How AP affects your bottom line, part 1: Improving efficiency
Manufactures, retailers, professional service firms, hospitals, universities, banks, municipalities. Regardless of your organization, we all have one thing in common: we want to produce, sell, treat, educate, or simply do more while spending less.
Technology is often the first place finance and other leaders look to improve operations. But certain departments, like accounts payable (AP), tend to get overlooked. While most AP departments are condemned to a life of paper and back-office bottlenecks, smart leaders realize that improving AP operations can actually be key to saving money and creating efficiencies company-wide.
In this first installment of a three-part series, we’ll discuss how improving AP efficiency, access, and visibility can improve your bottom line.
What’s sabotaging AP?
To increase efficiency, there are three aspects of AP work that you need to address:
1. Increasing invoice volume: 39 percent of AP professionals say their total invoices increased as much as 10 percent in the past year while 24 percent report an increase of greater than 10 percent, according to the Institute of Financial Operations Accounts Payable Efficiency Study.
2. Paper complexity: 50 percent of all invoices still arrive as paper, roughly one-third arrive via email, and 19 percent are sent via electronic data interchange (EDI).
3. Transaction times: Regardless of company size, finance teams spend about half their time (49 percent) on transaction processing.
Automate for efficiency
Automating invoice processing with enterprise content management (ECM) eliminates the excessive time and errors that result from paper-driven AP processes, like manually entering invoice data and indexing information from paper files. Regardless of how invoices and supporting AP documents arrive — fax, mail, email, EDI, etc. — ECM automatically accepts and imports the files into the system.
Enterprise content management is much more than a scan-and-retrieve system. The right ECM solution will also:
Extract critical data from imported invoices, like PO numbers, due dates and even line-item details.
Deliver that data directly to existing business applications, like your ERP, and validate that data against existing records.
Automatically file imported documents into a single database using the folder structure that you define, ensuring files are never lost or in the wrong place.
Additionally, ECM workflow management simplifies invoice processing by routing documents and information to the right business units at each stage of the invoice approval process. No more hunting approvers down or tracking progress on spreadsheets. Workflow automatically notifies key stakeholders via email when action is required.
3 ways to do more with less
How does this support your overall bottom line? Here are three ways:
1. Accelerate cycle times
With the right ECM solution, you process invoices – regardless of volume – quickly and with fewer errors, without adding to headcount.
Leggett & Platt, Incorporated, an S&P 500 global manufacturer, automated invoice processing with ECM to eliminate manual entry, connect systems and accelerate payments. By increasing speed and accuracy, the company saves $1.6 million annually in AP labor costs.
Or as another ECM user, Cornwell Quality Tools, puts it, “OnBase
2. Reduce operating costs associated with paper-based processing
By going paperless, you not only eliminate the cost of storing and maintaining paper documents, you can stop worrying about losing or misplacing an invoice. Chasing down paperwork is a thing of the past. With a centralized system where you can easily track payments, you prevent duplicate payments and late-payment penalties.
And faster invoice approval can help you negotiate with vendors to take advantage of dynamic discounting or early-payment discounts.
3. Improve customer service
When staff can’t locate the information they need to quickly and accurately answer questions, vendor relationships suffer. With ECM, staff quickly find the documentation they need to proactively and quickly resolve customer service requests – protecting the long-term viability of vendor relationships.
Every invoice counts. A single unpaid invoice can result in escalation to the highest levels of the organization, tarnishing the reputation of the AP team. With ECM, AP staff have a clear and auditable trail for every touch of a document and managers easily monitor the status of invoices. The right technology can keep you connected, speed processes and, above all, boost efficiency, which is a goal we can all agree on.
To learn more, download the Accelerating Accounts Payable eBook.