Sixty-two percent of businesses reduced expenses because of the economic volatility caused by the pandemic, the Institute of Finance and Management (IOFM) reports.
Accounts payable (AP) is a prime target for cost reduction.
Manual, paper-based invoice processes cost too much, take too long, and create too many errors.
Highly automated AP departments spend less than one-fourth as much to process a single invoice compared to their peers with little or no automation, IOFM benchmarking data finds. Similarly, paper check payments to suppliers cost 30 times as much as electronic payment methods.
And highly automated AP departments process eight times as many supplier invoices per full-time equivalent (FTE) as their less-automated peers – and even more when invoices are tied to POs.
The Cost-Saving Benefits of AP Automation
These are six ways that AP automation solutions reduce costs and improve efficiency.
1. Invoice receipt: AP automation solutions aggregate all paper and electronic invoices (including those sent via snail mail, e-mail, fax, portal, or File Transfer Protocol upload) onto a single platform, centralizing the process and making it a hands-off experience. Invoices are digitized, sorted, and coded. Data validations are applied in real-time and AP staff are instantly alerted to any errors or duplicate invoices, reducing the chances of over-payment. Invoices that match a PO are posted directly to an ERP. And recurring invoices are matched against a template or contract and any discrepancies are flagged for operator review.
2. Approval workflow: AP automation solutions optimize approval and exceptions workflows. Once an invoice is captured and validated, it is automatically routed to the person responsible for approving the payment, based on pre-defined business rules. Invoices can be approved from any device, at any time, from any location. Automating approval routing eliminates the chances of invoices becoming misplaced or “stuck” on an approver’s desk. Purchasers are notified of invoices awaiting their approval and users are reminded of pending due dates, reducing the possibility of late payment penalties or missed discounts. Some solutions also enable invoices to be paid automatically once they have been validated by the platform.
3. Data extraction: AP automation eliminates the tedious, time-consuming, and error-prone task of inputting data from invoices. Optical character recognition (OCR) technology and other technologies and processes extract invoice header and line-item data, according to pre-set business rules, as invoices are electronically received. Invoice number, invoice amount, invoice due-date, remittance address, supplier name, product amount, and product quantity are some of the data fields that can be automatically captured by an invoice processing solution. Captured data is then synchronized with systems across the finance department.
4. Data verification: Line-item data, general ledger codes, terms, amounts and other information captured from invoices is automatically verified against data residing in legacy systems, per pre-defined business rules. Any discrepancies are flagged for exceptions resolution.
5. Supplier payment: Keeping track of the payment due dates of invoices can burden accounts payable staff. End-to-end AP processing solutions enable users to effortlessly schedule payment on approved invoices to be made on or before their deadline. Users can choose which electronic payment method to use for an approved invoice (including virtual card and Automated Clearing House transactions), from a centralized location. The end-to-end AP processing solution ensures that payments are made accurately, on-time, every time.
6. Reporting/BI: The data captured by AP automation software is housed in a central location and instantly accessible by authorized users from any location, using any device, at any time. AP automation provides richer data – all the line items from invoices are captured. But the technology takes reporting to the next level with sophisticated business intelligence and real-time visibility that enables users to easily analyze any trends in cash flow or spend, based on the data captured from invoices. Users can track monthly and annual cost and consumption relative to their budget and estimated projections. Data can be filtered by category, supplier, time-period and geographic location and exported to downstream processes or applications.
These capabilities help businesses reduce costs and eliminate wasteful spending.
That’s exactly what AP departments need at a time like this.
Is your AP department looking for ways to reduce overhead and improve efficiency?
If so, IPS wants to speak with you. Contact us to arrange a consultation with one of our solutions experts.