I had a discussion a few days ago with a CFO, during which she mentioned her organization’s outdated processes. The company is looking to make several process improvements and spending cuts across the board, and she was asking for any advice I might have to share. As we delved a bit more into her area of expertise, it became evident that the company’s Accounts Payable (AP) procedures were holding them back in more ways than one.
Antiquated AP drains time and resources in any organization, no matter its size. Here are a few reasons why:
- It’s very manual and time consuming: Someone has to collect the invoice, key it into whatever accounting software program you’re using, get the information to AP, have AP cut a check, mail it, and potentially follow up with vendors on the status of each payment.
- It’s expensive: According to this white paper from CFO.com, each invoice can cost an organization an average of $11 to $15 to process! Over course of a year, this can add up to tens or hundreds of thousands of dollars, depending on the number of invoices cycling through your organization each month. Not to mention, there’s also the cost to mail each payment, and staff time dedicated to working on each invoice and payment.
- It’s highly risky: As is the case with many paper processes, outdated AP is fraught with risk. Giving staff access to blank, paper checks is just the start of it — but there is some degree of risk at every step of the process.
So, you know the inherent problems with legacy AP systems and manual, outdated processes and procedures. However, what’s the benefit of adopting a modern AP solution, you might ask? Many organizations figure the cost and hassle of upgrading to a new service won’t be worth the potential benefits, but in my opinion, they’re wrong.
The newest AP solutions address common issues in each part of the AP process, including invoice capture and document storage, invoice routing and approval, payment workflow and approval controls and payment execution. In doing so, companies can realize the following big benefits:
1. More efficiency
Newer AP solutions digitize paper invoices, typically by using Web-based or cloud computing. This makes invoices searchable and available from anywhere. Invoices are automatically routed to the correct department, approvals kick off the next part of the workflow, and so forth. Every step that would have required manual procedures quickly flows through the system, with little room for error.
Payments can be issues in a variety of ways, including paper and ACH/electronic payment, with most systems capable of printing, stamping and mailing – with little to no human intervention required. Electronic payments speed up timeframes and make for happier vendors, who can see turnaround times cut in half.
2. Cost savings
On average, digital invoicing through a modern AP service provider costs less than $4 per invoice. That’s as much as a 60 percent savings over manual processing. The larger the organization, the more you’ll save in moving to a new AP solution. In addition, the service itself is extremely cost efficient, so companies needn’t be turned off by the potential of a hefty price tag to implement a new AP processing tool.
You’ll also save on headcount too – fewer staff are needed to input invoices, mail checks, and so forth – so you can focus on growing your business without staffing up your AP department to meet demand. Also, employees can focus on other areas of their jobs.
3. Quick set-up and onboarding
Many businesses shy away from purchasing new software tools and applications due to the potential time it will take to implement and get staff up and running. However, today’s AP solutions are mostly cloud-based, requiring little to no set-up time, easy integration, and an intuitive user interface that makes training quick and painless.
4. Seamless integration
Modern AP is made to integrate easily with your organization’s financial accounting and ERP applications, as well as your bank or financial institution. So, whether you’re using QuickBooks or a similar accounting tool, there’s no need to upgrade software (or change banks). This not only allows accounting and finance departments to associate invoices with their corresponding records in your existing systems; it serves as an audit trail for effective record keeping.
5. Risk mitigation
Removing paper from the equation clearly makes invoice processing and payment a much more tightly controlled machine. With digital scanning and capture, audit trails, and user-based permissions and controls, modern AP offers so many advantages that reduce risk and let you shift your focus to running your business more efficiently.
So, I have to agree with CFO.com on this: Modern AP is a necessity, not a “nice to have” if you want to run your business efficiently and effectively.
Have you implemented a modern AP solution? Comment below and let us know!