As with so many other business-critical processes used today, accounts payable (AP) workflows benefit immensely from automation. In contrast to outdated models relying on manual data entry and invoice processing, accounts payable automation helps AP teams complete their work more quickly, accurately, and completely while supplying useful data for analysis and strategic financial planning.
Understanding why AP automation is so important—including the benefits it brings to business process management and how it empowers your company for greater competitive strength—is the first step to implementing it in your own software environment. Now is the time to get on board the AP automation train and see why more and more companies are investing in this game-changing technology.
Why AP Automation Matters
Companies place a high value on their AP departments, and with good reason. Efficient and accurate AP processes can help companies compete more effectively through greater cost savings and strategic, data-driven value.
The problem is, in the not-so-distant past, AP processes were, by default, manual processes. Data entry, invoice processing and verification, approval workflows—everything was tied to paper invoices and people. This limited the accuracy, speed, and efficiency of accounts payable in several frustrating ways. Absent (or simply absent-minded) approvers could create serious routing bottlenecks that led to late or missed payments. In the other direction, lack of visibility meant duplicate payments, maverick spend, and invoice fraud were all too common.
Cost savings via early payment discounts were lost; cash flow management could become a serious concern. Vendor relationships suffered, and AP teams wasted even more time and resources chasing exceptions, correcting errors, and putting out financial and professional fires.
Add in the substantial environmental footprint, storage costs, and labor demand that come with manual AP, and it quickly becomes apparent that hewing to old school methods in the age of digital transformation is a recipe for financial and competitive disaster.
AP automation benefits companies by addressing these pain points through improved transparency, greater accuracy, speed, and efficiency, and the elimination of human error. Modern accounts payable automation software has come a long way from the early days of optical character recognition (OCR) alone. In its heyday, OCR offered those looking to streamline data capture, improve processing costs, and eliminate the need for manual data entry a reliable first step into the world of AP automation.
That step was a serious and beneficial one for many organizations, but OCR technology has its limits. It is, in essence, a tool, rather than a complete AP automation software solution, and offers only one small part of the full functionality needed to achieve true AP automation. Accordingly, companies serious about protecting their competitive strength, improving risk management, and proactively engaging in business continuity planning are looking to more robust and complete AP automation solutions such as PurchaseControl.
In fact, 2020 research from the Institute of Financial Operations and Leadership (IFOL) found that chief financial officers (CFOs) at more than 40% of companies surveyed were prioritizing comprehensive AP automation over the twelve months following the survey.
This shift can be partially attributed to the competitive and operational demands imposed by major business disruptions such as the COVID-19 coronavirus pandemic; in light of the new challenges created by “the new normal,” companies are recognizing the importance of true AP automation to their continued growth and competitive performance.
“AP automation benefits companies by addressing these pain points through improved transparency, greater accuracy, speed, and efficiency, and the elimination of human error.”
Key Benefits of Accounts Payable Automation
Moving beyond manual AP—or even basic automation such as OCR-only software solutions—to a true AP automation solution is about more than just optimizing invoice management or taking time-consuming and tedious manual tasks off your AP teams’ collective plate.
The benefits of true accounts payable automation software extend well beyond the accounts payable department and inject value and cost savings throughout your organization—an important factor to consider in a business environment where competitive strength is driven in large part by savvy use of both Big Data and digital transformation strategies.
1. Faster Cycle Times, at a Lower Cost
2020 research conducted by Ardent Partners found just 24.2% of invoices were being processed straight through. AP automation improves processing times across the invoice lifecycle by 300%; the attendant gains in speed, accuracy, and transparency translate to invoice processing costs that are six times lower than those relying on manual AP.
2. Less Paper, Fewer Errors, Greater Value
Add in the long-term benefits that come from reducing the time and resources associated with manual processes (e.g., paper, storage costs, correcting exceptions, inconsistent invoice approval processes, chasing down invoice fraud and maverick spend), and it’s easy to see why an end-to-end AP automation solution is such a powerhouse of cost savings and value.
Ardent Partners’ research found that best-in-class organizations were 125% more likely to use a complete AP automation solution—and those who did so boasted exception rates 57% lower than the competition.
3. Cloud-Based Simplicity
With full AP automation and support for electronic invoicing (eInvoices), manual data entry needs are substantially reduced or even eliminated. Supplier invoices are easy to process, verify, and store. Cloud-based, role-appropriate access and full integration with your accounting software, enterprise resource planning system (ERP system), and other applications in your existing software environment means everyone can get the information they need, when they need it, whether they’re in the office, working remotely, or on a mobile device.
4. Total Transparency
Choosing a comprehensive procure-to-pay (P2P) solution such as PurchaseControl integrates AP automation with procurement optimization. The result? Full transparency into all your spend data. From the creation of the initial purchase order to the final payment to the vendor, a single system captures every aspect of every transaction you conduct. Paired with guided buying and centralized data management, organizations who automate accounts payable empower their AP staff to collect spend data, access and analyze it in real time, and then leverage the insights gleaned for more accurate and timely budgeting, better financial reporting, and speedier, less stressful audits.
Tracking cash flow and monitoring key performance indicators for AP is much easier as well. Your team can make adjustments to remove bottlenecks, further improve invoice cycle times, lower processing costs, and develop payment strategies that help you capture the greatest savings and value from both early payment discounts and delayed or skipped payments, depending on your needs.
Plus, equipped with more complete, transparent, and accurate data, management can plan more strategically and make better decisions based on truly actionable insights.
5. Stronger Internal Controls
AP automation makes creating, and enforcing, internal controls easier and more effective. Well-defined and transparent workflows not only capture all the data relevant to every transaction, but help improve accountability, compliance, and performance through the use of KPIs.
Consistent formats and seamless communication between your accounting system, ERP, procurement solution, and other software improve collaboration, further improve efficiency, and help ease compliance across your organization.
Both fraud and maverick spend are sharply curtailed by end-to-end transparency and verification tools such as automated three-way matching.
6. Stronger, More Strategic Supplier Relationships
In addition to the direct cost savings and value creation that accompany AP automation, 32% of companies surveyed by Ardent Partners who used a comprehensive AP automation solution reported greatly improved supplier relationships.
Consider these benefits:
- Support for vendor portals ensures documentation is always populated with the latest and most correct contact information, pricing, terms, and other data for every supplier. Ardent found best-in class companies were a whopping 152% more likely than their competitors to provide suppliers with a vendor portal.
- Complete spend visibility and optimized workflows makes it easier to capture early payment discounts, negotiate better pricing and terms, and identify opportunities to collaborate with key suppliers in developing new products and sourcing new materials (or sourcing existing ones more effectively).
- eInvoices make life easier for your suppliers as well as your AP team, and minimize the risk of miscommunication and late or duplicate payments. According to Ardent Partners, best-in-class companies were 71% more likely to make payments electronically, and 92% relied on eInvoicing as part of their AP workflows.
7. More Effective Use of Your AP Team’s Time and Talents
When it comes to your AP staff, the less time spent chasing exceptions, investigating fraud, or dealing with tedious, repetitive tasks such as manual entry of invoice data and invoice verification, the better. However, Ardent partners found AP teams spent an average of 22% of their work hours responding to vendor inquiries, with an alarming 15% spending more than a third of their time tackling supplier information issues (e.g., correcting supplier data, correcting mistakes, etc.).
AP automation frees your team to tackle more strategic tasks, including process optimization and strategic relationship development. Ardent Partners found companies implementing a comprehensive AP automation solution that included support for eInvoices and electronic payments were twice as likely to turn data-driven insights into better collaboration between stakeholders, and 2.2 times as likely to use spend data analysis to improve their invoice exception handling.
In short, choosing to automate accounts payable lets you harness the mutually exclusive talents of both your human staff and their digital counterparts while still reaping the biggest possible benefit from their collaborative efforts.
The Time is Right for Accounts Payable Automation
The efficiency and accuracy of your payable processes play a major part in your company’s overall health and success. If you’re still using manual processes or relying on basic automation tools like OCR alone, you may find yourself struggling to catch up with your competition—or worse yet, struggling to survive at all.
Make sure you’re among the best-in-class organizations competing in today’s complex global economy by investing in an accounts payable automation solution that gives you the tools you need to eliminate waste and error while maximizing cost savings, value creation, and operational agility.
PurchaseControl's Advanced AP Automation Tools Help You Maximize Your ROI on Every Dollar SpentFind Out How