Accounts payable (AP) departments play a critical role in business — ensuring the prompt processing of incoming invoices and the associated payment of suppliers. Unfortunately, while sounding simple, the AP process is incredibly complex, with different formats of invoice for each supplier, complex approval mechanisms, and frequent challenges with part-payments, missing data, and incorrect information.
For those companies still using paper invoices and manual processes to pay suppliers, it’s easy for errors and blockages to creep in, costing time and money. However, with the AP team at the heart of every business, even minor improvements in processing and efficiency can deliver significant benefits to the organisation as a whole.
The good news is that digital technology makes it easier than ever to streamline your AP activity. This blog looks at four key reasons why digitising accounts payable makes sense for every business.
Fewer Errors and Better Data Quality
If your company processes invoices manually, numerous opportunities for errors exist. Incorrectly entered invoice numbers, payment dates, or supplier numbers can all have significant ramifications such as:
- Late payment fees
- Cash flow issues
- Damaged supplier relations
- Missed early payment benefits
Digitising accounts payable can help reduce the number of data errors significantly. AP automation removes the need for manual data entry, meaning fewer errors will occur. Fewer errors lead to better data quality in the accounts payable process and throughout the business — driving increased productivity everywhere.
Manual AP processes struggle to provide adequate visibility across the overall process — even trying to locate the status of a single invoice requires you first to find who has the invoice, then identify whether it has been received, approved or paid. Scaling hundreds or thousands of invoices or where invoices arrive at different addresses or locations is incredibly challenging.
A digital AP system resolves these challenges and delivers complete visibility of any invoice, operator, supplier, or payment via intuitive and interactive dashboards. These real-time views data can also provide visibility across the whole AP department, identifying any bottlenecks in processing, staff who may not be performing well, or suppliers whose invoices regularly cause challenges. This increased visibility allows AP leaders to better control cash flow, team, and resource allocation and have a clear view of their team’s performance.
More Efficient Cashflow
The accounts payable process is often considered a necessary evil within organisations — costing the business money simply to pay suppliers. However, in many cases, bad management of AP actually ends up costing the business much more. Of course, there are late payment fines in place when you don’t pay on time, but if you are late with payments all the time, then this reflects on your business. This situation can be frustrating for you and the supplier, and it strains business relationships, which can even lead to a supplier refusing to supply goods to you.
Automated AP solutions can help remove late payment fees by reducing the time to process each invoice. Research shows that the typical time to process and invoice using manual systems is between 10 and 25 days. The average time to process an invoice using automated AP is under one day. Processing invoices this quickly not only removes the issues associated with late payments but can actually save the business money. Many businesses now reward customers who pay early with payment discounts — allowing companies to transform the accounts payable department from a cost centre to a revenue generator.
Increased Staff Engagement
The accounts payable process is challenging at the best of times. The procedure requires a very high level of detail, as even the slightest slip up can cause significant time and cost downstream. In addition, AP processors are frequently asked to solve problems and exceptions such as invoice value errors, invoices that don’t match deliveries, invoices without a purchase order, and many more nuanced and often unique issues.
This perfect storm of detail and constant firefighting in manual AP processes take a high toll on staff. The mundanity and tedium of data entry are completely at odds with the deeply analytical aspects of exception resolution. Digital AP solutions provide welcome relief by taking away most of the mundane parts of the process, in turn reducing errors and removing the need for many human-introduced exceptions. Capabilities such as automated data capture, which extracts the data directly from an invoice, checks it and identifies precisely where any inconsistencies exist allowing the humans in the loop to focus on higher-value tasks such as identifying potential early payment opportunities, streamlining the process further, and dealing with the genuine invoice exceptions. This change in emphasis, in turn, leads to greater staff engagement and satisfaction, as employees can focus on less repetitive and more mentally stimulating work with clear goals and outcomes.
The accounts payable department is the hub of any organisation. AP systems need to be accurate, efficient and easy to manage — none of which is the case if your business is still running a manual AP process. Manual systems are slow, cumbersome, error-prone and are costing you money.
Technology is evolving faster than ever before, and AP is benefiting from advances in areas such as artificial intelligence, analytics, and the cloud to drive more effective, automated systems and processes. Digital transformation within the accounts payable department removes paper and manual processes that cause more staff headaches than they solve and replaces them with streamlined solutions that automate the routine part of the process and make the most of humans in the complex areas. This reallocation of the time and effort within the AP team can make a critical difference in cutting costs, speeding up processes, and turning accounts payable from a cost into a source of savings.