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There is a significant need for process improvement and automation of the manual processes within accounts payables departments across America; 41% of AP professionals are concerned about improving the process and 33% of AP professionals are concerned about automating their manual processes as per 2016 AP Key Performance Indicators Survey by IOFM.

Best-In-Class AP Operations Attributes

Efficiency, automation, and collaboration are the hallmarks of Best-in-Class accounts payable operations. These high-performing teams leverage technology like e-invoicing system and three-way matching to streamline processes and significantly reduce costs. Skilled staff utilizes automation for straight-through processing, boosting accuracy and productivity.

But it’s not just about technology; these powerhouses also foster strong relationships with suppliers and collaborate closely with internal stakeholders to ensure they’re aligned with business goals. Remember, while automation and technology are crucial for efficiency, the human touch through collaboration is what truly sets Best-in-Class AP operations apart.

Manual processing of paper invoices incurs overhead costs and leads to the creation of error-prone operational practices. However, in order to lead a successful transformation towards a highly effective and best-in-class automated accounts payable operations, one must know its attributes.

There are 6 major attributes that characterize automation initiatives and denote great results in terms of the AP operations.

1. Fast Cycle-Times

Invoice cycle-time is one of the top concerns of AP operations in one-quarter (25 %) of businesses surveyed for IOFM’s 2016 AP Key Performance Indicators Study. Be it capturing early payment discounts or making timely payments to suppliers, faster cycle-times are essential to keep the AP department in control of the situation in any given case.

An electronic invoicing solution provides automation techniques which ultimately cater towards shorter cycle-times for all the invoices – PO or non-PO invoices. These solutions not only increase invoice data accuracy, but also extract the supplier, header and the line item data from invoices at the AP’s end and match the same with the POs/ goods received – thus reducing the time lost in manual validation, error resolution and so on. Thus, electronic invoicing enables top-performers process PO-based invoices 29 percent faster and non PO-based invoices 33 percent faster than their peers, according to The Hackett Group.

2. Low Invoice Processing Costs

As per a survey done by Ardent Partners 37% of senior finance executives top priority was to reduce their invoice processing costs. Prevalence of paper invoices and manual data entry and coding are the chief reasons behind high invoice processing costs.

E-Invoicing on the other hand reduces the costs associated with day-to-day invoice processing through touchless processing features like automatic validation, 2 and 3 way matching, dynamic workflow processes and upfront visibility across the lifecycle of invoices.

3. High Staff Productivity

Removing manual intervention and paper completely from your invoice processing workflow is the key in increasing productivity of the FTEs. According to a study by The Hackett Group, top performers process 175 percent more invoices per FTE than their peers. This ability to handle and process invoices successfully comes from the workflow technology that is able to automatically extract, validate, match and approve data from invoices without any manual intervention whatsoever.

Routine manual paper handling, routing and physical storage of documents create high stress levels for the employees and the enterprise as well. Also, paper invoices can get lost somewhere along a manual invoicing process. This leads to loss of valuable time which could have been used more effectively for higher value business support and analysis.

It is interesting to know that half of all businesses that have automated AP achieved payback in nine months or less according to a research by AIIM.

4. Fewer Supplier Inquiries

Organizations that are dependent on a manual and paper-driven AP process are susceptible to inundation with supplier inquiries, rising miscommunication between suppliers and the buyer, misplacement of invoices and ultimately loss of supplier trust.

The Hackett Group’s AP benchmarks have found that self-service visibility into invoice and payment statuses via an automated invoicing process can reduce inbound supplier inquiries by about a third. Costly repercussions and altercations can be avoided by enterprises if supplier queries can be addressed in a clear, complete and in a time bound manner. In a manual workflow process, it would not be possible to find and retrieve information in a detailed and comprehensive manner.

Electronic invoicing enables organizations to automatically communicate invoice and payment statuses through a self-service portal to suppliers at any given point of time. Such a visibility into the invoicing process and the payment statuses can lead to higher supplier trust, reduce miscommunication and ward off disputes.

‘Automatic invoice status’ was cited as the driver for implementing a supplier portal for over a third of businesses surveyed by Institute of Financial Operations.

The usage of technology not only increases overall processing efficiency but also lets you monitor and track key metrics almost on a real-time basis thereby creating competitive advantages for the enterprise.

5. High Straight-Through Processing Rate

Verifying the invoice information against the PO is laborious and time consuming however it is an essential component of the AP operations as it helps in prevention of payment errors, frauds and even duplicate payments. Thus, it is quite amazing to note that according to an IOFM research, matching invoice line items with data in a PO system is the top pain point for 28% of AP departments surveyed.

Straight-through processing of invoices by automatically extracting data from invoices, automatically matching them against the PO and proof of delivery documents is made possible by an electronic invoicing and touchless processing solution. This is confirmed by a study by Ardent Partners that 82% of organizations surveyed can automatically perform two or three way matching by means of an electronic invoicing solution.

Learn More: Merlin for AP Automation Software

A portal-based e-Invoicing software solution not only makes it easy for the suppliers to submit invoices electronically but also streamlines the invoice processing for buyers. In a touchless invoice processing solution information can be validated against data sources, business rules and applications, thus eradicating duplicate payments and thereby reducing the scope for fraud and exceptions as well.

6. High Discount Capture Rate

The savings potential that can be realized from early-payment discount programs can be as high as 14 percent if all customer invoices are settled on optimum payment dates, according to a study conducted by MasterCard. The heart of the problem is that in a manual environment it is difficult to facilitate discount payments as invoices are typically approved outside the discount window.

Automation in invoice processing enables the buyer in overcoming this problem by creating an early payment discount program through an e-Invoicing solution and inviting suppliers to sign up to avail early payment opportunities. According to a finding by The Hackett Group, top performers capture seven times more early pay discounts as a percentage of spend (0.16 %) compared to their peers (0.02%). This also means that the financial controllers in these high performing companies have better ways to manage the invoice processing cycle times and the liquidity in their organization.

Automation in AP operations enables businesses to effectively and optimally manage their cash flows through accelerated invoice approval cycles and by capturing more early payment discounts.

To learn more about how Zycus can help you implement data-driven, integrated, and intelligent request management, request a demo today.

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