January 23, 2024
Today’s Accounts Payable (AP) organization has many options and opportunities to capitalize on the use of emerging technologies such as artificial intelligence (AI), machine learning, and optical character recognition (OCR) from a growing field of solution providers. Despite advances in the AP tech stack, some AP departments continue to work with long and expensive processing and payment cycles, taking up to two weeks and costing an average of $12.40 per invoice. The most common cause remains rooted in manual processes. According to recent research by Ardent Partners, AP teams cited three main factors leading to significant slowdowns in their everyday work.
Long Payment Cycle
The average time to process an invoice – from received to paid – is anywhere between 10-15 days, which leaves much room for improvement. Manual processes in AP are notoriously time-consuming, with hours spent routing paper invoices between team members, identifying and correcting errors, and waiting for approvals.
By eliminating physical documents from the process and automating routing, approvals, and other functions, AP has an opportunity to benefit from early payment discounts to generate positive cash flow through payment program rebates.
High Percentage of Exceptions
Along with lengthy approval times, a high level of exceptions is a leading contributor that slows AP departments, which have reported that 22.5% of all invoices get flagged for manual handling. Team members spend valuable time manually researching invoices, purchase orders, and transaction details, as well as comparing, correcting, and oftentimes calling or emailing suppliers for reconciliation. It all adds up to hours that could be spent on much more valuable work.
AP Automation greatly reduces the errors that lead to exceptions and allows employees to easily track invoices throughout the approval process and pinpoint problem areas. Additionally, when team members spend less time on rework, there is capacity to pursue value-added tasks with a greater benefit to the organization.
High Invoice Payment Processing Costs
Invoice processing costs remain a useful benchmark for AP teams because this metric is indicative of the overall level of organizational efficiency. The cost to process an invoice ready to pay can be as much as $40, excluding the additional costs per manual payment. Finding the right automation solution provider to modernize your AP flow will simultaneously increase speed and reduce costs. Research consistently shows that best in practice AP organizations have cut their invoice payment cost (per invoice) up to 80%.
Each of these issues can be solved with a complete invoice payment automation solution that is designed to meet the needs of modern companies. The best AP Automation significantly increases the efficacy and efficiency of AP, eliminates capture and approval errors, secures your data, and protects you from payment fraud attempts. As more and more midmarket and enterprise organizations transition AP from a back-office function to a hub for data analysis and a financial shared service, completing the full workflow with payments automation also makes AP a conduit to generate positive cash flow.
With true, complete invoice automation replacing manual, home-grown legacy operations, employees have visibility on cash flow and the business intelligence to create and achieve goals that drive success for the whole organization.