Does it cost your organization too much to process the invoices it receives from suppliers?
If so, transforming accounts payable should be among your priorities for 2020.
Manual or semi-automated processes are a big contributor to sky-high accounts payable costs:
- Mailed-in invoices must be opened
- Electronic invoices must be retrieved from a supplier portal or e-mail box
- Invoice data must be keyed and validated
- Invoices data must be matched against purchase orders and shipping receipts
- Approvers must be tracked down
- Paper invoices must be manually routed to the correct approver
- Any exceptions must be resolved through back-and-forth e-mails and phone calls
- Lost or misplaced invoices must be replaced
- Data on approved invoices must be keyed into an ERP or system of record
- Approved invoices must be filed
- Invoices must be retrieved for audits and to respond to supplier inquiries
The list of pricey manual processes goes on and on.
Making matters worse, these manual processes increase the chance of costly payment errors.
Data from the Institute of Finance and Management (IOFM) illustrates the inefficiencies of manual invoice processing. Of the 69 full-time equivalents (FTEs) employed in accounts payable departments (on average across all locations), all but one FTE keys invoice data, IOFM finds.
It’s no wonder that most accounts payable professionals spend most of their day on tedious tasks such as data entry and very little time on strategic activities such as data analysis and supplier management.
Receiving invoices electronically is no guarantee that supplier invoices can be posted directly to an ERP application with no human operator intervention. Businesses only receive 39 percent of their invoices electronically in a format that can be posted directly to an ERP application, per IOFM. As a result, many payables departments process electronic invoices in the same manner as paper ones.
How transformation reduces invoice processing costs
Accounts payable transformation eliminates the biggest contributors to high invoice processing costs.
For starters, an accounts payable transformation solution aggregates all invoices onto a single platform and extracts and validates key invoice information such as the amount and due date. This enables organizations to post more invoices directly to their ERP, without operator intervention.
Transforming accounts payable eliminates other expensive labor-intensive tasks:
- Matching invoices with purchase orders and/or shipping receipts
- Assigning general ledger codes
- Calculating amounts and sales tax
- Routing invoices for approval based on pre-defined business rules
- Determining whether a document requires exceptions handling
- Facilitating exceptions resolution without the need for back-and-forth phone calls
- Posting approved invoices directly into an ERP system
- Reviewing approved invoices for errors and duplicate payments
- Storing, indexing and retrieving invoices and data
Many of these tasks can be performed effortlessly, freeing staff to focus on value-added activities.
Based on the IOFM and Association of Information and Image Management (AIIM) benchmarks for invoice processing costs, a business that processes 5,000 invoices per month will save $55,650 per month ($64,500 versus $8,850) and $667,800 annually through accounts payable transformation.
Want to see how much your accounts payable department could save in 2020 by transforming its invoice processing?
Contact us to arrange a no-obligation consultation with one of our experts.