Accounts Payable (AP) department usually refers to the person or staff that processes vendor invoices and pays the company bills. Being that every company has bills to pay on a monthly basis, AP processes are imperative to revenue management. The AP process involves reviewing an enormous amount of detail to ensure that only legitimate and accurate accounts are entered into the account system. With enormous detail come challenges to paper-based accounting practices that can negatively impact a company’s profitability, including; time-consuming invoice approval, error-print data entry, and missed payments. However, AP tasks are essentially universal and highly identifiable, which can be greatly improved with digital process automation.
In a study by the Aberdeen Group, it takes on average 4.1 days to process an invoice from receipt to approval because 59% of invoices arrive at respondents’ AP departments in paper format. The study also showed that organizations reported between 40-60% savings of implementing the right invoice automation solution with document management software. By leveraging software automation, AP department can benefit from effortless compliance with the latest regulatory requirements, increased process visibility, improved supplier relationships, plus the ability to leverage prompt-pay discounts.
There are quite a few common challenges of paper-based accounting processes; luckily, automation with document management software enables AP departments to work more efficiently. Let’s take a look at the common challenges an order has from start to finish.
Process Challenge #1: When an employee wants to purchase some office supplies, they send in a requisition request to their manager. These requisitions can be in the form of an email, or even a post-it note stuck to some paper, which makes it difficult for the manager to review, approve and forward to the AP clerk in a timely fashion.
- AP automation solutions assist the administrative tasks that, though critical, slow down productivity when performed manually. This is especially accurate when transferring documents between employees, such as purchase requests. As soon as a requisition is entered into the document management system, the department manager is notified via email that a purchase request requires their attention, which all in all streamlines the approval process. AP automation effectively enforces best practices for business processes with checkpoints to ensure that a requisition was in fact approved before continuing on to the purchasing process.
Process Challenge #2: The AP administrator inputs the requisition data into their accounting system and creates a purchase order to match the request. Depending on how many requisitions were received, this process can take anywhere from 30 minutes to 3 hours. The AP clerk then prints two copies of each purchase order, adding to the company’s print supply costs. One copy is sent to the vendor and another is placed in a folder that then goes in a filing cabinet.
- Time is money and money is time, and manual data entry is incredibly time consuming. There are multiple steps require manual data entry into the accounting system which can be both costly and prone to errors. According to PayStream Advisors, manual invoice processing can cost between $10- $22 per invoice! For example, say a company is processing 100 invoices a week, costs can reach anywhere from $4,000-$8,000 a month or $48,000- 105,000 A YEAR! By eliminating this manual process and making it digital, companies can use the money saved to hire several additional employees. Document management software integrates with popular accounting systems such as QuickBooks or Microsoft Dynamics. AP Automation is taken to the next level with instant data capture or automatic bill creation to eliminate duplicate entries.
Process Challenge #3: Once the supplies arrive, inside the box is the packing slip that tells the company what they are receiving. The receiving clerk has to manually check off that each item is in fact in the box, and then proceeds to give the packing slip to AP. The AP clerk searches for and retrieves the original purchase order from the filing cabinet, stapling the packing slip behind the original, before re-filing the documents again.
- Requiring someone to physically move a stack of papers from one location to another is asking for documents to get delayed, lost or even damaged. On average it takes $125 per misfiled document and $350 for each lost document. Those costs can add up. Often packing slips will end up on a desk that ends up being overlooked or lost, annihilating the process of reviewing goods received. Automation software holds employees accountable for their document-driven processes by keeping record of each file’s routes and user actions. AP software also eliminates the need for making and delivering copies, so employees can remain keeping productivity levels high while at their desk. Document management software acts as a digital filing cabinet that goes to work for you by capturing, organizing, retrieving and editing documents. This digital storage system eliminates the manual tasks, giving the employees the records they searched for in a matter of seconds.
Process Challenge #4: Now it is time to pay for the supplies. The invoice is routed to the AP clerk, who yet again, searches and retrieves the original purchase order and staples the invoice behind everything else. With a quick visual inspection of the documents, the AP clerk makes sure everything matches before finalizing payment and completing the transaction.
- The key to getting an invoice approved in a timely manner is validating that you received what was intended to be purchased, and that the terms and amounts are equal to the original purchase order. This process is commonly known as the ‘three-way match.’ With everything routed manually, there is no way to visibly tell where an outstanding purchase is bottlenecked. The current status of any given vendor invoice is not easily known, which can lead to the risk of late fees, if invoices aren’t paid on time. AP automation enables organizations to take full advantage of early-pay discounts as the software automatically matches incoming invoices to their respective purchase orders and packing slips through data recognition technologies. As soon as the match is confirmed, the invoice will automatically be routed for final approval and payment, cutting out a large chunk of the AP clerk’s time; allowing them to re-channel their focus to higher priorities.
All AP departments are all about purchasing and payments, hence the name itself. The faster a company pays their bills, the more credit they’re extended while also avoiding late fees. AP automation through document management software reduces the overall time it takes to complete AP tasks, without sacrificing the quality of work. Best of all, in most cases, the investment pays for itself within a matter of months!
Ready to work smarter, faster while being more productive? Then it's time to implement AP automation into your organization! Contact us today by filling out the form or clicking the image below to schedule a demo and explore your options!
Posted by Hilliard Office Solutions