Accounts payable automation has paved the way for many businesses to streamline their accounts payable processes. AP automation can provide many benefits to businesses that are still running a traditional manual accounts payable system. There are many AP automation tools such as invoice automation and supplier management portals that can make the procure to pay cycle of a business effective and efficient.
Despite the advantages that accounts payable automation can provide, many businesses do not want to convert to an automated system. One of the main reasons these businesses don’t adopt a new automated accounts payable process is because they believe that AP automation can’t provide them any Return On Investment (ROI).
However, automation in accounts payable can provide businesses with considerable cost saving and efficiencies, such as the ones on https://iqinvoice.com/features/. Businesses can also use the online ROI calculator on https://iqinvoice.com/roi-calculator/ to estimate their ROIs on AP automation. Similarly, the following are some examples of the returns that AP automation can provide on investment.
One of the biggest returns that a business can get from investing in accounts payable automation is increased staff productivity. AP automation can significantly reduce the procure to pay cycle time of a business. According to recent research by the Institute of Financial Management, automation in the accounts payable process can increase the invoices processed by a business by up to 17 times. This is a significant productivity gain that a business can get through investment in AP automation.
Furthermore, another research suggests that it takes 25 days to process an invoice in a manual accounts payable process. However, in an automated accounts payable process, the same invoice takes 3-5 days. This means a manual accounts payable process takes 5-8 times more time to process an invoice as compared to an automated process.
This means that an automated accounts payable process can improve the productivity of an accounts payable departments significantly. Moreover, the time that is saved by automation in accounts payable can be used in other value-adding services by the accounts payable department personnel.
Many suppliers offer their customers early settlement discounts if the customers pay their dues before a specified time. According to a report by the Institute of Financial Management, invoices with an early settlement discount make up about 80% of the total invoices of a business. However, in a manual accounts payable process, these discounts are rarely availed. The reason for this comes down to the fact that these invoices aren’t processed on time to avail those discounts and, thus, valuable discounts are foregone.
However, in an automated accounts payable process, these discounts can not only be easily identified but can also be automatically availed. This means that valuable early settlement discounts that were lost due to the inefficiency of a manual system can easily be availed through AP automation.
In a manual accounts payable process, all paper-based data such as invoices, credit notes, remittance advices, etc. need to be stored on the premises of the business. Some laws may require the business to store these documents for up to 10 years. Storing these documents can be costly especially when keeping them for a long time.
Similarly, if a business has many branches, the branches may need to send accounts payable documents to the central office for processing. Shipping these documents to and from the central office can take a lot of time and cost the business. Furthermore, if these documents are damaged in the storage or are lost while shipping, the business can also be penalized.
These are some costs that are involved in a manual accounts payable process that can easily be eliminated with automation in accounts payable. Businesses can easily scan these documents and store them digitally, which is much cheaper than physical storage. Moreover, these digital documents can also be sent to different locations through email or other online services without spending a cent.
According to research by the Institute of Financial Management, in a manual accounts payable process, a business spends $21 to process a single invoice. This is mainly due to the time it takes to process a single invoice and the cost for the time of all the personnel that is involved in the process. Moreover, due to the nature of manual accounts payable process, errors may occur that can be costly to rectify.
On the other hand, the cost to process a single invoice in an automated accounts payable process can be as low as $1 or even lower. These savings can add up for businesses that process hundreds of invoices daily and prove to be a great return on investment for AP automation. Also, costs related to errors are eliminated or minimalized due to AP automation.
Businesses that still prefer a paper-based accounts payable process over an automated on are missing out on many advantages. These businesses think that investing in automation in accounts payable does not provide a Return On Investment. However, automation in accounts payable can have many returns such as increased productivity, availing early settlement discounts, saving storage and shipping costs, and cutting process costs.