Ah, accounts payable.
Did you shudder reading that? Did your eyes glaze over? Are you fighting off the thought of manually inputting data over and over again?
The manual accounts payable process might seem like any other boring but innocent reality of life in finance.
Thing is, though…it’s anything but innocent.
In fact, it’s downright dangerous for your business.
I wish I was being hyperbolic. But, as you’ll see in this breakdown of the manual accounts payable process vs. accounts payable automation, I’m being 100% honest.
Manual AP is costing you. Big time.
But fear not—it’s not all doom and gloom. Because for every shortcoming of manual AP, there’s a more impactful benefit of AP automation (more on those very soon).
Here’s what you can expect in this guide to AP automation:
- The pitfalls of manual AP processes
- The obvious benefits of AP automation
- The not-so-obvious benefits of AP automation
- Why AP automation is a hard sell
- How to prove the ROI of automating your AP processes
And more…including our free AP automation ROI calculator.
Inside the pitfalls of manual AP processes
If you’re reading this, chances are you’re sick and tired of manual AP workflows and you’re interested in AP automation. Or, maybe you’re just curious. Either way, before we dive into the benefits of automating your accounts payable process, let’s visit some of the pitfalls of manual AP work.
Time and effort
The number of tedious tasks associated with accounts payable work is staggering. In case you need a refresher (I’m sure you don’t), here are a few:
- Invoice processing
- Data entry
- Monthly reporting
The list goes on and on. So do the drawbacks:
Businesses doing manual AP process a little over 6,000 invoices/FTE per year, while businesses using AP automation process over 23,000 invoices/FTE per year, according to a study by the APQC. And with slow, time-intensive work comes another downfall: late payments. According to PYMNTS.com, 40% of companies cite an “inability to validate invoices as the reason for late payments.”
Human error (inaccuracy)
Like I mentioned earlier, the accounts payable process is boring. And what happens when you get bored? You get sloppy. Unfortunately for us finance pros, we can’t get away with sloppy work. It’s detrimental to the business.
Here are some classic mistakes due to manual AP processes:
- Late payments
- Duplicate invoices
- Invoice-vendor mismatching
- No payments history
- Inconsistent tracking
This isn’t just anecdotal, either. In a survey of 500 finance professionals, the Accounts Payable Association found that 63% of them had received duplicated invoices (and 33% had actually paid them). They also found that 78% of those finance professionals admitted to paying supplier invoices late.
Those types of mistakes don’t only cost you money and data accuracy—they cost you vital vendor relationships, too.
Speaking of costs, the cost of manually processing an invoice for most businesses is between $14 and $50. That’s a lot. Add in the human errors we just talked about, and the number rises: In that same survey by the Accounts Payable Association, 58% of finance pros needed to pay late payment charges to suppliers at one time or another. Then, take into consideration the possibilities of fraud, missing discounts, and expired credit notes, and it becomes clear that manual accounts payable processes are a financial drain on your business.
Cash is king. Especially right now. There are few, if any, back-end processes so crucial to cash flow and cash flow forecasting than the accounts payable process. And yet, 56% of finance professionals surveyed said their businesses experienced cash flow forecasting problems due to AP issues.
Just like you and your business, your vendors need cash to survive. Manual AP processes often lead to payment snafus that lead to late payments or, sometimes, no payment at all. Most vendors are forgiving, but only up to a certain point. If the AP issues are consistent, you run the risk of not only damaging your relationship with vendors, but ruining them altogether. According to the Accounts Payable Association, 23% of businesses said at least one supplier had refused to work with them again due to AP issues.
That’s bad for a few reasons:
1.) You just lost a reliable vendor.
2.) Now procurement needs to find a new one.
3.) Your vendor has a network, and they probably don’t have many nice things to say about working with you.
And nobody wants any of that.
The obvious benefits of accounts payable automation
Phew. Okay, now that we got the bad stuff out of the way, let’s focus on the benefits of AP automation. Be ready—there are a lot of them. Some might be more relevant to you and your situation than others, but all of them together deliver the ultimate benefit for any business: faster, more accurate finance processes.
Cost savings and efficiency
AP automation delivers significant cost savings and efficiency improvements. It takes less labor, results in fewer mistakes, accelerates invoice cycles and reporting, and reduces the physical costs associated with traditional invoicing processes.
In short, AP automation means:
- Less manual entry
- Less invoice processing time
- Faster invoice cycle times
- Fewer physical expenses (paper, etc)
- Lower cost per invoice
- Faster reporting
AP automation removes the risk of a) paying for things you haven’t received and b) paying the same invoice multiple times. A common challenge is paying for goods or services which have not been received and that finance had no knowledge of prior to receiving the invoice. This relates to a process commonly known as three-way matching: did we request to buy this? (approved PO), did we receive what we ordered? (goods received), and does the invoice match the PO and the goods received?
It seems like common sense, but as businesses grow these are the processes which can fall through the cracks for any number of reasons, including: the time taken to manually create the transaction every time, different departments having different processes or authority, or the lack of a defined, end-to-end system-driven process.
Increased efficiency + improved accuracy = better reporting. It’s a pretty simple formula, really. Automating the creation of invoices gets data in faster and more accurately, meaning those who need access to it can see it sooner, trust it without question, and make more strategic decisions as a result.
Better vendor relationships
Business ultimately comes down to relationships. Yes, customer relationships are key, but so are ones with your vendors. Being organized with accounts payable and fulfilling payments on time are immensely important in strengthening your partnerships with your vendors—both big and small. And when you can have consistency with your vendors, you never have to worry about potential performance gaps in the service or product you provide and sell.
This one’s a bit of a gimme. You put all the other benefits together, and it’s a no-brainer that business performance will improve. With efficiency, accuracy, better reporting, and stronger vendor relationships comes more predictability (and profitability) in your business processes.
The not-so-obvious benefits of AP automation
Believe it or not, there are even more benefits of AP automation. Sure, things like cost savings, accuracy, and business performance might be the big-ticket items, but there are plenty of other small benefits that, when put together, don’t seem so small after all.
More time for value-added tasks
Because AP automation saves your finance team a boatload of time, each member of the team will be able to spend more time and effort on value-added tasks. Instead of intaking invoices and waiting on approvals, they’re now free to: help close the month, work with sales leaders on complicated deals and contracts, forecast finances, and more.
No more manual accounts payable, no more worries about someone altering invoices. While none of us want to believe it happens, it happens. In 2020, the AFCE reported 2,504 cases of fraud from 125 countries, totaling losses of $3.6 billion (USD), finding that smaller businesses were twice as likely to suffer billing-related fraud, and four more times likely to be the victim of check and payment tampering.
By automating AP, you remove the biggest chance someone has to alter critical details in relation to the invoice (e.g., supplier name, bank details, or payment amount). Combining the automatic creation of transactions with a three-way matching process for each invoice should deliver an airtight process to remove any risk of fraud, certainly from the perspective of creating, processing, and paying invoices.
40% of the world’s harvested trees are used to produce paper. That’s a lot of chopping and burning. Digitally automating accounts payable not only reduces your CO2 output, but it’s also better for your bottom line, too. The cost of paper alone is one thing, but add in the costs of storage, copying, printing, and postage, and you’re looking at some serious cost-savings by going digital (and automatic).
Team morale and retention
Well, this one’s easy…nobody got into finance because they love inputting data, intaking invoices, and chasing down approvals. In fact, those are the things that drive people away from this industry altogether. AP automation furthers your team’s sense of pride, and since they’ll be spending more time on value-added tasks, they’ll have more of a purpose. All of that improves morale and helps retention.
Why accounts payable automation is a hard sell
Though the pains of manual AP are obvious and the benefits of AP automation glaring, getting your decision-makers on board with an AP automation software is hard work. One of the problems is perception, as 60% of CFOs surveyed are unsure if their in-house staff has the technical expertise necessary to support significant digitization of financial processes.
Another problem? Cost: 37% of CFOs consider it a concern. And half of CFOs surveyed are also worried about not having fully integrated ERP platforms.
But, like anything else, there are ways around these objections—even if they’re from your CFO.
How to pitch decision-makers on AP automation
1.) Lay out your current state (pains).
2.) Present data around the pains.
3.) Show what the pains are costing you and the company.
4.) Lay out what could be.
5.) Propose a solution to get there (AP automation).
6.) Present data around the benefits of AP automation (use this ROI calculator for cost-savings).
7.) Talk about secondary and tertiary benefits of AP automation.
8.) Explain how it’ll integrate with your ERP (or other platforms).
9.) Present the expected costs of AP automation software.
10.) Make it clear that you have the technical wherewithal to support the software.
11.) Propose what your buying process would look like (and how long it would take).
12.) Ask the hard question. Get an answer. And discuss.
Introducing the AP automation ROI calculator
You might be reading this and thinking to yourself:
“Hmm, I wonder how much we could be saving by automating our accounts payable processes.”
Well, wonder no more.
Our team has put together an easy-to-use AP automation ROI calculator. Simply input the data and see how much you could be saving with AP automation—it’ll make the next conversation with your CFO much, much easier.
Interested? Try the calculator now or bookmark it for later.
About ZoneCapture: AP automation for NetSuite, in NetSuite
Developed based on NetSuite user requests, ZoneCapture uses a combination of OCR and AI technology to reduce manual entry by up to 83%, eliminate human error, and enhance your existing NetSuite workflows and customizations as standard. Learn more here.