You might be surprised to find out how much automating workflows, including invoice processing, can save your business—both in terms of your operating dollars and your sanity.
A study by American Productivity and Quality Center showed that because labor costs play such a huge role in how much an invoice costs to process, some businesses’ outdated processes cause them to spend nearly twice as much as they would with more automation. Extra operating costs can easily add up, so assessing your company’s current process to figure out where money might be slipping through cracks is a good first step.
Why do outdated invoice processes cost so much?
Many financial decision makers don’t realize how much manual invoice processes can cost their business. That's not to mention that many moving parts can make finding inefficiencies challenging. Here are a few things to consider and review in your current invoice process:
1. Outdated systems
Many businesses’ invoicing processes are out-of-date. The Digital Age makes information very accessible, and automation can simplify processes to save both time and money. Taking out unnecessary steps, such as printing out documents and manually filling out information, should be considered. Ask yourself these questions:
- Has your business grown since you originally implemented your accounts payable system, or is your business growing? How much extra time will the manual process take, given this growth?
- How many invoices go out each month, and are they complex? Could the process be simplified with a streamlined solution?
- Does your invoice system make it easy for you clients to pay you? Could accounts be delinquent because making payments isn’t streamlined?
- Are you possibly losing vendors or partners because of too many late or failed payments?
- Is reimbursement taking too long? Are your employees getting frustrated?
- Do you have the necessary software/tool support needed to keep your invoice system running seamlessly?
In addition to costly manual invoice processes that are often outdated, many studies have discovered that inaccuracies can also be a problem. Manual processes are prone to inaccurate data entry and even fraudulent practices, which can result in the following:
- Manual processes often result in duplicate invoices and payments. In fact, AuditNet estimates that businesses make duplicate payments at the rate of two to three percent, which may not seem like a lot, but can add up to thousands, or even millions of dollars quickly.
- Overcharges can be a problem as human error is often inevitable. Not to mention inventories can easily be off with data entry, causing overcharges—all of which can cause mistrust and confusion between you, your customers and your employees.
3. Labor costs
Getting work done more quickly with automated invoicing solutions drives down labor costs. American Productivity and Quality Center research also found that labor comprises 62% of total AP costs. Because labor costs with manual processes are causing many organizations to spend nearly twice as much on invoicing processes than they would with more efficient and streamlined solutions, businesses are unknowingly throwing away a lot of money.
4. Decreased productivity
Manual processes between different departments that touch invoices often add up to wasted hours, days and dollars. AP personnel spend significant work time with manual invoice processing, as there are quite a few steps. Plus, financial decision makers and CFOs spend a lot more time trying to analyze data from manual processes than they would from automated systems and reports.
Automating invoice processing is easier than you think
In today’s fast-paced business climate, organizations in every sector are under pressure to do more with less. This means businesses cannot afford to squander opportunities to free up their working capital. This includes optimizing invoicing processes as everyone involved wants the process to go faster. Figuring out how to streamline, though, requires expertise.
With a simple cloud-based AP solution, the process can be simplified to remove a lot of wasteful steps. Automating accounts payable with modern solutions—that work with what you already have—just makes sense. Get business process out of the way to focus on what's actually important for your business today.