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How much does AP Automation cost? - Updated 2022

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Last updated September 13, 2022, edited by Chris Cosgrove

 

How much is it?

“How much is it?” If you’re anything like most people, these four words can sometimes preempt a deal-breaker for whatever it is you might be thinking about purchasing: a car, a vacation, clothing, or a home improvement solution. What’s important here is to define exactly what it is you need or want and then explore options and make an informed decision based on your budget and preferences. In other words, a little research can help you choose a product or solution that you’ll feel good about for years to come.

This same question applies to AP automation for businesses, and it’s undoubtedly one of the most important ones. While automation is a great concept and a revolutionary accounting technology, the overall cost of the solution will typically determine whether a business will implement it. The good news is that depending on your approach to technology and the type of software you choose, it’s entirely possible to find an affordable option that fits your business’s needs—without breaking the bank.

 

A Look Back at Manual Accounts Payable Processing

 

Historically, every workflow in an accounts payable department has been a time-consuming part of a business’s operations, from receiving and managing invoices to making payments and filing paperwork. And depending on a business’s size, it’s taken a large staff of accounting and clerical employees to manage tasks. On top of it all, more work has typically been generated due to late payments, clerical errors, and delays in payment approvals.

How many employees do you have on staff to keep your AP department running smoothly? Are you looking for ways to either reduce FTE or utilize existing staff for other duties? With Glassdoor reporting the average salary and benefit combination of an accounts payable clerk to be over $73,000 at the end of 2021, it’s important to consider how AP automation software can reduce your manual workload and what you can do to streamline and improve outdated and clunky functions.

If you’re not sure where your business ranks as far as invoice processing speed, it’s considered average for an AP clerk to be able to cycle through about 5 invoices per hour, which translates to 1,000 invoices per month. And although a small business might get by with one employee handling accounts payable tasks, the volume of invoices can become overwhelming and inefficient for a larger operation. Manual invoice processing typically includes:

  • Data entry to the ERP
  • Matching invoices to POs
  • Sending and validating approvals
  • Coding to general ledger
  • Completing disbursements
  • Statement reconciliation
  • Resolving errors and exceptions
  • Answering calls and emails related to invoices and payments, both internally and from vendors

The total cost of manually processing invoices can vary widely, but according to Adobe, many businesses that haven’t upgraded any automation efforts report that they spend between $15 to $40 per invoice, on average.

To see where your business stands, try measuring your cost per invoice and use this formula to calculate an average:

 

(Employee Salaries + Lost Rebates + Late Fees + Postage + Software and IT) 

÷

(Number of Invoices) 

= Cost Per Invoice

 

If this number surprises you, it’s probably time you begin finding some ways you can reduce your expenses and learn just what automation can do to make your processes more efficient. With the Institute of Finance and Management (IOFM) reporting that over 77% of AP departments they surveyed were using at least some form of automation in 2021, the options available through technology and innovation will only continue to improve.

 

How AP Automation and ePayment Solutions Bring Cost Savings

 

Most businesses report significant value and ROI from implementing AP software technology within their departments, and although some savings may not be noticed immediately during the initial stages of automation (training and conversion), the reduction in data entry processes and physical paper management will be clear. Here are some of the positive outcomes businesses can achieve:

  • Reduction In Late Payment Penalties. One of the more frustrating aspects of accounts payable processing for both businesses and clients is the number of late payments occurring. In fact, a 2022 report from

PYMNTS said that 49% of the invoices produced by US businesses go overdue on a regular basis and 73% of procurement professionals believe late payments strain business relationships. When AP automation and ePayments are used to manage invoices and payments, however, the timeframes from receipt of invoices to approvals and payments can be reduced significantly—enough to start capturing early payment discounts.

  • Elimination of Clerical Errors. It goes without saying that manual clerical errors can cause processing delays, incorrect payments to vendors, and missed payments, all of which can result in significant penalties over time. Even with a 1 to 2% transaction error rate, these mistakes are time consuming to fix and stressful for employees. But once an automation solution is implemented, it’s possible to reduce manual data entry 80 to 100% and allow your AP staff to focus on other tasks and initiatives.
  • More Economical Payment Processing. When it comes to paying vendors, there are essentially four ways that businesses are currently managing transactions: checks, wire transfer, ACH, and virtual credit cards. Checks are probably the most cumbersome and time consuming of all payment methods, with The Aberdeen Group estimating the average cost of cutting a check at $7.78 per transaction

Newer to the payment scene but full of potential are virtual credit cards, which you can read more about in this Forbes article. When used, these cards can yield rebates averaging 1 to 2% per payment. Besides gathering you nice cash return, these timely and efficient transactions can result in better business-vendor relationships and ongoing negotiation potential.



AP Automation Solutions: Exploring Models and Costs

 

Choosing a solution that fits your business’s needs can range in price and function from very basic data capture to full-service work that performs everything from invoice digitization all the way to auto approvals and ePayment processing. Read below for overviews on the various models available, their prices, and their capabilities.

 

Scan & Archive:

 

Considered a more basic approach to automation, “scan & archive” is how some businesses first cut teeth on process improvement. While this model helps with archival and retrieval functions, it actually does very little to improve the automation process—and some argue it actually encumbers the process by requiring additional post-process steps of scanning and indexing.

At the elementary level, success can be achieved with this model by assembling some kind of shared drive and folder-based storage approach, but it’s not the best solution for finding things, unless you’re a very small business. The moment your transactional levels jump into the hundreds of thousands per month, you’ll find “scan & archive” to be a less-than-adequate solution.

Regardless of functionality, this model can be implemented for a few hundred dollars on the micro scale. If you’re looking at layering in an electronic document management system, it's likely you'll be spending between $10,000-$100,000, depending on how robust the system is. There are also annual license fees and technical support costs to factor in.

 

Model #1: FRONT-END INVOICE PROCESSING, AUTO-MATCHING, APPROVAL WORKFLOWS, and Archival:

 

This model has been a tried-and-true approach for many businesses but can be quite costly in a deployed setting since the systems necessary to power the approach (OCR, bi-directional integration, business intelligence, workflow, audit trail, and storage) are all very complex. These types of deployments are typically taken on by businesses running 10,000 or more invoice transactions per month, and the associated spend easily ranges from $100,000-$500,000 plus annual software license fees and related personnel support costs.

Because of the deployment price tag, many businesses shy away from this model because the up-front costs outstrip the immediate benefits. Often, the ROI isn't seen for at least a 12-month period, making the option unfavorable.

 

Model #2: Cloud-Based AP Automation:

 

This approach is similar to the above model, but because the infrastructure investments are cloud-based and generally deploy across multiple tenants, the cost is shared between software provider and business. Further, hardware requirements are obviated (especially if data center elements are hosted) and therefore the point of entry costs are vastly reduced.

In many cases, the providers of cloud-based AP automation solutions charge transactionally versus through a software license model. Implementation fees are typically proportional to the number of invoices processed per month, which makes it a favorable option for some businesses. But—to piggyback off this scenario—at over 10,000 invoice transactions per month, it’s not uncommon to see implementation fees ranging from $20,000-$35,000 and transactional costs ranging from $0.65-$0.95  per invoice, depending on the scope of services and automation provided.

 

Model #3: AP Automation & Integrated Payables

 

This is where things get interesting. In all the above cases, the typical play for a CFO, Controller, or Treasurer is to look at AP automation as a means to cut costs and streamline processes, which it certainly does. However, when we start considering the vital role of physical payment execution and the byproducts of automation (i.e., time saved, and visibility generated through data lifting and automation) there are worlds of additional benefits possible.

For starters, ePayments (ACH, EFT, wire transfer, and virtual cards) are growing quickly in the B2B space, saving time by displacing the heavy reliance on issuing paper checks. More importantly, these electronic payment types provide a more secure conduit—one that can actually monetize the payment process. In fact, many companies utilizing virtual credit card payments are generating a 1-1.5% tap on eligible spend on this ePayment type alone.

 

A Closer Look at APSmart by CloudX

 

If you’re looking to get started with an AP automation model for your business, APSmart is an end-to-end automated accounts payable software configured for the unique workflows of your automotive business. With APSmart, you get complete visibility of your invoice and payment processes in addition to unique reconciliation features, audit tools, and fraud protection.

This software integrates seamlessly with top ERP Solutions including Netsuite, SYSPRO, Infor, Epicor, and Dealertrack DMS to help you manage accounts payable so you can create an accurate and searchable timeline of all your supplier transactions and gain important insights about your business.

With full P2P automation capacity, you can digitize 100% of your invoices, control and change who makes approvals, set up workflows to streamline your payments, automate approvals, and much more.  APSmart also automatically indexes and catalogs your documents so you can recall them whenever they need to be referenced.

An excellent add-on worth its weight is APSmart’s PAYSmart module. This payment processing software combines your payments into a single file, centralizes payment execution, and gathers you cash rebates on eligible purchases. PAYSmart can run a batch of virtual card payments, ACH transactions, and check transactions from a single payment action, a function otherwise known as “integrated payables.”

Conclusion

In today’s super-networked economy, you have a lot of options for streamlining your AP processes. Based on your budget and your existing mode of operations, you may want to start out with automating your invoicing and then deploy automated payments when your staff is comfortable with the new technology. 

Whatever you want to start with first, CloudX can help you understand the costs and benefits of all the various automation models available. For a primer, try reading through our eBook called Unlocking Profit from Transactional Document Processes and then contact us to learn more about APSmart.

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