by detecting missing information from invoices (e.g., PO number), and automatically sending a request to the supplier to provide information, all without AP staff intervention. By accelerating the resolution of invoice exceptions, data gets into Oracle much faster.
5. Real-time reporting. Invoices are more likely to be paid late when AP professionals don’t have visibility into the process. AP automation systems put smart insights at the fingertips of the people who need them, long before the invoice is posted to an Oracle ERP. Graphical dashboards show the status of invoices from the moment they are received, drill-down capabilities empower AP staff to uncover invoice processing trends and discover the root cause of processing delays, mobile access keeps decision-makers in-the-know while on-the-go, exports get information into Oracle and other downstream systems and processes fast, and ad hoc reporting allows AP departments to easily adapt their reporting to new needs. The visibility provided by automation also helps departments keep tabs on their performance.
6. Scalability. SaaS-based AP automation solutions enable AP departments to efficiently scale their operations to keep up with business growth, without the need to hire additional staff.
AP automation helps Oracle users significantly reduce the cost of processing supplier invoices.
What’s more, tightly integrating an end-to-end AP automation solution with a legacy Oracle ERP allows AP departments to achieve cost savings at every stage of the invoice-to-pay process.
As you can imagine, that has big implications on a finance department’s overhead.
For any AP department that wants to reduce its invoice processing costs, IPS can help!
Contact us to speak with one of our representatives about your needs or to book an online demo.