It’s an interesting time to be in accounts payable. Throughout the last few years, there has been a wave of cloud-based technologies that promise better visibility into spend, greater cost control, and significantly improved operational efficiency. Yet, the majority of companies haven’t caught up with the times. A study by the Institute of Financial Operations (IFO) revealed that, on average, 50% of invoices are still received by paper, 37% by e-mail, and 5% by fax.
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Manual AP systems are painful and paper-heavy, requiring a human being to open envelopes, print out emails, match invoices with purchase orders and receipts, and decide whether or not the invoice needs exception handling. Then, everything has to be sent downstream for approvals. Travel makes it more complex. If your employees are required to submit paper receipts, then you have to wait for them to come in off the road to do so—often times, asking managers who are out of the loop to approve the expenses.
As a result, gaining full visibility into spend is difficult. If you’re not able to get real-time data, it’s hard to track payments. It’s a challenge to be on top of compliance issues if you have to wait three weeks to see paid invoices. And, it’s asking a lot of managers who are usually more focused on the business of your business, which often isn’t AP.
Manual AP processes are also time-consuming. A 2016 Aberdeen Group study, Reap the Benefits of Invoice Excellence with AP Automation, shows that it takes, on average, 17 days to approve an invoice manually—a process that costs $31 per invoice. Only after those 17 days is that invoice added to the ERP system, giving you the visibility you need to create a report. And then, of course, you have to archive the invoice and any other paper that goes along with it. That’s a lot of work in the days of cloud computing.
This manual approach can also lead to duplicate invoices, lost invoices, and insufficient controls. Reimbursement takes longer than your employees would like, and vendors are often left to wonder when their invoices will be paid. And then there are late payment fees and, in the worst cases, the possibility of losing a vendor or a partner to too many late or failed payments.
But, when you move accounts payable to a cloud-based system, you can simplify processes and offset your costs with the savings in time and labor. Research by Ardent Partners showed that businesses can reduce their invoice processing costs up to 70% through automation.The emotional costs of moving your employees to a new system are also offset by the reduction in rote tasks and the ease-of-use of modern digital AP systems.
Digitizing your AP processes gives you a scalable way to gain visibility into when and where spend happens, take advantage of discounts from paying quickly, and integrate payment tracking, compliance, and management. And with cloud technology, you can spin up a pilot project easily and inexpensively to see whether or not it’s right for you.
By using cloud-based AP processes, you can:
- Log invoices automatically, using optical character recognition (OCR) to extract text from invoices
- Automatically match invoices with their POs and forward it for approval (or for exception handling)
- Set up a portal to give your suppliers visibility into the process, enabling self-service (and reducing your costs)
- Set flags on certain types of spends and behaviors to notify you immediately when problems occur
- Give your employees the ability to use mobile technology to create and submit expense reports on the road—reducing error rates by filing expenses while they’re still fresh in the employee’s mind
- Automatically submit invoices to your ERP, significantly reducing the need for manual input
- Develop reports more quickly and get a better handle on your company’s cash flow, immediately seeing what your liabilities are
- Archive invoices, receipts, and other proofs electronically, for as long as it’s required, without taking up physical space
Automated, cloud-based AP gives you the ability to reduce risk, increase compliance, make tax management easier, and cut off bad spend before it happens.