Manufacturers and distributors are being forced to do more with less as the labor shortage continues late into 2021. We’ve provided resources and strategies for countering this shortage in two areas where this “squeeze” is most noticeable: sales and the supply chain. A third, more easily overlooked area where you can maintain and improve productivity without increasing headcount is in the accounts payable (AP) process.
Short-staffed or no, improving AP can make a difference.
If you’re short-staffed on the invoice processing side of your business, you risk getting off track with payments, affecting your relationships with vendors. Your employees might experience burnout trying to ensure accuracy and timeliness with manual or inefficiently automated processes. And they’re more likely to make mistakes under these conditions.
If you’re not short-staffed in this department but you’re operating on long payment cycles because of manual or inefficiently automated processes, you’re missing opportunities to improve supplier relationships, earn discounts and get on priority lists. And with manual entry, it’s likely you and your team are constantly clearing up errors, such as duplicate payments.
In this third installment of our three-part series about improving productivity in the midst of a labor shortage, we talk strategy for capturing more productivity in accounts payable.
Why target the accounts payable process for productivity improvements?
If your AP process isn’t automated, chances are your employees spend an exorbitant amount of time on tasks such as data entry, invoice verification, data transference, account reconciliation and payment processing. If your process is somewhat automated, staff likely still spends chunks of their day reviewing, correcting and approving.
Today, these steps exist within a gap that full automation can close accurately and securely.
Manual or semi-automated AP processes present the following pain points:
Slow processing times
Manual or semi-automated AP processes take days and even weeks from receipt to payment. Employees must cross-check to ensure the accuracy of an invoice and ensure its fulfillment, match the invoice to supplier-specific terms and pricing, combine multiple orders into one invoice, etc. When this process takes longer than it needs to, you miss out on discounts, risk incurring late fees and strain your relationships with suppliers and vendors.
- Average time to process one invoice: 16+ days
- Average cost to process one invoice: $7 to $15
Human error is unavoidable in a manual process such as this, with its many steps, details and customizations. And it’s particularly difficult to maintain accuracy if you’re running with a lean staff. A single missed zero or misplaced decimal could easily slip past. And a duplicate payment could go unnoticed until month’s end and beyond.
Manually avoiding, triple-checking for, and resolving errors takes time and resources. This keeps payment cycles long, causes delays and absorbs employees’ energies. In addition, it’s another pain point that could strain supplier and vendor relationships.
- Manual data entry has an average 70% accuracy rate.
Manually inputting data and cross-checking information takes time out of your staff’s day. This keeps them from focusing on strategic, value-add activities that could improve productivity at your organization. And it equates to a higher cost per invoice.
What makes manual entry so tedious in accounts payable?
- There’s a long chain of events in the process, from “opening” the order, keying the data, validating the invoice against the purchase order, and so on.
- Individual customer-vendor relationships are complex. Each tends to have unique terms and pricing, which must be referenced, validated and checked against the original purchase orders.
- Additional time is lost if an employee must match and validate multiple invoices to a single purchase order.
- Data must be pushed downstream depending on the payment method and how the payment is attributed.
- Employees often spend time ensuring accuracy around differentiations in language and format.
These non-value-add manual processes are inefficient and cost more in time and money than necessary considering today’s automation options.
One strategy to close a large productivity gap in AP
Automation is a key tactic for distributors and manufacturers to deploy in their accounts payable processes. However, just any automation solution won’t get you the productivity you’re capable of. In fact, 49 percent of orders that are “automatically” processed today still require a human “touch” and aren’t truly automated. For AP specifically, the percentage of truly touchless document processing is even lower: 12 percent.
Ensure you’re getting a true automation solution that won’t leave you with errors and corrections to review and approve.
For example, an automation solution like Conexiom’s Platform for Accounts Payable will take your processing times from days to seconds, processing invoices in less than two minutes. It’s 100% accurate and touchless.
- Reduces supplier inquiries so that staff spends 30% less time handling them.
- Processes 3x the invoices as manual methods.
- Has 73% faster processing cycle times.
- Cost 81% less to process versus manual methods.
- Decreases cost of processing invoices by up to 50%.
- Leads to faster approvals for invoices.
With truly automated invoice processing, you’ll improve processing speed, reducing errors and optimizing resources. As a result, you’ll capture early discounts and retain favor with suppliers. And your staff can redeploy their time to value-add activities, spending more time managing supplier relationships, or simply catching up to the volume of invoices you already have so you can make more timely payments.
Learn how to future-proof your finance operations with the Conexiom Platform for Accounts Payable.