If your accounts payable department is still relying on traditional methods and manual processes, they will know how frustrating and tedious it can be. But there is a better way.
Accounts payable automation will free up time the AP department has been spending on manual tasks, eliminate the clutter for their work day and give them better strategic insights to help move the company forward. Automation will change the way your accounts payable department is perceived by peers and vendors alike.
So why specifically should you and your accounts payable department be excited about automation?
IOFM’s report, Is Your AP Performance Top Tier?, provides a look into what accounts payable departments can expect to achieve through automation:
The use of automation eliminates the time consuming, manual tasks related to processing supplier invoices. Invoices in any format, from any vendor channel can be received, digitized & standardized, and collected into a single platform.
Header and line-item data can be automatically extracted from invoices, which are then matched with purchase orders and receipts. Invoices that require approvals or exceptions handling can be digitally routed based on defined business rules and workflows, eliminating the chance that invoices get lost.
Keeping track and being able to pay invoice on time eliminates late-payment penalties, reduces supplier inquiries, improves supplier relations, and gives better visibility into cash and spending.
According to IOFM’s AP department Benchmarking & Analysis report, 87 percent of businesses surveyed receive invoices that offer discounts on the invoice due amount in exchange for early payment.
Top performers capture 7 times more early-payment discounts as a percentage of spend as their peers, according to The Hackett Group. So, this means that a company that previously captured $100,000 annually in early-payment discounts stands to gain $700,000 a year in additional early-payment discounts through automation.
According to IOFM, highly automated AP departments process 14 times as many invoices per FTE each month as their peers with no automation.
Automation eliminates many of the manual tasks associated with processing invoices, as it extracts and validates invoice data, matches invoices with purchase orders and receipts, and posts approved invoices directly into any ERP system.
For invoices that require review, approval or exceptions resolutions are digitally routed to specific users based on predefined rules. Dashboards are also set up to alert managers of bottlenecks and reminders for users of invoices approaching their due-date.
Automated AP departments spend less than 1/4th ($5 vs $20 per invoice) as much as their peers who do not use automation, according to IOFM. They also found that AP departments that processes 5000 invoices per month stands to save $55,650 per month and $667,800 annually with automated invoice processing.
This is because automated invoice processing eliminates manual processes that drive up the cost of processing invoices. Challenges like manual data entry, invoice matching, tracking down purchasers, physical routing invoices for approval, manual phone calls, searching for lost invoices, setting up payments, resolving payment issues, preparing reports etc. all add up to time wasted and extra costs.
According to IOFM, matching invoice line times with data in a PO system is the highest pain point for 28 percent of survey respondents.
This huge pain point is eliminated through automation by automatically capturing invoice data, checking for duplicates, validating supplier info, and calculating line-item data on invoices.
Extracted data is then automatically matched with POs and info can be validated against data sources such as an ERP system. Any unmatched invoices are then electronically routed to a queue for review and correction or routed to approvers based on predefined workflows.
Industry standard is that a duplicate payment rate over 0.5 percent shows weak controls, or the master vendor file needs to be cleaned. Top performers have a duplicate payment rate of less than 1 percent.
IOFM found that 39 percent of business reported duplicate payments and over payments represented more than 1 percent of their payments.
By automating accounts payable processing, it will eliminate these duplicate errors by validating invoice data early in the process, eliminate manual human errors, flag duplicate invoices, facilitate better collaboration between suppliers, and use analytics to review problem suppliers.