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Why Making Room for AP Automation is Critical in the New Year
With 2018 in full swing, businesses of all shapes and sizes are reviewing their budgets for the year ahead. For most organizations, this kind of budgeting is a standard Q1 occurrence and typically follows a certain template:
- Calculating the cost of standard operations.
- Considering the bottom line impact of recent market and consumer trends.
- Writing line items for needed upgrades and improvements.
With that in mind, businesses that still rely on manual accounts payable processes should consider writing a line item into their 2018 budgets for AP automation. This may seem like a bold move, particularly if past years’ budgets have proven “successful” without it. Yet the truth is, AP automation doesn’t just provide marginal benefits: Instead, it can serve as a key driver of success in the year to come, offsetting its own cost and totally redefining the way your company conceptualizes its operating budget.
Time Is Money: Visible and Invisible Costs
Perhaps the most direct area where accounts payable automation delivers value is via time and labor savings. The adage “time is money” comes to mind, and it certainly applies here. Obviously, any comprehensive annual budget factors in the cost of labor – yet for many companies, manual AP processes carry “invisible expenses” that inflate this cost unnecessarily. These expenses include:
- Manually entering data into accounting software.
- Checking and rechecking that information is accurate.
- Authorizing and scheduling payments.
- Closing out invoices and filing paperwork.
By itself, the manual AP process is costly, even when performed perfectly. When there are adjustments and errors, however, even the soundest budgeting in the world won’t save you from additional expenses: Taking the time to track down and rectify potential entry errors with hard-copy invoices both has its own labor and resource costs associated and diverts resources away from standard operations.
Per-Invoice Expenses Pile Up
Beyond the abstractions, this labor and time cost has a definite impact on a company’s budgetary bottom line. MineralTree research shows that each manually processed invoice typically costs companies between $10 and $20.
This may not seem like an expense that will make or break a budget, but consider it this way: If a mid-market company processes an average of 1,000 invoices a month, at a cost of $15 per invoice, by the end of the year manual AP adds up to $180,000. Even for businesses regularly processing less than that, the costs associated with AP are no minor expense.
Many companies assume this $180,000 would simply be the “cost of doing business.” But AP automation effectively slashes the cost per invoice by rendering the entire process far less labor-intensive. Additional profit comes from the ability of AP employees to turn their attention to value-added efforts such as long-term planning, thereby rendering the cost of invoice processing essentially null. Imagine having access to funds you didn’t know you had, simply by automating what you’d previously assumed was a static expense.
Hidden Value: Visibility, Rewards and Fraud Prevention
Aside from reducing operational expenses, AP automation provides ancillary benefits that accrue value and help craft leaner, more profitable budgets. For instance, by reducing the need for manual entry, verifications, approvals and filing, companies quickly gain more actionable insight into their finances and are able to make more informed decisions about spending going forward.
AP transactions are completed more quickly, via a set schedule, making cash flow more predictable and reliable. Payments are never in a state of flux while they’re in the mail or waiting to be processed and cleared. AP automation seamlessly integrates with card-based payments, bringing with it the chance to earn cash-back rewards and other benefits to further add ROI opportunities for businesses.
Finally, if you have relied on manual AP, part of your annual budget probably included some level of fraud protection/mitigation. With the global fraud detection and prevention market expected to reach $42.6 billion by 2023, according to ReportBuyer, businesses must consider fraud mitigation this in budgeting. AP automation can significantly reduce the risk of payment fraud because of the layers of protection and oversight built into these systems. Multiple people will have to sign off on any given transaction, and missing money is far more likely to be spotted and rectified quickly.
Now Is the Time for AP Automation
As we’ve outlined, companies can often see dividends from abandoning manual AP for automation within the same calendar year. Armed with these potential benefits, financial professionals whose companies have not yet adopted accounts payable automation would be wise to make the case for writing AP automation into their budgets for 2018 and beyond. Doing so sets them up for success in the years to come.
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