Accounts Payable is a crucial arm of any successful organization. Managing outgoing expenses and vendor and supplier partnerships is not an easy task, and without an effective process in place things can slip through the cracks.
The way the industry is moving, it’s no longer a question of if your organization will automate, it’s a question of when and how. To further understand the necessity of automating accounts payable, we’ll look at the technical definition, specific use cases, and how you can implement AP automation.
Defining AP Automation
In technical terms, Accounts Payable automation (AP Automation) refers to the technology used to streamline and automate accounts payable processes, removing manual tasks and providing better visibility and control over important financial data.
AP Automation isn’t just a piece of software you install on your computer, it’s a set of connected tools that work as one unified solution to simplify your organization’s processes.
These tools can include:
- Document management
- Intelligent Data Capture
- Integration with your ERP
- And others to create a seamless holistic system
Using manual methods, the average invoice takes two weeks to process and requires approval from two to five people before it is fully processed. If your organization is processing hundreds of invoices monthly, relying on manual payment processing is simply inefficient. In a study on AP automation by the Ardent Group, best in class companies process invoices in less than 4 days while others can take over 13 days to process them.
By implementing AP Automation, your organization can:
- Decrease invoice processing costs
- Decrease invoice processing time
- Capture more early payment discounts
- Avoid late payment penalties and interest
- Improve visibility over cash flow and liabilities
Cost-Driven Reasons to Automate AP
Manually processing an invoice tends to vary in cost. Some organizations with relatively streamlined processes may pay as low as $15 per invoice, while others may pay upwards of $40 per invoice. This accounts for labor, software systems, outsourcing, overhead costs, and other miscellaneous expenses. Unfortunately with manual processing comes human error. With each error made, your organization is faced with overpayments, duplicate payments, unused credit notes, and unclaimed discounts which ultimately drives costs up as well. Just a few mistakes over time can quickly cost your organization thousands of dollars.
With automation, the cost can be reduced to as low as $2 per invoice. AP Automation moves invoices along quicker than employees, and it eliminates the error associated with manual data entry (or any mishaps that may happen in the office). It’s more efficient, which means it works quicker, which means it can save both resources and money over time. The more efficient the system, the greater the cost savings.
How do I know if I should implement AP Automation?
Every organization is different in terms of need, ability, timeline, and budget to automate their current processes. Having executed hundreds of AP Automation projects, we’ve noticed patterns among our most successful deployments. If the following problems apply to your organization, you’re a perfect candidate for AP automation:
- Process 500 or more invoices per month.
- More than 2 full-time AP clerks
- You are outsourcing your AP
- Too many late payment penalties
- Missing early payment discounts
- Invoices processed in more than one location.
- Manual data entry errors
- Misplaced invoices and other documents take up to much time
- There is a lack of visibility of cash flow
More often than not, some organizations that need a solution the most don’t realize it. Their current state of managing their processes is “good enough” so they’re resistant to change.
Why Implement AP Automation:
Beyond the clear cost incentives, AP Automation is a solution you can easily implement now to help your organization succeed long term.
- Reduce the time required to process invoices
- Eliminate the manual processes associated with routing, approving, and GL coding invoices
- Process invoices faster and more accurately reducing payment errors
- Reduced paper and improved operational efficiency
- Better data visibility
- Means real-time access across your organization
- Streamline vendor invoice processing and manage discounts to improve cash flow
- Ensure record retention compliance and keep documents safe and secure
- Say goodbye to filing cabinets
- Saves headaches come audit time – have peace of mind that you will find documents you need
How to implement it
As previously mentioned, AP Automation isn’t software you can simply download and install. There are many moving parts to an effective system, but by working with a partner that can design a solution that fits your exact needs, moving to a fully automated process becomes so much simpler.
Mosaic has vast experience in implementing smart automation solutions, and we constantly evolve to offer innovative solutions to transform our clients’ business processes.
Give us a call at 1-800-387-7859 to discuss your current AP process and learn how we can help transform your business.