Why Do I Need AP Automation?
Today, automated processes like accounts payable (AP) automation can make many of our day-to-day business processes more efficient and streamlined. On the other hand, manual approach to AP can often lead to disadvantages such as slower processing times, higher labor costs and lower visibility into your processes. No matter your industry, from retail to manufacturing, you’re probably looking to work smarter, not harder — and manual accounts payable processes aren’t conducive to that.
That’s why you need AP automation, which offers the following seven must-have benefits.
Automation Eliminates Lost Paperwork While Increasing Savings
Error-filled, lost, misfiled and duplicate documents can cost your organization more than money — and in almost 88 percent of manual accounts payable documents, they’re the result of human error. They can lead to frustration and mistrust of your entire department.
Automation, in contrast, is designed to eliminate these human-error events and, as a result, better support the high-level work your personnel does on a daily basis.
According to the Institute of Finance and Management, the cost associated with processing just one invoice manually is typically 20 times higher than processing it automatically. Clearly, greater accuracy at lower cost is something every accounts payable department can appreciate.
With AP automation, you remove all paper from the equation. Instead, when your invoices arrive, you scan and upload them to your automated system. Now, they’re in a digital format that’s accessible to everyone in your accounting department, plus the parties that must sign off or approve the payments. The elimination of error-filled, lost, duplicate and missing documents is a significant benefit of AP automation when it comes to time and expenses.
Boost Approval Cycles and Transaction Life Cycle Visibility
On average, the processing time for an invoice is 20 days, which isn’t surprising since manual AP consists of at least 15 steps before the final posting — another reason to automate your accounts payable. With an AP automation system, you can process four times as many invoices in the same amount of time and lower the processing time from 20 days to three.
How? With optical character recognition (OCR) and business rules that you can customize to your operation. They convert your invoice scans into text, route them to the appropriate party and transfer that information to your accounting software. Your company leaders can then review and approve the payments via the system or email. It’s quick. It’s efficient. It’s productive.
The minimization of paper in your accounts payable processes also improves visibility into your transaction lifecycle, which is essential due to fraud. Unfortunately, more than 60 percent of organizations experience fraud or attempted fraud, and when corporate fraud occurs, it’s most often in accounts payable. It can translate to a five percent loss in your revenues. That’s why heightened visibility is so critical today, as well as why it’s one of the most noted benefits of automation in your accounts payable.
Improve Number of On-Time Payments
A lot of factors can contribute to delayed payments, incurring interest and late fees as well as strained relationships with vendors. One of the reasons is due to the potential for missing or lost documentation, as well as lengthy accounts payable processes. Another factor is that many invoices take more than five days to reach the accounts payable phase — in fact, only 14 percent of paper invoices are entered the day they arrive. That sets your company back further when it comes to submitting an on-time payment.
While vendors may still send paper invoices, AP automation tends to undo the additional effort of paper invoices due to its other time-saving benefits. With a streamlined approval cycle, as well as automated processing phase, your team has more time to scan paper invoices and start them in the three-day accounts payable process. As a result, you can submit payments promptly to your vendors, which can help you take advantage of early payment discounts.
Increase Vendor Satisfaction
It’s imperative to keep your vendors satisfied, which is another reason to automate your accounts payable and deliver your payments on time. When you’re a valued customer, you can expect your supplier to go the extra mile for you. As an example, imagine you have a rush order from a big-time client that’s looking for a long-term partner. To complete the shipment, however, you need your vendor to hustle. If you have an excellent relationship with them, they’re likely to make what seems impossible possible for you.
How else can you improve your vendor relationships? Ask if they offer an e-invoice program. In the past, you may have turned it down due to your current accounts payable processes. However, with an automated one, it’s a seamless step to receive digital invoices and send them through your accounts payable cycle — it’s quicker than scanning a paper invoice too. Your supplier may even offer a discount for you signing up, as you’re saving them the cost of paper.
Capture More Vendor Discounts
Many suppliers are offering discounts for early invoice payments, yet more than 40 percent of companies capture less than 10 percent of those discounts. The reasons behind that statistic can vary, but a common one is drawn-out accounts payable cycles. One of the benefits of automating your accounts payable — noted earlier — was that it expedites the process to three days versus 20.
When you have those kinds of turnaround times, you have a better chance of submitting your payment during the discount period, which is often around the 10-day mark. In most cases, vendors will offer a one to two percent discount for payments within 10 days. That may not seem like much, but it can lead to significant savings, as demonstrated by one company, which saved $1 million in its first year of submitting payments early.
Strengthen Your Internal Controls
Today, fraud is a growing concern among organizations of all sizes. For corporations, it’s a significant challenge for the accounts payable department, as it’s the most common location for corporate fraud. Our AP automation software helps boost your internal controls in several ways. It provides robust automated and preventative controls and simplifies and centralizes company processes.
Reduce Staffing Requirements and Processing Costs
For many companies, one of the most compelling reasons to automate accounts payable is the savings. When you adopt an AP automation system, you can expect to save 19 percent on invoice processing, which translates to $16 in savings per invoice. That’s why many systems pay for themselves in six to 18 months, which provides your company with a substantial return on your investment.
Due to the productivity and simplicity of AP automation, you can often decrease your staffing needs too. Some businesses, for example, may rely on remote or contract workers to process their invoices. With the speed of automation, your company may be able to lower your staffing costs and maximize the time of your employees. That improvement can lead to overall gains in your company’s goals for each quarter.
Optimize Your Budgeting, Planning and Forecasting
Inaccuracies in budgeting, planning and forecasting can have an adverse effect on performance, leading to issues in controlling costs, predicting future growth and targeting pain points. Through a clean vendor master file (VMF) and accurate spend analyses, our accounts payable management software provides you with the in-depth insights you need to avoid errors.
Lower Supplier Inquiries, Exceptions and Discrepancies
Another benefit of automating accounts payable is decreasing those inquiries from suppliers, as well as the time-consuming task of remedying discrepancies and reviewing exceptions — actions that become more complicated when you’re dealing with missing paper invoices. With AP automation, your invoices have a 63 percent greater chance of proceeding through processing with zero issues. Errors decrease too, lowering from four percent to 3.1 percent. Your chances of re-issuing a check also go down.
Errors and inaccuracies can impact turnaround times, costs and even a company’s reputation. We’ve designed our AP workflow software so that it provides you with a reliable, easy-to-learn technology foundation that facilitates a culture of continuous improvement. With a range of self-service tools and automated processes, your team can focus on the details to prevent errors and enhance quality.
The benefits of AP automation are well-documented. After all, companies want to ensure they’re investing in a sound and proven technology. With Vanguard Systems, you can trust that you’re choosing not only a smart, reliable technology but also a trusted and respected business that values simplicity and streamlining your processes to your preferences to help you save across the board.
See How Vanguard Systems Software Works Today
The best way to see how Vanguard Systems software works to protect and maximize the efficiency of your business is to see it in action for yourself. We want every business to be able to benefit from our services, so we’re happy to offer a free, no-risk, no-obligation demonstration of what we can do. To schedule your demo or discuss ID Protect or any of our other software applications, call 800-445-1418 or contact us online now.