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 with invoice processing software solutions, 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 at your business.
Defining AP Automation
In technical terms, Accounts Payable automation (AP Automation) refers to the invoice software solutions 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 one 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
- Built-in Workflows
- And others to create a seamless holistic system
Using manual methods, the average invoice takes about 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 2021 study on AP automation by the Ardent Group, best-in-class companies process invoices 74% faster with invoice processing software than companies that process paper invoices with manual processes.
By implementing AP Automation, your organization can take advantage of these key benefits:
- 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-Savings With Invoice Processing Software
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. These hefty costs account 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 drive costs up as well. Just a few mistakes over time can quickly cost your organization thousands of dollars.
With invoice automation, the cost can be reduced to as low as $2 per invoice. Invoice processing automation uses Intelligent Data Capture (IDC) for speedy and accurate invoice data extraction. Built-in workflows in Accounts Payable Automation software moves invoices along quicker than accounts staff and it eliminates the error-prone 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 its current payable process. 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:
- You process 500 or more invoices per month.
- You have more than 2 full-time AP clerks.
- You are outsourcing your Accounts Payable.
- You face too many late payment penalties.
- You are missing out on early payment discounts.
- Your invoices are processed in more than one location.
- You see many entry errors in your manual data entry procedures.
- Misplaced invoices and other documents take up to much time.
- Your company struggles with a lack of visibility into cash flow.
More often than not, most organizations need an invoice solution and don’t realize it. Their current state of managing their financial processes is “good enough” so they’re resistant to change. These organizations are missing a huge opportunity with the company growth and cost savings that come along with implementing invoice automation software.
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. Businesses must prioritize digital transformation to keep up with the competition and meet the expectations of vendors. A manual invoicing process simply won’t cut it as more and more companies digitize and automate processes.
By implementing invoice processing software in your Accounts Payable department you can also see these key benefits:
- Reduce the time required to process invoices
- Eliminate the slow manual processes associated with routing, approving, and GL coding invoices.
- Process invoices faster and more accurately, reducing payment errors and capturing cost discounts.
- Reduced paper usage and improved operational efficiency.
- Better data visibility into cash flow and invoice cycle times.
- Real-time access across your organization.
- Streamline vendor invoice processing and manage discounts to improve cash flow.
- Free finance teams from repetitive processes so they can be productive in other areas.
- Ensure record retention compliance and keep documents safe and secure with digital invoices.
- Say goodbye to over-stuffed filing cabinets.
- Saves headaches come audit time – have peace of mind that you will find documents you need.
How to implement Invoice Automation
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 an invoice processing 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.
Contact Us to discuss your current AP process and learn how we can help transform your business.