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Dont Overlook Role AP Plays Saving Money
Even though the accounts payable (AP) department governs money leaving your company, it’s one of the best places to work on saving money. According to interviews with hundreds of finance leaders conducted by the firm Insight Avenue (March 2024), 80% believe accounts payable should lead a company’s efforts to identify cost savings. When it’s working efficiently, AP can play a key strategic role in company finances and help the company save money.
A smoothly functioning AP department doesn’t lose money to late fees, has a low processing cost-per-invoice, streamlines your payment information, and collects usable data. It also helps your company maintain a good reputation with vendors. When you’re on good terms with vendors, they’re more likely to negotiate discounts and better payment terms.
In the modern business world, the best way to streamline your AP process and save money is with Business Process Automation (BPA) software. This type of software makes the whole process more efficient, most cost-effective, and simple for employees.
Identify Errors and Stop Losing Money
It’s normal for money to leave your company through the AP department as payments for goods and services. However, you might have more money leaving the company through AP than you think.
An outdated, poorly functioning AP department is a sinkhole for cash. Your company could be losing money due to overpayment, late payment fees, and duplicate payments. An automated AP software system that can track deadlines and cross-reference payments will help stop that. The software can also help identify discrepancies, such as a supplier charging two different prices for the same product. If you do find any discrepancies or errors, that can open an opportunity to renegotiate contracts with suppliers and correct costly miscommunications.
Other costly errors can come from poor budgeting and maverick spending. With automation software taking over time-consuming tasks like data entry and invoice processing, human employees will have more time to dig into the data. With software support, they’ll have an easier time identifying mistakes in budgets and rogue spending from people at your company going around the procurement department.
Save on Processing Cost Per Invoice
One of the biggest ways that AP automation software saves money is by speeding up invoice processing. With a paper system, invoice processing takes longer, which means a higher processing cost per invoice. Moving to an automated AP system can cut costs by almost 250% per invoice.
One study by the Institute of Finance and Management (IOFM) reported companies that automated their AP departments could see costs as low as $2 per invoice compared to around $15 per invoice for companies with little or no automation. Similarly, a survey by the American Productivity & Quality Center (APQC) found that the median cost for manual invoice processing is $12.44, while top performing companies spend $4.98 or less per invoice.
At NextProcess, we’ve found that organizations that implement fully automated accounts payable processing save an average of $14.93 per invoice compared to those that manually process invoices. That’s a huge discount if you take advantage of it. Plus, faster processing means a faster close at the end of each month.
Streamline Payment Data and Workflow
As we mentioned earlier, automation speeds up invoice processing. It also, especially if it’s from a Software-as-a-Service (SaaS) provider like NextProcess, centralizes your payment information and streamlines the payments workflow. First, the invoice enters the system (either a digital copy submitted directly into the system or a scan from a paper file). Then, the system automatically and accurately captures all the data from and about the invoice and quickly routes it through the approvals process. Once the invoice clears your company’s custom approval settings, it gets routed for payment.
With a good BPA system, you couldn’t lose track of accounts payable information unless you tried (and maybe not even then). Our AP Automation Software automatically matches invoices to purchase orders, processes invoices, and keeps track of payment deadlines. All the information on the invoices and about the invoices (e.g. metadata, such as when the invoice entered the system) is collected automatically as the invoice goes through the system.
Once you’re ready for payment, NextProcess also offers the option of outsourcing your payment disbursement. We’ll print checks for your company and mail them on time to your vendors, or pay them via ACH. The software lets you customize the checks’ appearance, maintain security, and see your payment process in real-time.
Simplify Data Processing
Manual data entry is notoriously slow and riddled with errors. When you switch to BPA software, you’ll get much more reliable data. And with a cloud-based SaaS system that centralizes all your processes (even across multiple company locations) and updates in real-time, you’ll get data that’s both accurate and timely.
A SaaS BPA system provides complete oversight of your payment process. This makes it easy to see where the money’s going and organize short-term and long-term credit. The accurate, easily accessible, real-time data accessibility simplifies audits. It also makes it easier to generate accurate forecasts and budgets.
Accounts payable plays a key role in maintaining a successful business. Automating accounting processes and centralizing information about incoming and outgoing payments can save you money and ease the burden on your financial department. Contact NextProcess today to schedule a demo and see first-hand how we can help save your company money.
