Even with all the enterprise-level digital adoption, Accounts Payable could still be one of the most paper-intensive departments in your organization. The team’s primary function, invoice processing, is usually a major drain on a company’s resources — given errors due to human involvement, time-consuming and repetitive tasks, and slow processing cycles. The longer you ignore the cost impacts of the business-critical processes, the deeper the dents they tend to cause in your organization’s bottom line.
Now, consider this fact. The US Institute of Finance & Management (IOFM) suggests that the cost of processing a single invoice can be anywhere between $1 and $21. In the UK, Gartner pegs the average cost of invoice processing at £4-£25. Just to put things into perspective, think of a mid-sized company that has approximately 1000 invoices to process per month: they’d be losing significant money through the gaps caused by process inefficiency. The benefits of accounts payable automation can help to solve the inefficiencies of invoice processing.
What Makes Invoice Processing Expensive?
Wondering how best to calculate the expenses involved in invoice processing in your organization? The simplest way is to equate it with the costs of associated human effort. Let’s look at an example. Typically, a member of your Accounts Payable team would take at least 30 minutes to process a single invoice fully. Now, considering the average salary of an Accounts Payable clerk in the US as $43,917 (approximately $21 per hour), processing one invoice could cost you $10.5. For the mid-sized company, we took into consideration earlier, this could add up to over $10,000 every month.
And that’s not all! At this point, we’ve only discussed the base costs involved. But there’s more to it, such as:
- Cost of fixing manual errors: Invoice processing is highly susceptible to errors — due to day-to-day variances or volume-based pressure, or sometimes even due to sheer human fatigue. To fix such errors on a paper invoice, you might have to spend a significant $53.50 again – for creating a new document, communicating with different stakeholders, and for redacting payments, if already made.
- Lost opportunity costs, such as discounts: Most vendors offer discounts for early payments, which can be as high as 2-5%. Manual invoice processing can cause delays, which could result in the payment missing the discount window.
- Strained vendor relationships: Delayed payments, redacting incorrect payment amounts, the need to ask for the same information repeatedly, and other related inefficiencies can seriously damage your brand’s reputation in today’s vendor and supplier landscape. More serious mistakes could even harm long-term relationships, adding to your overall costs.
- Physical costs like storage, paper, etc.: Manual invoice processing goes hand-in-hand with paper-based processes, involving cost components such as space for physical file storage, need for regular supply of stationery, etc. Unstructured hybrid systems can be even more expensive as the Accounts Payable team might have to switch between digital and paper formats, often spawning duplication.
- Cost of efforts diverted from core functions: Finally, the complex approval processes coupled with frequent exceptions call for efforts from personnel outside the Invoice Processing team. Often, business leaders might have to intervene in invoice processing, and their valuable person-hours (which would otherwise be spent on higher-value functions) must be factored in.
What is Invoice Automation & STP?
To begin with, invoice and accounts payable automation benefits go beyond barebones e-invoicing, which only recreates paper processes in a digital format and also replicates its inefficiencies. Intelligent invoice processing automation leverages technology in a meaningful way to remove the bottlenecks in your Accounts Payable workflow, bringing human intervention down to near-zero. This enables straight-through processing or STP, where the end-to-end invoice lifecycle is handled by automated technology and in case of exceptions, the average handling time by humans is dramatically reduced.
6 Benefits of Accounts Payable Automation That Achieves Straight-Through Processing (STP) and Helps Reduce Invoice Processing Costs
According to McKinsey, intelligent automation can streamline 93% of tasks in payment processing. The stages of automation of accounting process and invoice processing include:
1. Extract invoice data using Artificial Intelligence and Machine Learning
AI/ML-based technology such as object recognition and optical character recognition (OCR) can extract data from scanned images, PDF snapshots, etc., and populate the fields in your Accounts Payable system automatically. Intelligent invoice extraction is compatible with country-specific EDI formats, XML/JSON files, scanned images, and even mailbox attachments.
2. Set up a custom supplier portal
The heaviest long-term issue caused by inefficient invoice processing is probably the erosion of trust in vendor relationships. The smart UX of an automated solution allows you to set up a digital portal where vendors and suppliers can choose their relevant forms, make data entries, and enjoy a seamless experience interacting with your Invoice Processing team.
3. Configure workflows to handle exceptions
Among the many benefits of accounts payable automation, automated exception handling lets your Accounts Payable staff tackle complex invoice scenarios without claiming the time of multiple business stakeholders. For example, they can set up workflows to handle exceptions such as potential signs of fraud, invalid vendor data, invalid file formats, and specific PO detail mismatches. Configurable rules like these for invoice validation reduce an agent’s time to manually process an invoice by 80%.
4. Integrate with your ERP
An automated invoice processing solution can connect with your existing systems like SAP, Oracle, Pegasus, Microsoft Dynamics, Salesforce, Infor, Sage, and homegrown applications to enable bi-directional data flow. Your ERP can act as the reference for validating extracted invoice data (which otherwise needs to be performed by an AP staff member), and the workflow information is documented in ERP.
5. Gain from analytics and data insights
Over and above saving invoice processing costs, automation becomes a true value generator here. First, it uses validation rules to assign a risk assessment score to every invoice, and prioritizes tasks automatically based on load, productivity, or your unique segmentation rules. Next, it uncovers key data from your invoice processes to highlight productivity trends, KPIs, and improvement areas – e.g., real-time visibility into invoices pending approval.
6. Consider hosting on the cloud
Cloud-based invoice processing automation significantly lowers your upfront costs and ongoing maintenance overheads, while also reducing your overall TCO. On-premise partly-managed hosting is also an option in areas where there are key regulatory requirements.
Save More as You Grow. Make Accounts Payable a Profit Center.
While traditional invoice processing methods become more expensive with scale (as volume and costs are directly related), intelligent automation and STP allows you to reduce costs as you grow. As the solution architecture is inherently scalable, your automation partner can offer volume-based efficiencies – for example, incrementally reduced pricing for volume tiers above 5000 invoices per month.
JIFFY.ai has been delivering invoice processing and accounts payable automation benefits for small business, large finance and accounting teams and every other organization in between by helping them to achieve 80% straight-through processing and bringing down the human efforts needed to process invoices from a new supplier to absolutely 0%. Sophisticated AI and ML-based workflows give you the opportunity to look beyond just replicating age-old manual processes in a digital wireframe. Leveraging our intelligent and scalable automation HyperApps, we are committed to helping future-oriented enterprises derive business value across critical functions like Accounts Payable..
If you are looking to iron out bottlenecks or inefficiencies in your business processes through sustainable, intelligent automation, please email us at firstname.lastname@example.org and our HyperApps experts will be happy to help you accelerate!
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