In the quest for financial excellence, finance departments face the challenge of processing Accounts Payable (AP) invoices efficiently while controlling costs, managing staff levels, and ensuring timely payments according to contract terms.
Key Challenges in Manual Invoice Processing
Manual processing involves several labor-intensive steps:
- Data entry into ERP systems
- Matching invoices with purchase orders (POs)
- Approval workflows
- Coding transactions to the general ledger
- Disbursements and statement reconciliations
- Handling discrepancies and exceptions
- Managing related communications internally and with vendors
Understanding AP Cost Structure
- Cost Per Invoice:
Automated systems can reduce the cost to $8-$25 per invoice, compared to over $30 with manual processes.
- Days Payable Outstanding (DPO): Managing DPO effectively allows companies to optimize cash flow and maintain good supplier relationships. Industry standards suggest aiming for a DPO of 30 to 45 days.
- Invoice Exception Rate: Reducing this rate below the industry benchmark of 2% can significantly improve efficiency and lower costs.
- Percentage of Electronic Invoices: Increasing electronic invoicing can enhance both accuracy and processing speed, with leading organizations processing up to 90% of their invoices electronically.
Benefits of Cloud-Based AP Automation
Investing in cloud-based AP automation offers significant advantages:
- Cost Reduction: Lower processing costs and eliminate the need for additional AP staff.
- Efficiency and Accuracy: Streamline operations and reduce error rates with automated systems.
- Strategic Resource Allocation: Free up existing staff to focus on higher-value tasks.
- Enhanced Financial Health and Competitiveness: Improve your company’s overall financial operations and competitive position.
For CFOs navigating today's complex business environment, prioritizing AP automation is crucial for achieving operational excellence and sustainable growth. I highly recommend integrating cloud-based AP processing with your existing ERP systems to maximize benefits.