86% of Accounting Teams Rely on Invoice Data Entry – When They Don’t Have to
October 26, 2020
Estimated reading time: 6 minutes
Is your company an SME – defined as any organization which makes between $1 million and $100 million in annual revenue? If so, you might recognize the following scenario. Your accounts payable (AP) is inefficient and paper-based, but the tools for automating AP have traditionally been designed for bigger companies. Instead, you may have patched together a series of tools, from spreadsheets to online document management systems. Some of these will tackle specific pain points, such as reducing the time staff spend on data entry.
But the benefits of a fully automated AP system go way beyond saving time on data entry. Automated AP applications and platforms offer tighter controls, streamlined approvals, strategic payments, and real-time access to transactional data. All of this allows finance professionals to make better and smarter decisions for their organization’s bottom line.
A research paper from Levvel Research, Mature Accounts Payable for the Small and Mid-Size Enterprise, has found that such tools are now available for small and medium-sized companies. Researchers have analyzed the effectiveness of various AP management strategies used by SMEs and identified some common pain points. Find out what your organization’s AP maturity level is and how you can take it to the next stage.
Is your organization an Innovator, Mainstream, or Novice?
|Innovators have a high percentage of digital invoice formats and very few paper invoices. They use cloud-based AP automation tools, such as automated approval workflows, which speed up payments and give them high visibility into spend. This advanced approach gives Innovators stronger financial reporting, reduced risk of fraud, better insights for better decisions, and a high early payment discount capture rate.|
|Mainstream organizations have a more even mix of digital and paper invoices. They might use a data capture tool to eliminate manual re-keying of invoice data or an electronic payments tool to enable faster payments and lower payment risk, but rarely have automated invoice workflow to expedite approvals. Lack of full adoption limits their access to the benefits which Innovators experience from their more comprehensive solutions.|
|Novice organizations experience high paper invoice volume while mostly using manual data entry, invoice coding, and manual routing processes. They are unlikely to use a cloud-based AP application. Novices will have poor visibility into invoice workflows, data, supplier questions and risk, and suffer from late payments and will rarely capture early payment discounts.|
According to Level Research’s market analysis, 45% of SMEs fall into the Novice category, and only 10% are Innovators. SMEs are the most likely to accept paper invoices, with 45% falling into this category – that’s compared to just 22% of large enterprise companies. And 86% of SMEs manually enter invoice information into their systems, a job which is both tedious and time-consuming for staff. That’s compared to 22% of enterprise organizations.
SMEs are also the most likely to have manual approval workflows. While 87% of enterprise organizations have an automated invoice routing process, about half of SMEs still hand-deliver paper to managers for approval, while just under a third depend upon scanning and emailing individual invoices to managers.
SMEs tend not to use cloud-based applications or platforms for AP. Instead, most SMEs that use technology opt for an ERP-based tool.
What is all this costing Novice organizations?
Being a Novice comes at a heavy price for SMEs. It takes them an average of 45 days to process an invoice, while those in the Mainstream category can do so in 23 days, and Innovators take just five days. The average cost for a Novice of processing each individual invoice is $15, while for an Innovator that is reduced to just $2.36. There are less obvious costs too, such as the effect on staff productivity, overall efficiency and accuracy. The top pain points identified by Level Research for SMEs include manual data entry and inefficient processes (79%), manual routing of invoices for approval (61%), and lost or missing invoices (48%).
$15 – the average cost for Novice organizations of processing a single invoice
$2.36 – the average cost for Innovator organizations of processing a single invoice
The outcome of this for too many SMEs is stretched resources and high-cost processes that ultimately inhibit growth. They are often stuck with systems which are not scalable when the volume of invoices rises, and disproportionately feel the effects of errors or fraudulent transactions.
How automation can help
Automating their AP process can help SMEs address these pain points. Most notably, the Levvel Research team found that 59% of SMEs saw a reduction in their paper invoice volume when they went for full adoption. Nearly half saw quicker approval of invoices, and got greater visibility into unpaid invoices. There were other benefits too, including reduced costs and increased employee productivity.
The research also showed that SMEs typically focus only on their most immediate pain points, because of their perception that their more limited resources will only go so far. However, in doing so, they remain cut off from the tools which would address the root of the problem and enable more strategic growth.
Taking the first steps towards automation
Innovators in North America are more likely to be larger organizations in the upper middle market or enterprise revenue segments. They are older and have more resources with which to invest and more technology options priced at their budget. However, your SMEs can benefit from well-executed AP efficiency too. Driving down the cost of processing invoices per employee will allow them to recoup the cost of investing in new software. Eliminating manual labor enables AP employees to process a much higher number of invoices per person. SMEs should begin their AP automation journey with a solution that allows them to immediately reduce paper invoice volume and automate data entry and invoice coding.
The second key area for SMEs to focus on is automating the approval process, which will reduce bottlenecks and give them full visibility of the entire process. An invoice workflow solution will not only provide that information on customizable dashboards but can also remind approvers of invoices waiting in their inbox, to speed things up.
Thirdly, switching to automatic, secure and strategic payments can have a big impact at a low cost. Many SMEs still use paper checks to pay suppliers or contractors, even though these are more expensive than electronic payments such as commercial cards. With this ePayment option, organizations can earn rebates from virtual credit card payments, speed up invoice payment times to improve supplier satisfaction and reduce data gaps within payments and reconciliation data. They also reduce payment fraud risk.
But how can I be sure of ROI? Follow these three tips
Resource-strapped SMEs need to be sure their investment in new business software is worth it. Follow these tips for best practice to help you ensure ROI.
- Find software which integrates tightly with your ERP system
SMEs depend heavily on their ERPs or accounting tools for AP processes. Be reassured that you do not have to abandon them – instead, opt for an automated application that integrates with your existing system. SMEs should look for AP automation providers that have relationships with some of the ERPs that are often leveraged by smaller organizations.
- Develop a strong business case for increased visibility, lower costs, and the impact of improvement on the rest of the business
Assess the current AP state and forecast what it might be after adopting the new technology. This can go a long way towards showing decision-makers what the whole organization has to gain from an automated AP system.
- Employ a provider who understands your space
A few years ago, AP automation offerings were limited, but there are many SME-tailored options on the market today. SMEs should identify solution providers that understand the needs of their size, industry, and even existing technical environment including ERPs or accounting tools.
Approve invoices and pay vendors remotely while reducing AP costs – find out how.
Data Entry is Finished. Here’s What’s Replacing it
About 86% of accounting teams enter data manually – and for 40% of them that task takes up a quarter of their workweek. Learn how AP automation can help accountants become more progressive by freeing them from the chore of keying invoices.
Completing An Audit Remotely Can Be Stressful – But There is A Solution
In a normal year, an auditor would meet staff in the office, or rely on physical records and verifications to make assessments. But with COVID-19 limiting travel, they’re now bound to phone and video calls.
If You Think Manual Work is the Biggest Challenge for AP Teams, You’re Wrong
Companies are typically taking up to four weeks or more to pay vendors – unnecessarily incurring late payment fees and breaking down supplier relations. Here are some ways that companies can use AP solutions to improve their purchase to pay (P2P) process.
Straight To Your Inbox
Stay up-to-date on top accounting and finance trends
Sign up for our newsletter and receive our latest resources, news and insights.
Learn More About Beanworks
Discover how AP automation can free your accounting team from manual data entry, delays, and paper-based processes.