AP Automation Benefits : 7 Reasons to Automate in 2019
AP automation benefits are trending at number one in accounts payable (ap) solutions in 2019. Number 1.
AP automation streamlines how accounting departments process invoices and make supplier payments. Considered a cost center, investment in digitizing the AP is usually overlooked. We can all agree however, that longstanding accounts payable glitches include manual processes, paper invoices and paper checks or payments. The outdated function contributes directly to higher costs through labor intensive processes, lost financial incentives, errors, downtime, decreased productivity, damaged or poor supplier relationships and more.
The facts are in. Companies that switch to AP automation see the benefits not just in AP, but across the organization as a whole.
7 AP automation benefits
It’s past time to let go of dated processes that hold your accounting department back from meaningful work. Embrace technology to enjoy AP automation benefits.
1. Revenue Generation
The C-suite doesn’t always perceive AP to be a revenue stream for the business. If anything, AP is often viewed as a cost center. Let’s be honest, receivables get all the attention!
However, financial incentives are now in the mix, available from issuers of purchasing and virtual cards via significant cash rebates through shared revenue streams. Rebates are outlined in basis points. Easier now to demonstrate measurable outcomes with epayables when AP automation benefits drive revenue.
An automated AP department strengthens businesses with cash flow.
2. Reduce Costs with Dynamic and Early Pay Discounting
Most suppliers offer early pay discounts as high as 3% for paying invoices early, usually within the first ten days after issuance. This makes a big difference to your bottom line.
Moreover, dynamic discounting provides a sliding scale of flexibility. Payment terms vary the discount rate with the invoice paid date. Accelerated supplier payment reaps big rewards in cost savings.
With manual processes, businesses are unable to meet the tight turnaround required to pay early and earn a discount. As a result, your business is missing out on thousands of dollars’ worth of savings. Revenue generation and early pay savings are the “creme-de-la-creme” of AP automation benefits.
3. Reduce error and improve compliance
Errors happen frequently in manual AP processes, largely due to human error or wayward paper trails.
This not only slows down payment processing but increases the chance of overpaying, underpaying, or even paying twice. Each invoice error can cost easily more than $50 per incident.
When you experience this level of error, it’s inevitable that your compliance risk increases, too. Your business is more likely to be audited when you have a paper process, where the risks for fines are higher. The audit trail demands quick and accurate information. What payments were authorized, when, and by who. Easily demonstrate payment authorization, payment date, and purpose with an automated system that faithfully logs this information each time, without fail.
4. Collect and analyze data in real time
Manual processes don’t allow businesses to see their data in real time. It’s difficult to understand your current cash flow or to make future projections with missing data.
AP automation benefits businesses by offering data collection, aggregation, and analysis in real-time. Access all of your data in one place with no need to wait for AP to update the books. Visibility and transparency of payment data is available on your desktop or even your phone.
Automation moves AP past a processing function and into an analytical role that delivers insights, improving your bottom line and encouraging healthy business growth.
This data demonstrates the health of your business as well as your long-term ability to scale. For example, you can analyze the relationships with vendors to ensure you’re being charged fairly or to detect if it’s time to renegotiate rates (XBS Global can help with this).
Paper processing requires immaculate filing, plenty of storage, and attention to detail. It’s incredibly expensive to print, file, and store paper records.
5. Reallocate Finance Staff to Strategic Initiatives
First, AP automation benefits your staff by freeing up their time. Thanks to automated processes, there’s less friction in the AP process. In fact, with more time and newfound data visibility,the focus turns toward more strategic financial tasks.
Smart Payments 2019 Accounts Payable Best Practices makes note of a number of them.
- Identify trends and bottlenecks in AP processes
- Monitor the volume and value of invoices, related documents, and payments
- Improve cash analysis, cash planning, and liquidity management
- Speed up accrual reporting on financial reports
Second, AP automation data helps businesses analyze their vendor relationships and spend. You know how important it is to have a good relationship with suppliers. See number 6!
6. Improve Vendor Relationships
AP automation benefits your suppliers by helping you pay on time, and often early. Your suppliers are inundated with late payments (see Thomas’s Why are US Companies Delaying Payments to Suppliers?). The lack of control associated with manual AP processes effects outcomes and triggers past dues. Late payments are game changers in the buyer/supplier relationship.
Manage your supply chain and foster goodwill with suppliers through AP automation.
7. Reduce Fraud
Finally, in a paper based accounts payable system fraud detection can go unnoticed for a long time – to the tune of years (see AP Automation fortifies defenses against fraud by the Association for Financial Professionals).
In fact, the accounting department itself is responsible for 17 percent of all internal fraud cases. AccountingWEB lists internal fraud stats that are staggering. A lack of internal controls “is the leading area of organizational weakness”. Check fraud is impressive, accountable for 77% of all payment fraud in 2014.
AP automation benefits are no longer an option or luxury, but a necessity. It is time to get your affairs in order and automate.