Can your organisation benefit from Accounts Payable Automation?
How do you know if an investment in accounts payable automation will reap sufficient rewards for your organisation?
This article outlines the variables and metrics you should consider to evaluate whether an investment in automation will yield a return.
The drivers that kick off the need for an accounts payable automation implementation may be internal or external. Whether you face pressure from the executive team to provide faster cash flow reporting or your team is at a breaking point working nights and weekends, accounts payable automation can address a number of problems that finance teams face everyday.
Problems Accounts Payable Automation can address:
Your AP team has become inefficient and you are looking for solutions that improve productivity.
Transaction volumes are increasing and your existing systems and processes won’t scale with business growth.
The executive team is expecting faster reporting and insights but your AP team is already working overtime at period end to close the books.
Your are worried about an increased risk of invoice fraud, accounting errors and duplicate payments due to the amounts of manual handling.
How much is invoice processing costing you?
To understand the potential productivity and cost savings accounts payable automation can provide, you need to determine how much you are currently spending on processing invoices. At the most basic level, you can calculate this by determining how much time you spend processing and paying each invoice and multiplying the number of minutes by the average accounts payable salary per minute.
What goes into the cost of an invoice?
Labour costs make up the majority of invoice processing costs:
Receive and open the invoice through direct mail or email
Scan the invoice or key data into multiple systems and spreadsheets
Review the invoice for accuracy, match to purchase order and get approval
Upload batch payment files to your banking system
Communicate with suppliers due to missing or incorrect information
Analyse and correct duplicate invoices, data entry errors and exceptions
Additionally, you need to factor in penalties for late payments or missed early payment discounts.
Depending on your unique business requirements, a detailed audit of how many steps and staff are involved in processing and paying an invoice may be appropriate to get an accurate picture of the true cost.
How much could your organisation save?
Let’s outline the variables that determine the tangible impact an automation solution can have:
Total number of invoices
The number one variable that determines the ROI of your accounts payable automation solution is the amount invoices you process. As a general benchmark, companies processing 1,000+ invoices per month will see the greatest impact of accounts payable automation. For high-volume invoice processing businesses, even a small percentage of efficiency improvement can have a big impact on the bottom line. Additionally, this invoice volume size indicates a level of cash flow that can gain significant cost savings from capturing early payment discounts.
When evaluating the viability of accounts payable automation, you should also consider how your invoice volumes will change in the future and if your existing systems and processes are fit for purpose to scale with growth.
Current level of digitisation and spend controls
Depending on how manual and mature your processes are right now, even automating the processing of lower volumes of invoices can deliver benefits. The more double handling you can eliminate, the more time and money you can save.
Do you receive paper or PDF invoices?
Paper invoices are the most costly so if you are starting from a highly manual, paper-based baseline, your cost savings will be significant but the implementation will entail broader organisational change. If your process is predominately based on PDF invoices, you can not only see significant cost savings but also realise them quickly.
How many invoices are associated to a purchase order?
Purchase orders (POs) provide a pre-approved record for what was ordered and if a process is already in place that attaches POs to invoices, automated processing can be implemented more effortlessly. Invoices with POs can be processed without human touch completely, therefore offering the biggest opportunity for fast automation and cost savings.
Additionally, the processing of non-PO invoices can be accelerated through custom workflows that intelligently route invoices to the correct approver.
Do you already have other automation tools in place?
The main automation use cases are scanning invoices, setting up approval workflows, automating PO matching, scheduled payments and reconciliation. Organisations that are moving from an entirely manual process to an end-to-end automation solution can expect the largest cost savings.
Depending on the number of invoices and current level of digitisation, you can expect to see an average saving of 0.5 FTE per 500 invoices / month.
Benefits beyond cost savings
Time and cost savings are not the only return of an accounts payable automation. If implemented successfully, you'll also see the following benefits:
💪 Future-proof your processes
Adding more and more staff to do manual work as your organisation grows is not scalable. Automation enables you to grow sustainably and scale up or down with business needs and seasonal demand.
⏰ Speed up month-end
With manual processing, your data will always have a time-lag. Automation can make faster reporting and analysis a reality, giving your executive team the timely insights they need.
🥇 Stay competitive
Digital transformation is here to stay and companies across all industries are modernising their back offices. Level up your finance team so you don't fall behind the competition.
🤗 Keep suppliers happy
Late payments caused by efficiencies can damage your supplier relationships. With prompt invoice processing and early payment options you become the customer everyone wants to work with.
✅ Reduce payment and accounting errors
A fully digitised process eliminates the risk of human error which is inevitable with manual data entry, spreadsheets and double-handling. Automation at every step increases confidence in the accuracy of your accounting.
👩💻 Attract and retain talent
Employees want to grow their careers through learning and being challenged. By automating repetitive tasks, your employees can focus on developing new skills and adding more value to the business.
If you are ready to start your finance automation journey, let's chat. Book a free consultation to find out how to get started.