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Why Invoice Automation Through Accounts Payable Software Paves The Way For ePayments

Posted by Chris Cosgrove

Sep 11, 2017 4:34:52 PM

Get rid of paper invoices through accounts payable software!

 

Get The Junk Out


If you’ve ever seen the TV show Hoarders, you’re in for a real treat.  Through its raw and real approach to exposing the substandard level that some people are acclimated to living at, it provides a unique insight into a rare and disturbing subset of people in our modern society.  Unfortunately some people get into such a psychological or spiritual place of negativity that they manifest a psyche that feels the need to grasp and retain literally piles upon piles of junk, to the point that common thresholds of cleanliness often go out the window.  Through an intense gut-check process, interventions are staged and the cleansing process involving family, medical, and even operational folks kicks off after the subjects realize the state to which they’ve sunk.  It’s kind of a cathartic experience, though something that should probably be avoided at all costs.


With that said, Accounts Payable invoice processing is very much something akin to this especially when you’re found in a manual processing environment.  Paper invoices, copies, supporting documents, coding documents or notes, and the like create a hoarder’s paradise, and many businesses are eager to get out from the cushing weight of manual invoice processing.  This is not only due to just the sheer volume of documents but the myriad challenges that manual processing creates to include late payments, lack of visibility, and high processing costs.


Enter Accounts Payable Software


With the deployment of advanced automation tools that comprise Accounts Payable software, you can meaningfully transform your invoice processing into something excelsior.  Through intentionality and the right alignment of people, process, and technology you can make it something that creates value for your organization and curb the flow of documents internally while ushering in visibility and slashing costs.  The wins generated through this effort, which don’t necessarily come cheap and easy, will be the wind in your sails to continue innovating internally.  Often this becomes the gateway to ‘wall to wall’ process improvement and the gains in this area become the springboard and the impetus to drive change in others areas of Accounts Payable, most notably in payments.


When you get out from under the thing that is crushing you gain renewed energy from a fresh perspective to advance other positive changes.  So, and this is more to the thrust of this article, beyond the basic concept just offered about momentum and perspective swing, Accounts Payable software paves the way for things like ePayments.  Once you start to exercise tighter controls over the process and you don’t have the tiger by the tail, you can take the same tack with respect to payments, and the way most businesses are trying to go is via ePayments.


ePayments empowered through Accounts Payable Software


In our travels we came across this interesting article from PYMNTS.COM talking about this exact idea...and unfortunately some ePayments, particularly virtual payments powered by virtual cards are still slow to adopt in the market.  Part of this has to do with vendor acceptance and the workflow required to process incoming payments.  PYMNTS.COM asserts that more vendors are and payables departments are inclined to process ACH payments, which makes sense because of the push pay methodology, which while more efficient lacks the financial motivation that you get from monetizing your payment stream.


We think the bottomline here is that a rolling stone gathers no moss.  Essentially if you’re already jumping on the invoice automation train and are willing to go half way in terms of invoice processing and get things streamlined and automated, then jump in with both feet and go all the way.  In this regard you can literally transform Accounts Payable from just a process stakeholder to a value creator as it will more tightly align to treasury and cash management functions.


If you got something out of this, then please check out the ebook below!

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Topics: accounts payable software, epayments, invoice automation, Invoice Processing

Harnessing the Cost Reduction Power of Invoice Automation & Payment Optimization

Posted by Chris Cosgrove

May 3, 2016 1:30:47 PM

Accounts Payable Automation helps you harness the power of cost reduction!

Are you tapping the power of accounts payable automation and payment optimization?

 

Many pieces have been written on the virtues of automating payments from both a process and profitability standpoint.  With that said, it makes sense to revisit the potential gains of this area as many organizations have yet to fully realize the benefits associated with automation.  Part of this has to do with antiquated models of software deployment and long term ROI’s that many business executives can’t justify investment in.  However, modern, cloud-based, transactional models afford the same automation impacts of traditional on premises software, with a price tag that is typically a fraction of the cost.

Let’s take a look at both invoice processing and payment methodologies to uncover the costs associated with each area and where it’s possible to trim the excess.

Invoice Processing

The beginning of wisdom is the definition of terms, and for this component, the terms that need to be defined are what what ‘invoice processing’ actually means.  Essentially, this is the process component that encompasses invoice presentment and processing, but before actual payment occurs.  To be more precise, it entails the physical receipt (whether hard copy or digital), data entry, matching and reconciliation, GL-coding, and approval processes that have to happen for an invoice to be processed to the point where it can be paid.  This area represents the bulk of human labor efforts that have to occur to get an invoice prepared for payment, and as a result typically contain the highest number of cost components from a time and effort perspective.  With that said, it’s worth delving into for this reason as the gains from an improved process are numerous and sustainable.


The Average Cost to process an invoice is over $6.29 according to The Aberdeen Group.  Best in class organizations per the same study process their invoices for $3.34 per transaction while laggards’ invoice processing costs are over $16.67 per invoice according to the same study (Invoice Automation in a Networked Economy, 2012).


In most cases automation can improve invoice processing cycles by over 70% to completely manual processes.  While certain benefits can be derived solely through the initial push for electronic archival of invoices from a storage and retrieval perspective.  However, in order to juice the process for all its worth, it’s necessary to tackle several components simultaneously.  For starters, data entry, which tends to be the most onerous aspect of invoice processing, needs to be fully automated (or as close to fully automated as possible) through advanced optical character recognition (OCR).  This, combined with data correction (of the less than 2% of characters that OCR may be unsure of in terms of accuracy) enable AP staff to get out from underneath the drudgery that is invoice entry.  Now, in harnessing the data lifted from all the data fields off the invoice, automated secondary validation can offload the task of invoice matching be it 2 or 3 way (either against open purchase order data or receiving data or both).  This is another major time consumer in the data entry process especially for companies who rely heavily on PO line item matching in their invoice approval processes.  In most cases nearly 80% of this effort can be streamlined as well.  


Once invoice data has been captured, validated, and indexed, that data can and should be utilized to drive the process forward dynamically.  For non-PO based invoices, this data can be used to drive automated workflow and escalation processes to swiftly GL-code and assign invoices to the appropriate departmental approvers with minimal effort.  This becomes a time and money saving effort for AP staff, but more importantly can begin to eliminate mundane tasks for higher dollar value FTE’s including departmental managers and executives, freeing them up to concentrate on core duties.


Finally, integration harnessing the invoice data into the back end ERP or accounting system needs to be in place through whatever means possible.  This may include direct, API, flat file (alternatively .csv / .xls, etc.), or even automated robotic technology that writes data in mimicking human effort, but autonomously.  Any of these methods frees up AP staff to focus on higher order activities and slashes manual processing efforts and their inherent costs.


Payment Optimization

Once the heavy lifting of invoice matching, approval routing, GL-coding, and data entry have been thoroughly automated, the final component to tackle lies in payment optimization and automation.  Payments represent another significant area of opportunity for AP department transformation.  With The Accounts Payable Network’s cost benchmark of $5.14 per check cut for the average company, it’s little wonder that savvy finance leaders are searching out ways to eliminate these nagging costs.  However, given the changing landscape of payments, and specifically the advent of virtual card payment technologies, it’s not only possible to slash costs in this area, but actually monetize them to the point where AP, which is normally a cost center for most organizations (hence why it gets little investment comparative to front office areas likes Sales & Marketing) and morph it into a profit center.


Let’s look at the following sample scenario to show how much an organization can impact its costs and the financial upside it can reap:


ABC Corp

 
   

Annual Revenue

$100,000,000

Annual AP Spend

$40,000,000

Monthly AP Spend

$3,333,333

AVG # Invoices / Mth

2500

Number of AP Processors

3

AP Processor Load

833

AVG Cost to Process Invoice

$6.69

Monthly AP Invoice Processing Cost

$16,725

% of spend paid via check

100%

AVG # checks / Mth

1250

AVG Cost to Process Check

$5.14

Monthly AP Check Processing Cost

$6,425

   

Total Monthly AP Processing Cost

$23,150

   

% Productivity Improvement Invoice Processing

70%

Improved AP Processor Load

1417

Improved Staff Count

1.8

Improved Cost to Process Invoice

$2.01

Improved Monthly AP Invoice Processing Cost

$5,017.50

Monthly Invoice Processing Cost Savings

$11,708

   

% Improvement in Checks Cut

30%

Improved # Checks / Mth

875

Check Processing Cost Savings

$1,928

   

Total Monthly Processing Cost Savings

$13,635

   

Monthly Cash Rebates @ 1.25%

$13,750

Annual Cash Rebates @ 1.25%

$165,000

   

Total Monthly Impact

$27,385


As you can see, profound gains can be had both from the cost reduction channel as well as the rebate generation channel.  Combined, the two create a compelling business case for automation.  What makes this doubly appealing is that in the most modern approaches to AP & payment automation, there isn’t a need for major capital investments as cloud-based approaches offer immediate returns on services that are garnered quickly instead of long term return on investment scenarios that deployed software typically requires.


In addition to the financial impacts, the operational and strategic elements of both of these types of automation are profound, essentially giving finance leadership the icing on the cake and should not be discounted.  

 

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Topics: payments optimization, invoice automation

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