How to address key challenges in accounts payable processing
FYI, this story is more than a year old
Traditional approaches to accounts payable (AP) are changing and the focus is shifting from seeing AP as a cost centre to recognising it as a profit centre. To manage this change, organisations need to stop viewing AP through the lens of bookkeeping and bill payment and begin to think about compliance, forecasting, extensive reporting, and working capital management, according to Upstream Solutions and ABBYY.
Upstream pre-sales manager Jai Dyer says, “Organisations need to be freed from routine work like checking invoice compliance, entering invoice data manually, checking invoices against purchase orders, or responding to vendor enquiries regarding the status of payments. Not being distracted by these manual, tedious tasks, means that organisations can focus on innovation and strategy. This includes forecasting, finding ways to leverage dynamic discounting, and optimising cash flow management.”
Manual invoice processing attracts high operational costs. This can include late payment fees or missing out on early payment discounts, as well as the high cost of the manual labour involved in managing invoices. The time spent on data keying and checking details could be better spent elsewhere. And, paper-based processes can result in delayed or lost invoices, a long invoice processing cycle, and lack of visibility and tracking.
ABBYY sales director Henry Patishman says, “The pain associated with manual invoice processing can be seen across all companies and in any industry. And, the downsides aren’t limited to the accounts department. Executives can become frustrated at the lack of accounting accuracy, high costs, lack of cash flow visibility and control, and compliance risks. The IT team may struggle with ineffective legacy technology that’s hard to manage and secure.
“The AP team is a cost centre when people spend their time on low-value tasks such as making copies and routing invoices for approval. However, with the right systems in place, it could become a profit centre.”
One of the most readily-apparent ways to do this is to automate the invoice process. On average, organisations can manually process 50 invoices per day. After automating the process, most organisations see two to four times more productivity.
Based on the IOFM and AIIM benchmarks for invoice processing costs, an accounts payable department that processes 5,000 invoices per month stands to save $55,650 per month ($64,500 per month versus $8,850 per month) and $667,800 annually through accounts payable automation.
In addition to these cost savings, Upstream Solutions and ABBYY have identified eight clear benefits of automating invoice processing:
1. Unified processing independent of form or format saves time.
2. Reduced invoice processing cycle and timely payments unlock discounts and lower labour costs.
3. Transparent invoice lifecycle delivers increased visibility and control.
4. No invoice is lost, so suppliers are always paid, improving relationships.
5. Fewer staff are involved in invoice processing, freeing them up for more strategic work.
6. Data is more accurate, leading to better business decisions.
7. Additional costs such as late payment penalties are avoided.
8. Operational efficiency is improved overall.
To automate invoice processing, organisations need to choose a purpose-built solution that is ready to use, flexible, and integrated. Accounts Payable Automation solutions can involve scanning an invoice when it arrives, extracting key data fields, applying workflow in which the purchase order number is checked and routing the invoice to the relevant approvers based on pre-determined business rules. Exceptions trigger alerts that can be dealt with manually, while the vast majority of invoices that are correct and match with an existing purchase order can be handled automatically.