In any economy, it’s always been important for businesses to operate as efficiently as possible. When most organizations look to increase operational efficiencies, however, they tend to focus on processes associated with revenue generation. A software company, for example, might have no problem investing in tools that help developers work faster and more productively. Yet, at the same time, they might be hesitant to buy new equipment for the janitors who clean their offices.
Even though it’s not connected to revenue generation, investing in certain areas, such as accounts payable (AP), can have a profoundly positive impact on operations. For example, by implementing an AP automation solution, organizations can improve AP productivity while reducing overpayments, double payments and late payments. They can also improve their cash flow situation by reducing payroll costs and taking advantage of every early payment discount available to them.
Keep reading to learn more about how automating accounts payable enables organizations to build smarter AP systems that drive more efficiencies and help businesses soar to new heights.
Building More Efficient AP Workflows
When you automate AP, you build a significantly more efficient accounts payable department for several reasons. First, AP automation enables organizations to move away from paper invoices and entering data from PDFs to implement a wholly digital system. As a result, AP employees no longer have to spend time searching for misplaced invoices or purchase orders details; all the information they need will always be in one place, a few clicks away. Plus, they don’t have to follow up on approvals by hand, either.
AP automation also enables teams to eliminate invoice exceptions and achieve 100% straight-through processing. In the event a supplier sends in an invoice that’s missing key information, the technology will automatically complete two- and three-way matching exercises with zero manual intervention required.
Due to these benefits, organizations can get away with having fewer people in the AP department, which enables them to invest their resources more effectively. To illustrate, an organization might realize it needs three fewer people in AP and can reallocate those resources to finance and marketing. With resources allocated more effectively, efficiency improves even more.
Improving Margins and Profitability
AP automation gives the AP team complete visibility into their invoices, purchase orders and other financial documents in near-real time. As a result, AP professionals are able to keep their fingers on the pulse of cash inflows and outflows. Gone are the days of stumbling across a stack of forgotten invoices on someone’s desk and being blindsided by bills you weren’t expecting.
With increased visibility into the invoicing process, it’s much easier for AP teams to take advantage of early payment discounts when they want to, holding onto more of their money as a result. On the flip side, when cash is tighter, AP can decide to withhold payment until the day it’s due, further extending cash flow.
Additionally, since AP teams get more visibility into invoices and everything is done out in the open, AP automation helps reduce instances of payment fraud. And that’s a big deal since 71% of organizations experienced payment fraud attacks or attempts in 2021, according to the 2022 AFP Payments Fraud and Control Survey. With a lower likelihood of being a victim of fraud and having to respond to it, margins improve further.
And again, since AP automation helps teams operate more efficiently while requiring fewer people, organizations can cut down their payroll expenses too. Not only can this help them protect their cash flow during a difficult economic climate, but it can also put the business in a strong position to supercharge profitability when the market ultimately rebounds.
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Strengthening Supplier Relationships with a Direct Digital Connection
AP automation enables organizations to form direct digital connections with each of their suppliers. As a result, suppliers don’t have to pick up the phone when they’re wondering when they can expect a check. Instead, they can view a supplier portal and self-serve that information at their own leisure. Not only does this make life more convenient for suppliers, but it also frees AP teams from having to respond to repeated requests over and over again. And since happier workers are more productive, taking busywork away from AP delivers additional efficiency gains too.
By empowering them to find information and stay on top of payment schedules, AP automation improves supplier experiences. As a result, suppliers will be more likely to view the organization in a favorable light. Depending on the payment issues and supply chain struggles they’re dealing with on their own, this could have profound impacts. If given the choice between working with a company that offers predictable payments and one that’s still relying on paper-based, error-prone manual processes, the supplier who’s in a pinch will almost certainly choose the former option.
Since AP automation gives you visibility into all invoices, you won’t have to worry about paying a supplier late, which, in turn, prevents the supplier from placing a credit hold on your account. As a result, you get the peace of mind that comes with knowing that your business can keep humming along with supply shipments coming in like clockwork.
Building a Smarter, More Resilient, More Efficient Business with AP Automation
In today’s challenging economy, many organizations don’t have as many sales or as much growth as they’re used to. At the same time, they’re facing cost pressures due to rising inflation and labor costs, and money’s getting tighter.
Good news: Investing in AP automation can be one way to alleviate these concerns. By investing in AP automation, your organization will be in a much stronger position as the economy starts to grow again, and you won’t have to hire additional resources to process the increased invoice volume because the technology can scale alongside you.
If you’ve been operating AP the same way for quite some time, your department is long overdue for an overhaul. Luckily, a simple investment in AP automation technology can go a long way toward accelerating your organization’s digital transformation journey, modernizing AP workflows, and building a smarter business that’s ready for the future.
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