As an accountant or member of your company’s financial team, you understand the need for automation within accounts payable. AP is often one of the most overlooked areas of business, but as a critical process for operations, it’s invaluable to upgrade performance here by eliminating manual work while streamlining approval and payment activities.

Before automation can be put in place, though, you must convince your supervisors and the executive team that an investment will be beneficial for the organization. Here are a few essential items to remember as you make the business case for AP automation:

Highlight the problems with paper-based processes

First, it’s important to shine a light on the complications and issues with current manual AP processes. Some problems to bring up can include:

• Lost or missing invoices, and the costs associated with finding and replacing them.
• Drawn out approval processes that can cause late payments.
• Charges related to late payments, and the inability to take advantage of offered vendor discounts.
• Problems with tracking and reporting for outstanding invoices.
• Issues and costs related to human error.

Starting off in this way will help demonstrate the need for change within AP that can support less expensive and more efficient internal processes.

Preparing to make the business case for AP automation? Consider including these talking points.

Discuss the potential time savings

Once you’ve highlighted the issues stemming from current processes, it’s helpful to underscore some of the most value-driven benefits that AP automation can provide. As this blog post pointed out, time savings – specifically, the ability to considerably streamline the approval process – is one of the most attractive advantages of AP automation technology.

It’s also beneficial to support this discussion with key data points. For example, the Aberdeen Group discovered that while the typical organization sees anywhere from 500 to as many as 5,000 invoices per month, it can take up to 10 days to process these manually. What’s more, these paper-based activities come with a cost as high as $15 per invoice.

The time employees devote to manual AP processes, including the approval process specifically, could be much more usefully spent on other, more mission-critical initiatives. Driving this point home will help you provide a robust business case to supervisors and executives.

Note the impact to partner and vendor relationships

It can be advantageous to follow up by highlighting the impact that inefficient AP processes can have on the company’s relationships with its partners and vendors. As reported in this blog, one study found that 47 percent of businesses had not met contractual payment deadlines on 10 percent of their invoices. Another 16 percent of organizations are consistently late with their vendor payments, while only 5 percent of companies can say that they always pay on time.

Vendors and partners don’t appreciate late payments, particularly when deadlines are included in contractual agreements. In addition, processing invoices behind schedule can also prevent the company from taking advantage of potential service discounts that come as a perk for paying on time.

Overall, there are numerous elements that can be included in the business case for AP automation. In addition to these points, it’s also helpful to consider including data about the security and fraud prevention advantages, as well.

More often than not, accounts payable falls near the bottom of the list when it comes to business priorities. This department is typically overlooked – until something goes wrong.

In today’s enterprise landscape, however, decision-makers at large and even small organizations should take a closer look at their AP processes. Certain AP activities and legacy strategies could hold the business back, and now is the perfect opportunity to optimize.

AP: What’s the problem?

Because accounts payable activities impact internal operations as well as external partner and vendor relationships, any hang-ups or recurring challenges here could present a bigger problem than many company leaders realize.

As Deloitte pointed out, there are several common risks that come up in accounts payable:

• Extending payment cycles past the preferred period: Some organizations adopt this approach to help maximize free cash flow, but it can considerably hamper trust and relationships with vendors while causing the business to miss out on early payment discounts.
• Inability to accurately confirm deliveries against contractual obligations: This can lead to problems in resource management and heavily impact supplier relationships.
• Lack of process to prevent payment issues: Late, missed or duplicate payments can quickly become an accountant’s biggest headache. The ability to support scheduled, accurate payments is critical.
• Use of manual processes: Time-consuming, paper-based processes are still in place within many businesses, and can contribute to long approval times, inaccurate data entry and payment issues.

Automating accounts payable provides necessary transparency.

Optimizing AP: Digitize paperwork and eliminate manual

One of the first and best steps a company can take to improve its accounts payable department is adopting an automated solution that reduces or completely does away with paper-based manual processes and instead leverages a digital system.

This doesn’t just provide additional, valuable time for employees who no longer have to carry out manual data entry and other related processes – automating accounts payable also significantly reduces the chances for inaccuracies and helps shorten the approval process. Suppliers, vendors and partners receive the correct payment right on schedule, every time.

Supporting visibility

AP automation should also be coupled with robust visibility for both the internal AP team and those receiving payment. Utilizing an accessible and secure online portal is a major advantage.

“Making this data available to a number of individuals in an organization can help ensure that the accounts payable department has proper oversight, and it can help speed up the time it takes to approve invoices,” The Balance contributor Dennis Najjar wrote. “Letting suppliers access the portal enables these businesses to submit invoices and track payments as well as be made aware of any issues with supplies received or invoicing issues.”

Preventing errors and fraud

Automating AP and boosting visibility for management can also benefit efforts to eliminate fraud and mistakes that can impact payment and resources.

“Automation tools and engagement management can monitor your company’s accounts payable closely for fraud,” Due contributor William Lipovsky wrote. “They can also catch accounting errors as well.”

Optimizing AP with automation should be a top priority for today’s businesses, offering substantial value for internal staff and external partnerships.

The accounts payable process has been rated as one of the most time-consuming, resource- and paper-intensive activities within a business, according to a study from the Institute of Finance and Management. While ensuring the efficiency, accuracy and security of accounts payable is critical for today's enterprises, it's high-time to ditch the manual tasks for something that can better meet company goals.

Bringing automation to accounts payable is the ideal solution, offering time savings as well as a robust ROI. Let's examine all the ways your organization can put money back into its pockets with AP automation:

1) Lowering processing costs  

One of the main sources of savings with AP automation comes from the ability to reduce the time it takes to process vendor payments, thereby cutting down the labor costs associated with this key activity.

According to a study from the American Productivity and Quality Center, while the typical cost for processing an invoice sits around $7.75 per document, this cost can be more than 2.5 times more expensive for bottom-performing organizations, or those without adequate AP resources.

Automating key AP processes – including invoice approval and sending payment through a secure portal – eliminates a considerable amount of manual work, reducing the time and cost required to process each invoice.

Replacing manual tasks with automatic processes can lower the cost of invoice processing to as little as $2 per document, saving the average company more than $5 on every invoice document.

2) Reducing the chance for expensive errors

Limiting the amount of human interaction and manual processes in accounts payable with automation also means a reduction in invoice errors. These mistakes can quickly add up and become incredibly costly for the typical business, particularly if they aren't caught early on.

Research from Canon found that 3.6 percent of all invoices include errors. If an incorrect payment is sent to a vendor or partner, it can impact the entire relationship, not to mention the brand's reputation within the marketplace.

Inaccurate payments aren't the only errors to watch for, however – manual AP processes can also result in invoices being lost or misfiled. And as Canon pointed out, the more individuals involved in AP and the more times an invoice is handled, the chances of it being misfiled or misplaced only increase. Currently, it costs $125 to find a lost invoice. Worse still, if the document can't be located, it costs $225 on average to replace it.

AP automation significantly reduces these kinds of instances by ensuring that invoices follow the company's specific approval path, and that approvers receive automated emails during every step along the way. This type of visibility over AP processes is simply unmatched when tasks are carried out manually.

3) Supporting employees, vendors and partners

This one may be a bit more difficult to calculate, but it's also important to understand the savings that can come from providing better support for your internal AP team, as well as for your external partners and vendors.

Overall, 40 percent of AP professionals have reported being frustrated by paper invoices and long approval processes, and almost 100 percent of these individuals noted that AP automation provides the ideal solution.

To find out more about the savings AP automation can provide for your business, connect with the experts at SK Global Software today.

Digital transformation’s impact can be felt across virtually every department, from IT and human resources to asset management and finance. One area which is occasionally overlooked in this discussion, but which is prime for improvement via automation, is the accounts payable department. To see these gains, though, organizations must first understand how AP automation can deliver powerful time savings.

Expensive, inefficient and resource-intensive

As Spend Matters pointed out, the accounts payable department represents one of the top consumers of time and resources in many organizations, and much of this has to do with manual processes for invoices.

According to a 2016 study, two-thirds of companies are still using manual strategies to receive, process and make payment on their invoices. This includes receiving paper or faxed invoices, processing them by hand according to the company’s own rules for matching, validation and approval, and completing payment via check, wire transfer, or another payment network.

Research from the Aberdeen Group discovered that these efforts aren’t just time-consuming, but costly as well – in 2015, it took nearly 10 days for the average organization to process a single invoice manually, coupled with a cost of more than $15. And that’s just for one invoice – most businesses today see anywhere from 500 to 5,000 invoices in need of processing every month.

This type of AP landscape doesn’t just create risks for companies to fall behind in comparison to their competitors, but can cause internal struggles, as well.

“The outdated paper process and lack of well-designed AP technology is costing companies dearly,” Spend Matters noted. “In order for the accounts payable function to keep up with the other silos of business that have been automated or digitized by technology, CIOs and decision makers need to work to implement paperless processes and automated software into the day-to-day application of AP.”

Time-saving benefits of AP automation

Bringing automation into accounts payable processes offeres considerable advantages for enterprises, particularly in terms of time-savings. An automated solution eliminates the previous manual work that was required from AP employees, ensuring that invoices are correctly matched with work orders, validated and approved in record time.

This translates to quicker payments to vendors and customers, thereby supporting the best partnerships and experiences possible.

In addition, best-in-class automated solutions also take into account the most current regulations. Invoices are processed and paid according to overarching industry rules, ensuring security as well as compliance.

But the advantages don’t end here. One study found that automating accounts payable can also reduce the cost of invoice processes by as much as 50 percent.

“For an enterprise, the potential saving is substantial, and that’s without mentioning the number of resources that are freed up in the finance department,” SignUp Software’s Henrik Garvner for The Record.

To find out more about the time and resource savings your organization could realize with accounts payable automation, contact us at SK Global Software today.