Sifting Through Technology: Best Practices for Efficient AP Automation
by Lenny DeFranco
In the last few years, the landscape of software promising to automate critical accounting processes has exploded. Some solutions cover the whole spectrum of operations, from payroll to inventory and everything in between. Others are focused on excelling at specific use cases, like spend management or invoice processing.
To the business operator trying to sift through this crowded landscape, there are many questions to ask during the sourcing process: what are my best practices, what do I want this software to do, how much ROI am I looking for?
Here are a few guides to help in your search.
Establish a workflow that saves the most time & money
According to our research, the cost of manually processing a single paper invoice (including data entry, copying, matching, routing, and postage) averages out to $5.00.
In addition, there are added costs for approval time and inquiries, including error resolutions, auditing, and requests to the vendor for lost invoices. In the best-case scenario, these issues add about $3.00. Vendors can also charge for those dispute resolutions, or charge late fees even if they were due to the invoice itself being missing. In total, the cost for processing one paper invoice generally comes out to a minimum of $8 per invoice on a manual workflow.
When you look at the savings associated with automating invoice processing, many of those cost-accruing stages are sped up significantly, if not removed completely. With automation, you’re able to accomplish all of the data entry, matching, and approval processes for an average of 90% less than the average cost of manual entry.
Invoice automation also drastically cuts the amount of time required. On average the time to process an invoice manually, especially if you are shipping the invoices to a home office, is around 3.5 weeks. Automated processes lower that time to 2.5 days. Imagine the payroll savings that could mean!
Turning your invoices into insights
Prices change constantly in the restaurant world. One important job of invoice automation is showing you exactly how and why your prices are fluctuating.
That’s great and all, but how can you make that work for you? Easily, it turns out… once you have a system in place.
If a vendor increases their prices without alerting you, accounts payable automation gives you the power to let them know your restaurant is aware and needs the prices corrected — especially if the prices are increasing only for certain locations and not for others. As you start to scale your business, these types of COGS analytics become invaluable to your bottom line.
Program your approval tree precisely to fit your company
While being able to track your prices is invaluable, the only way to benefit from these informative insights is to make sure the proper people are aware of them. What happens when an invoice comes in higher than other similar invoices? In those cases, it’s essential you have a system that can alert the right people and prompt them to deal with it.
Automate the entire invoice life cycle
Once your invoices have been automatically coded and synced into your accounting software, you may think you’re done with them. Some systems even stop there. But those systems disregard the final steps.
Bill payment and reconciliation are essential parts of the process to automate. With an AP specific software, you’re able to pay your vendors with little more than a click of a button, while resting easy that all of that information will be logged directly into your accounting software. It makes for a seamless experience not just for you, but for your vendors as well.
Once payment is complete, the final step arrives and is one of the most time intensive tasks in the office: statement reconciliation. Each one of those vendor statements has to be examined and verified. If any credits are owed but not marked on the statement, or if an invoice is missing entirely, there is a cost associated with the time that it takes to reconcile these issues.
Automation turns problems that normally take days, if not weeks, to notice into immediately obvious alerts. Whether there is a credit due that the vendor didn’t list in their records, or an invoice they claim was sent but was never received, the expedited automation process allows operators to get back to the task at hand: overseeing their store itself, instead of waiting for a response from your vendor or digging through a filing cabinet to find that one mysterious missing invoice.
In the grand scheme of things, automation is key for success across all industries, and most specifically in regard to invoice management.
Stay up to date on the latest news in AP automation and finance
Related
