After years of half-baked attempts, accounts payable departments are finally making transformation a top priority. Gone are those days when the AP department was considered a tactical back-office function where organizations thought of them as cost centers and saw no competitive advantage. Instead, the Accounts Payable (AP) department has become an integral part of any company that needs to be competitive in today’s business world. In addition, they are responsible for making sure all financial transactions go smoothly and timely to not disrupt operations or hinder growth plans by ensuring nothing falls behind schedule.
Organizations are increasingly recognizing AP’s role in providing insightful analytical information. Nowadays, many companies (42%) use AP for problem-solving such as exception handling and credit management. As AP’s business perception improves, the focus and investment the function receives are bound to increase. Enjoying a high maturity vis-a-vis other Finance & Accounting (F&A) processes, the AP function also lends itself beautifully to digital transformation. But why is there a sudden shift towards digital transformation?
In a report produced by the Aberdeen Group, the best-in-class practices in AP— including automation—can reduce the Invoice processing time by 58% over the industry average. Moreover, Electronic invoice approval can trim invoice processing costs by $5 per invoice. Similarly, Efficient AP management can eliminate late payment penalties and capture 35% more early bird discounts.
Such an expanded scope of automated AP can dramatically cut down the resources required by the accounts departments besides improving speed and accuracy. Digitizing supplier management’s entire gamut, including order processing, accounts receivable, and e-procurement can be the next logical steps. All this will improve overall business efficiency, decisively plugging in the possibility of leaks and significantly saving cash for the enterprise.
However, transforming AP is not an easy process due to the function’s existing limitations, including high processing costs, inefficiencies, lack of end-to-end visibility, and data storage and integration problems. Furthermore, making this transformation successful requires consolidating all contributing factors such as change management, governance, business process management (BPM), and agile methodology to orchestrate and accelerate the journey.
You and your organization are already at a disadvantage without catching up on accounts payable. Don’t risk falling even further behind!
Long approval cycles result in late-payment penalties and strained supplier relationships. In fact, only 4% of the businesses surveyed by the Institute of Finance and Management (IOFM) pay their invoices on time. Most accounts payable departments cannot pay more of the invoices they receive from suppliers on time because they rely on manual and semi-automated invoice processes. Automation expedites approving and posting invoices because it eliminates many time-consuming tasks associated with the approval process. Regardless of format or delivery channel, the input of invoices is digitized and combined into one platform. According to The Hackett Group, the top-performing accounts payable departments process PO-based invoices 29 percent faster than their peers and non-PO-based invoices 33 percent faster.
The time spent completing manual tasks is an overhead cost for any company and processing invoices manually is no exception. Automation eliminates the manual processes that make invoice processing one of the most expensive finance and administration functions.
When you are uncertain about the financial health of your business, you may be unable to determine where the gaps lie in your cash flow. Visible workflows and transparent processes can allow you to fully understand your organization’s cash flow and decide what changes need to be made for long-term profitability.
To be paid, your invoices must be approved by someone at the company you sold the services or goods to. However, with no reliable way of keeping track of when each invoice is in the approval process, you might not know which invoices are waiting for approval. Automated AP systems allow you to keep track of each invoice through every stage of processing. The system also sends reminders for approval and remote system access lets employees approve invoices from anywhere.
Some people pay early to get an early-payment discount to avoid late-payment penalties. However, The IOFM reports that most accounts payable departments capture less than 21 percent of all early payment discount offers. So, if automation can help you avoid late payment penalties, you can surely make your money work and avail yourself of those early payment discounts for your business.
Manual invoicing procedures can result in errors due to mis-keyed information and waste hundreds of hours because the invoice data is not validated. By validating invoice data early in the process against information in downstream systems, automating invoice processing enables users to access supporting data quickly, detect duplicate invoices, and facilitate collaboration between suppliers and internal stakeholders.
Arranging and handling invoices is a time-consuming and challenging task, especially for small-to-medium-sized organizations. AP Automation helps businesses in this area by automatically gathering and filing invoices in a database.
Manually processing invoices is labor-intensive, with extra steps such as manually keying and validating Invoice data, matching invoices with purchase orders, tracking down purchasers and physically routing or mailing the invoices for approval. Some businesses even keep original paper invoices in their accounting system and hand-stamp them as they are processed. These manual tasks consume staff time and keep them from performing high-value activities such as data analysis, managing suppliers and vendor master cleanup. E-invoicing can eliminate 80% of the manual tasks currently involved in this process, and it can make processing an invoice faster and less expensive, without error.
If some of these signs have given you food for thought, it’s a good indication that your organization is ready for AP Automation. Zycus’ AP Automation Solution reduces 60% of operational costs and enables faster invoice processing, leading to a 30% reduction in approval cycle time. Contact us now to discuss your AP transformation goals, or view our on demand demo sessions.