AP Automation: ROI and Benefits

Accounts Payables Automation : ROI and Benefits

Accounts Payables departments primary goals is to support their organizations by controlling and managing the processing of vendor invoices transactions while collecting and delivering accurate financial information to the right recipient/system at the right time.

However, Accounts Payables departments face several challenges in their efforts to meet this goal. AP processes are traditionally paper intensive, time consuming and expensive. Furthermore, AP departments are faced with an ever-increasing volume and variety of information (incl. paper documents, spreadsheets, print-streams, e-mails, faxes, and electronic documents)

AP Operational Challenges

• Time consuming and inefficient Invoice registration process.
• Difficulty accessing all information related to a specific transaction.
• Cumbersome three-way match process.
• Late payments to suppliers.
• Invoices get lost in the loop.
• Lost discounts for prompt payments.
• Poor record handling for audit trains and potential litigation.
• High rate of duplicate payments.

AP Managerial Challenges

• Limited process visibility and transparency
• Incorrect information and lack of defined, audited A/P processes can lead to unnecessary and hidden costs, fraud, late payments, process errors, and double payments.
• Lack of Real-time Metrics
• Management finds it difficult to leverage real-time metrics to better understand outstanding liabilities and improve cash flow planning.

What are the main reasons companies are investing in AP automation.

According to a recent AIIM study, the biggest benefit reported by AP users is better monitoring of invoice status and therefore improved process transparency. This also ties in with fewer invoices being lost in the loop, presenting a more professional and efficient face to suppliers, who otherwise find it frustrating to chase payments where the customer has no real idea where in the payment process a stalled invoice might be.

The following chart ranks the key factors that drive companies to invest in AP automation

AP Automation ROI

Even though AP Invoice processing is not a direct revenue generation activity, companies that invest in AP automation are benefiting from tangible operational cost savings and even unrealized revenue, such as the one provided by better credit terms and discounts from prompt payment.

According to the Aberdeen Group, a streamlined, well automated Accounts payable operation will process an invoice, on average, in about one-sixth the time, at about one-twelfth the cost, of manually operated Accounts Payable operations.

Furthermore, organizations that automate A/P processes can shave more than 80% of the cost of processing and can decrease processing time from 17 days to less than 5.

According to IOMA’s AP Department Benchmark & Analysis, the average cost to process one paper invoice is $12 in average. This cost goes down to around $6 after deploying a medium level of AP automation. Cost goes down another 20% after a deploying a high level of AP automation