One of the biggest benefits of accounts payable automation is its ability to save your team time.
In fact, Goldman Sachs recently estimated AP automation can drive 70-80% time-savings for small and medium-size businesses (SMBs).
But how does an automated solution cut so much time out of the invoice and payment cycle, and what does that actually means for the business?
Reduce time accessing data
Goldman Sachs also reported that AP professionals spend about 30% of their time collecting data and fielding inquiries related to invoices and payments.
That’s a massive amount of time on tasks that are purely procedural.
Fortunately, automating AP drastically cuts down the time it takes to collect and access that data. Rather than relying on rows of file cabinets, a cloud-based AP automation application stores all your invoice and payment related information in one central and secure digital repository.
In addition to improving your security through a audit trail of past transactions, ap automation solutions enable you to quickly call up invoice and payment related files in real time anywhere, anytime, so you’re not stuck sifting through folders in a single physical location.
Not only does it reduce the time it takes to answer inquiries, but if your automation partner also offers dedicated service teams alongside their software, they may field some supplier inquiries for you – allowing you to offload even more of that time-consuming task.
Not to mention, the ease of accessing all your information and pulling detailed reports in a matter of minutes means month-end and year-end close, along with internal and external audits, become a breeze.
Eliminate invoice chasing
In a paper-based system, invoices are often coming into your AP department through a mix of snail mail, email or fax and are then passed hand to hand for review.
In fact, a recent article from PYMNTS.com showed 72.4% of AP professionals receive invoices in the mail. Apparently, more than 40% are still receiving some invoices via fax!
That manual, paper-based system of invoice collection is time-consuming to start, but it can become chaotic and often lead to lost invoices that require the AP team to spend even more time chasing them down.
Automated invoice processing streamlines payables from start to finish, removing the burden of receiving and capturing invoice data from your team while providing you complete visibility to all the important information you’ll need for reconciliation.
Expedite approvals and payments
Data collection isn’t the only challenge of the manual AP system. If your AP process is paper-based, you know how challenging it can be to work through multiple levels of approvals to process a single invoice and payment. Let alone hundreds or thousands each month.
With an industry average of more than a week to process a single invoice, it’s safe to say many companies could benefit from reducing manual tasks.
AP automation brings customizable workflows, rules and restrictions that eliminate the hassle of reaching out to an approver and manually routing invoices to the next step in the process.
Actual payments can be approved and executed in just a few clicks.
So, instead of spending time chasing down approvers, manually routing invoices or printing checks and stuffing envelopes, AP staff can focus a ton of new-found time on more strategic work.
Cutting processing times can create thousands in labor-related cost savings and late fees
Time is money, and finance professionals understand that better than most.
Although the hard costs associated with processing paper payments are easy to spot – check stock, envelopes, postage, etc. – there are also soft costs to consider when assessing the true cost of invoice-to-payment processing. Most notably, the time accounts payable departments spend on menial tasks related to processing payments.
Again, in a manual accounts payable system, team members are spending hours of valuable time on tasks like copying and scanning files to archives, searching for lost or misplaced invoices, and fielding inquiry calls.
In Goldman Sachs’ breakdown, they estimated the total headcount cost associated with AP staff involved in manually processing a single invoice was $14.69 for medium-size businesses and a whopping $20.79 for small businesses. The estimates in an automated system dropped to $3.87 and $4.49, respectively.
With automation, those hours and headcount costs can be reallocated to areas that, instead, offer more opportunities for greater strategic contribution to your company’s growth and success.
In addition to the salary-related costs, lengthy processing cycles can lead to frequently late payments that often come with late fees. Simply paying on-time can even come with its own opportunity costs if you’re missing out on significant early payment discounts that many suppliers offer.
Better business payments can strengthen supplier relationships
Relationships are the foundation of business building, but poor payment practices quickly ruin them.
Studies have shown that nearly half of all businesses pay 10% of their invoices late. Almost 20% say that one out of five invoices aren’t paid on time, and only 5% say they pay on time every time.
By enabling you to track and pay invoices more efficiently, automated solutions will improve your “on-time” record with suppliers and help foster stronger relationships with them.
AP automation also provides you more payment options beyond paper checks, like ACH and virtual card. These are more secure and financially advantageous for your business while also benefiting your suppliers by accommodating their preferences. A true win-win.
AP automation may sound like the wave of the future, but it can make a tremendous impact on your business in the present.
To learn more about putting the benefits of accounts payable future of payment processing to work for you today, check out AvidXchange’s suite of automated accounts payable software solutions.