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As the current crisis unfolds, many businesses are looking at solutions that will help them prepare for the coming months – whether supporting remote work, ensuring business continuity, or cutting costs where possible.
In the accounting department, one area that is often inefficient and reliant on manual, paper-based activities is accounts payable. Paying invoices manually leads to high costs, late payments, errors, approval delays, and other challenges. However, accounting automation tools can help.
If you are thinking now is the time to reduce cost by automating AP, you are in good company. 41% of respondents in a 2020 EY survey said that investing in automation is a key priority given our current economy. Industries most affected by the crisis are rapidly becoming the first movers of de-risking their businesses with automation. For example Procede Software, a firm servicing the commercial trucking industry has implemented AP automation to reduce cost and help their finance team work remotely. Look for this trend to continue as finance leaders become laser focused on reducing cost, increasing efficiency, reducing risk and supporting remote work.
Manual invoice processing has high hidden costs
With 57% of businesses still using manual invoice data entry processes, it’s not surprising that this has been identified as the top AP challenge. In a traditional model, an accounting professional would be entering data for all the incoming invoices, sorting them into specific batches, matching to a PO, coding, and following up with managers for approval. With the current crisis, how is your accounting team managing these operations remotely?
Research firms such as Levvel Research have noted that the average cost to process a single invoice can be up to $15. This explains the often overheard joke in AP departments – is the cost of processing a $12 invoice more than the actual amount of the invoice. Organizations that have implemented some kind of accounts payable process improvement—namely an AP automation system—have realized significant savings of 60-80% over manual processing with an average per invoice cost coming down to $5 or less.
How does manual invoicing impact your business?
- Prone to human error: Incorrectly coded line items, manual key-in errors, employee bottlenecks—it happens to the best of us. Human errors add to the cost of manual AP invoice processing, leading to delays and extra, unnecessary time spent on reconciliation.
- Impeding communication and delays: With a manual system, communication can be slow. This tends to be even more pronounced when your workforce is functioning remotely. Invoices tend to sit on tables or inside inboxes of approval managers for days, if not weeks. Time that could have been used to work on high-value tasks, is spent hunting down approvals. In the middle of an internal or external audit, this can be highly stressful. If the invoice is going through multiple layers, there is a greater chance of it getting lost or tampered. Let’s not forget the loss of trust with vendors that comes with late payments.
- Fraud losses: Lack of efficient and automated audit solutions makes businesses vulnerable to AP fraud resulting in hefty monetary losses. The higher the degree of manual processes within your accounting department, the greater the chance of payment fraud going undetected. In 2018, organizations experienced more than $7 billion in losses due to fraud worldwide.
How to calculate your cost of processing an invoice
How much time and money are you spending with manual invoicing? Get an estimate by examining the time your team spends on each of these tasks.
- Creating requisitions
- Routing POs for approval
- Submitting to vendors
- Data entry
- Matching to invoices
- Receiving invoices
- Invoice approval routing and follow-up
- Data entry
- Filing & storage
- Creating aged payables lists
- Deciding what to pay
- Match invoices to checks
- Submit to signing authorities
- Collect documentation
- Check stuffing
- Release or mail
How does AP automation reduce costs?
- $13 less per invoice: According to Levvel Research, AP automation helps teams save $13 on average for each invoice processed. For companies processing 500 invoices per month, that is an annual savings of $78,000. Calculate your potential savings here.
- 83% reduction in data entry: With an automated solution, your team can spend time on higher value tasks instead of manual data entry.
- 100% visibility into approval channels: Beanworks allows accounting teams to look up invoice status in real-time, helping alleviate lengthy invoice processing times and late payments. Beanworks allows you to set up approval workflows and run reports on them, making it easier to track where an invoice is being held and how long it’s been there.
- Real-time access to invoices: Printed invoices provide no quick access to data, costing time and money spent filing and looking up paperwork, especially during an audit. Beanworks stores all invoices digitally, and has a global search that lets you quickly look up invoices based on any filter you type in, such as vendor, invoice number, or amount. An image of each invoice is also stored in the system and readily available. This makes internal and external auditing a lot more efficient and fast.
- 99% accuracy: Invoices are entered into the system with 99% accuracy, which helps your team reduce the scope of human error and save countless hours on reconciliation.
An automated AP process not only relieves your finance team from manual, repetitive tasks, but also allows them to keep critical AP operations running as they should in a remote setting with minimal costs.
From start to finish, an accounts payable solution is able to capture, route, code, request approval, and ensure payments get sent to the right supplier in a timely manner. The risk of errors, fraud, and late payments are mitigated and the cost to process a single invoice is significantly reduced. Learn how Beanworks can help you reduce your invoice processing costs quickly and painlessly
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