For companies in the lower middle market (LMM), when it comes time to make process improvements, the accounts payable department is an easy target. Why? Because between the high volume of documents and the lack of efficiency due to never-ending manual processing, inefficient AP processes drain both your capital and your employees.
Without AP automation, businesses large and small are forced to enter invoice data into their ERP systems manually. The time employees spend verifying, correcting, and updating information from paper invoices adds up to hundreds of hours a year, and without a proper flow for reviewing and approval, average invoice processing time could reach as high as 45 days.
Do you know how much money you’re wasting by not automating critical AP processes?
Manual document management creates a high volume of extra work, wasting crucial hours across multiple departments and generating substantial invoice processing costs. Not to mention that manual processes are prone to human error, and when employees have to backtrack to fix mistakes, it causes stress, lowers productivity, and—you guessed it—costs even more money.
Research by PayStream Advisors has shown that when processing invoices manually, companies spend an average of $15 per invoice on the employees and tools necessary to see it through its lifecycle—now consider the potential savings of accounts payable services.
With automation, companies could reduce this cost by at least half. Organizations that automate a portion of their invoice processing workflow spend an average of $6.70 for every processed invoice, and businesses that rely on technology to manage the entire AP process spend as low as $2.36 per invoice.
But there are even more costs to manual AP processing than just employee wages. Late payment fees, duplicate payments, and the early bird discounts you miss by taking too long to process invoices can set you back by more than you think.
Let’s take a closer look at the other ways paper invoice processing costs you money month after month.
When you manage invoices manually, approval time can be anywhere from a few days to upwards of a month, depending on your company’s size, the number of employees involved, and the volume of invoices you receive.
For example, 38 percent of companies with annual revenues under $30 million have an average invoice approval time of five to ten days. That time increases, though, once we consider common hiccups such as misplaced or lost invoices—digging through files or chasing down approvers from other departments to find a missing invoice is time-intensive!
When you process invoices manually you’re less likely to approve payments in time to catch early-bird discounts. In fact, small and medium companies that manually manage invoices are only taking advantage of an average of 18 percent of discounts available to them.
Automating your AP processes gives you much more of an opportunity to benefit from early payment discounts. In fact, depending on the number of invoices and your suppliers, data from small and mid-sized companies collected by PayStream Advisors shows it’s possible to capture up to 75 percent of discounts!
Duplicate payments are another top pain point for many companies that manage AP processes manually, regardless of size and revenue. Companies risk losing thousands of dollars every month by paying invoices more than once—money better spent on innovation, training employees, or implementing new projects.
If you’re looking to grow your business and increase productivity, you can’t afford to waste your time rectifying overpayments. Luckily, AP automation can make duplicate payments a thing of the past.
Document Storage Costs
There’s another commonly overlooked cost associated with paper invoice processing: storage. The more paper invoices you file, the more square footage you have to use to store file cabinets or banker’s boxes, costing you up to $20 per document. Multiply that figure by the number of paper invoices you receive each month, add the costs of access control, fire protection, insurance, and more, and you’ll quickly see why so much of your budget is disappearing before your eyes.
How Much Could You Gain from Automating AP Processes?
It depends on how much of the process you automate, but generally speaking, companies that automate critical AP processes see significant improvement in their invoice processing times:
- In 66 percent of cases, the volume of paper invoices lowers significantly;
- 62 percent of companies improve their approval time for invoices;
- 40 percent of businesses state that AP automation allows them to get more visibility into unpaid invoices;
- 35 percent of companies manage to increase employees productivity by automating;
- 30 percent of organizations that have automated AP processes cut down their processing costs.
Other benefits of invoice processing automation include:
- Easier compliance with regulatory requirements
- Improved relationships with suppliers
- Employees can spend their time on more critical work
- Eliminate data entry errors
- Better insight into transactions to spot areas for improvement and potential savings
Start Saving Money with AP Automation!
Whether you choose document scanning and document management software or nip paper problems right in the bud with mailroom outsourcing services, any kind of automation you implement will provide excellent ROI. It allows you to lower processing costs, avoid late payment penalties and interest, and maintain a competitive edge by staying current technologically—a big draw for potential customers. And in the long run, the money you save on labor, storage, and fees can be invested back into your business to generate growth.
So what are you waiting for? Get started with AP workflow automation today!