One of the most effective ways to take your business to the next level is by automating processes. Whether that’s time sinks, administrative tasks or money leakage, you know there are things that if you could automate, your business would be easier to manage.
One of the most simple processes to automate is conversion to a fully-digital Accounts Payable system, with automation set up inside.
Like all aspects of business, though, it’s important to understand what your Return on Investment (ROI) of automating AP is. There is no standard ROI across the board, since the return you get depends heavily on your current situation and, frankly, how inefficient your AP process is.
Still, there are many ways to measure the significant ROI of AP processes. You can do this by tracking data such as your average cost per invoice, the total number of invoices received and processed, your invoice cycle time, discounts you received and wrong payment rate.
These will help you measure all sorts of ROI calculations, in relation to both time and money saved.
The beauty of AP automation is that it will help your business realize ROI in two areas. One is financial and one is non-financial. Let’s take a look at both.
When you’re discussing the financial data of AP automation, you’ll be looking at three main areas — the cost to process invoices, the reduced losses that used to be caused by human error, and the reduced invoice paying cycle.
- Invoice cost
This calculation is fairly straightforward. It’s simple to compare how much it costs your company to process an invoice manually versus using an automated process.
Studies have shown that processing invoices manually costs on average between $14 and $17 for each invoice. An automated AP system can drop that figure all the way down to only $3 per invoice. That’s a savings of $11 to $14 per invoice!
For simplicity’s sake, let’s assume that you process 1,000 invoices per month. Simply by automating your AP processes, you’ll save anywhere from $11,000 to $14,000 per month or $132,000 to $168,000 per year.
- Human error
Humans make mistakes. That’s just part of our nature. While these mistakes are understandable and fixable, they can be extremely costly.
Manual invoice processing requires a human to type data into the computer. It’s very simple to add a zero or leave off a zero when typing in an amount. That could easily result in you collecting hundreds of dollars versus thousands of dollars, and vice versa for invoices you’re paying.
These mistakes can be fixed, of course, but it’s expensive to do so. On average, correcting a mistake made on a paper invoice costs $53.50. That’s three times more expensive than processing the manual invoice in the first place.
How much you can save in a month by eliminating these human errors really depends on how many errors your team is making now. As you can see, though, eliminating this human error through automation can be a huge money saver.
- Pay cycle
Automating AP can significantly cut down on the number of days it takes to process and pay an invoice. On average, manual payment takes 14 days versus only three days if your company uses automation.
This matters because it can help you avoid paying late fees to your vendors. In the United States alone, late payments cost businesses $3 trillion each year, according to a Sage economic report.
When you automate your AP processes, you realize benefits that go beyond straight finances. First, doing so will allow you to add cash to your bottom line. You’ll also achieve financial savings within these areas, but it’s more difficult to measure directly.
The biggest ancillary benefit you receive from automating AP is time. No longer are your skilled AP employees bogged down with manual data processing. When you automate AP, these employees are freed up to take on larger projects and tasks that can not only save you money but can make you money, too.
These employees can work on shopping around for better prices and/or services, optimizing your schedule for payments to take advantage of early payment discounts, and establishing better working relationships with your vendors.
An automated AP process is an efficient one. When your system is set up, it’ll run flawlessly in the background with little to no attention.
One of the biggest benefits of automation is that it’s scalable. If all of a sudden you acquire new clients/customers or add a lot of vendors, your AP system can handle it.
A sudden influx in invoices won’t instantly force you to add to your staff. Your automated system will easily be able to handle everything and integrate it into the current workflow.
Another big benefit of automation is the fact that it will standardize your processes. While you may have had a SOP document before, each employee may have had their own little way of doing things.
This is gone when you automate, and that’s a good thing. It makes everything much easier for everyone to digest and understand.
A lot of people fear automation because they think they will lose control. On the contrary, it does the exact opposite of that: It puts total control in your hands. You can set the levers in the system that will determine how and when invoices are paid, including the approval process and other steps.
Get Started with AP Automation Today
There are limitless benefits of automating your AP processes. Some of them you’ll be able to measure in real numbers, while others you will see ancillary benefits from.
But there’s no doubt that converting your AP processes to automatic ones will result in significant ROI for your company.
Get started with AP automation today by contacting the experts at BluePenguin. They can help customize the package for you, and show you some of the excellent benefits of making the switch.