The benefits of accounts payable (AP) automation
Migrating your accounts payable functions from manual to automated processes could transform and breathe new life into your financial department. To see if moving towards automated software could be just what your company needs, let's take a look at five of the key benefits.
1. Reduction of errors
We've all heard the famous statistic that says 88% of all spreadsheets contain errors, which just goes to show how easily mistakes can creep in when data is inserted manually. They can lead to serious consequences though, such as when 16,000 COVID test results were lost from British records because someone at Public Health England used the wrong version of the spreadsheet program.
Within financial departments, payments could be duplicated, transactions missed and incorrect figures logged - and these types of problems can quickly create negative perceptions of even the most diligent organizations. Using automated software for accounts payable minimizes the risk of human error and makes mistakes less likely.
2. More time for employees
When manual reports and data entry need to be carried out, employees are forced to spend more of their time reviewing information than analyzing it. This means they could miss out on valuable insights that could change the way the company works for the better.
Conversely, when accounts payable software is used, staff have access to real-time data, can keep figures at their fingertips for audits and are able to generate reports for analysis. Furthermore, they'll have the time to look at the information and carry out extra tasks such as descriptive analytics.
This may lead to compliance issues being spotted more quickly, more accurate budgets and better financial forecasts. Essentially, your finance teams will be able to flourish and do the job they originally wanted to do.
3. Greater efficiency and better relationships
With manual accounting systems, there is a tendency for sluggishness. Invoices may sit on desks for days, paperwork can get misplaced and - worst-case scenario - financial information could be tampered with. This doesn't make for great relationships with clients and vendors, particularly if payment deadlines are being missed.
In contrast, automation can reduce delays using facilities such as programmable reminders, meaning customers receive invoices when they should, while creditors and suppliers get paid on time. Indeed, according to the Aberdeen Group, accounts payable automation may reduce days payable outstanding by as much as 18%.
That's a big improvement and could significantly enhance the way your contacts view their relationship with your business.
4. Lower costs
Leading on from the benefits already mentioned is the reduced cost associated with accounts payable automation. Figures from Levvel Research suggest the average cost of processing an invoice manually is up to $15, which can quickly add up if you're going through this procedure several times a week.
However, with automation, savings of between 60% and 80% could be achieved, taking the average cost per invoice down to as little as $5.
There are savings to be made in other areas, too. For example, the Institute of Finance Management estimates most businesses capture fewer than 21% of all early payment discounts, while 12% of companies don't manage any. With accounts automated, invoices can be paid as soon as they're received and early-bird concessions activated, creating potentially valuable improvements to the budget.
5. Reduced risk of fraud
No finance department likes to think it will happen to them, but fraud is unfortunately a modern reality. Indeed, according to the AFP Payments Fraud and Control Survey, 74% of organizations were targeted by payment scams in 2020. With manual systems, a member of staff might receive a fraudulent invoice and fail to recognize that it didn't come from a legitimate partner, leading to the bill being paid and the money lost.
However, with AP automation, invoice approval can be restricted to limited employees and payments released only after flagged bills have been checked, thereby making losses less likely.
More than a third of companies were starting to automate their accounts payable in 2020, up from less than a quarter in 2019, and the benefits listed above clearly indicate why. Choosing suitable AP automation software could streamline and optimize your own finance department, ensuring the whole company is better prepared for all eventualities - and, in turn, for growth.
- Understanding Accounts Payable: The CFO’s Complete Guide
- Tips to Streamline Your End-to-End AP Invoice Process
- Overcome Budget Challenges: How CFOs Can Master Budgetary Control
- Budget Forecasting: 4 Techniques You Could Be Using
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