Effective managers make a point to critically examine their business processes, always searching for ways to improve. They’re careful not to confuse their company’s habits—such as processing invoices manually—with industry best practices. That’s because old habits can be expensive; according to the Aberdeen group, automated invoice processing costs 63% less than manual processes. Companies that continue to rely on bulky, manual procedures (which may seem perfectly adequate), risk market displacement by those that cut avoidable costs and reinvest the savings.
To stay competitive, it’s wise to periodically reexamine any operations that might be bloated or inefficient. A common source of bloat: the accounts payable department, which in many companies gets throttled by tedious, time-consuming paperwork.
Receiving and opening mail, routing invoices for approval, and payment processing are just the beginning of an AP department’s work. On top of that there’s cash flow management, managing vendor relationships, staff oversight, and document management. All of these processes, from opening the mail to archiving the paid invoice, are greatly slowed down by email, paper, and manual processing. An easy, reliable remedy for that? Business process outsourcing.
It’s now possible to forward accounts payable related mail and email to a trusted partner for outsourced processing. This partner will receive, digitize, and index your invoices. If desired, they can also kick off automated processing of those invoices, effectively handling the entire invoice process from end-to-end. There are six great reasons for doing this:
1. Keep up with invoices
Managing and paying all of your invoices is a demanding job. But increasingly, there are ways to outsource the paper shuffling. Mailed or emailed invoices can be received, opened, and routed by BPO experts, easily meeting turnaround requirements during your normal business cycle, peak seasons, acquisitions and periods of rapid company growth. PO invoices can be processed automatically, allowing your AP staff to handle exceptions only and focus on more value-added work. Decision makers can quickly track and approve invoices on a PC or any mobile device with a single click.
Most companies that do this see a dramatic reduction in invoice processing time (from an average of 45 days per invoice to five days per invoice, according to PayStream Advisors), which is critical to running a best-in-class AP department.
2. Stop losing money on late fees and missed discounts
If you’re struggling to keep up with invoices, then you’re probably paying more money than is necessary. Late payment fees start to add up. And early payment discounts can feel like a pipe dream. But if you outsource the most tedious work to experts, then the critical job—review and approval—can be done automatically or with a click. Late payments and missed discounts are a thing of the past with processing outsourcing.
3. Improve visibility
When you outsource mail related processes, you’re creating an opportunity to do more with your information. On top of scanning invoices, a BPO company will key the data as well, either directly into your accounting system for automatic payment or to move your invoices through workflow automation software based on indexed fields. That means your data will be captured by specialists, minimizing errors, and will be archived in a well-structured database, giving you unprecedented access to financial information. And that could lead to some strategic insights, such as the following:
- AP visibility: Know which invoices are in process, who’s processing what, and how productive your staff are.
- Identify problem vendors: Do certain vendors have a history of duplicate invoices? Or invoices that don’t match proof of shipment or delivery statements?
- Cash forecasting: Track and anticipate your spending. It pays to know in advance when major bills are coming.
- Load forecasting: Knowing which times of the month are especially busy will help you prioritize critical invoices.
4. Make compliance easy
Delegating mail-related tasks to a trusted outsourcing partner can make document retention and audits, including tax compliance, easier than ever before. With a digital mailroom for instance, your incoming invoices can be imaged, indexed, and uploaded to a document management system for secure storage and immediate accessibility from your computer or mobile device. This would allow you to quickly access paid invoices and comply effortlessly with audits.
5. Strengthen relationships with vendors
Timely payments are the backbone of your relationships with suppliers and having a good system for making payments on time shows respect, reliability, and a commitment to your long-term business engagement. Some vendors are irreplaceable and being late to pay is one of the fastest ways to ruin your credibility as a buyer. A digital mailroom is a great way to make sure that every invoice, whether mailed or emailed, is promptly opened and queued up for approval. Expert BPO companies can ensure that none of them ever falls by the wayside.
6. Save money
Even if you’re keeping up with payments, keeping good records, and maintaining a pristine payment history with your suppliers, there’s always your bottom line to consider. Receiving, sorting and distributing time sensitive mail and email is almost never a good use of an employee’s time. According to PayStream Advisors, the average invoice costs $15 to process manually, but less than $3 to process digitally.
For most businesses, accounts payable is an auxiliary function—a necessary part of running a business, but not the focus of your organizational expertise. Increasingly, business process outsourcing is allowing companies to save money in areas like invoicing and dedicate more of their limited resources to core business functions.
With a little help, breaking old habits doesn’t have to be difficult. Get started by outsourcing your mailroom today.