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Where would any business be without its suppliers? Organisations rely on the products and services they receive from vendors, however the process of paying them has become a largely burdensome and complex task.
In fact, a study by Ardent Partners and Canon found the average cost to process a single invoice is a whopping $10.08, requiring more than 8 days of processing power! For businesses that process thousands of invoices every week, the overall cost and time delays of accounts payable can severely impact the company’s bottom line.
For accounts payable (AP) professionals, one of their most significant challenges is the time it takes to process and approve a payment. In addition, professionals say they spend more than 20% of their day simply contacting suppliers about invoices – further adding to time pressures.
The accounts payable process refers to the series of steps and procedures within a business that involve managing the financial obligations related to the acquisition of goods or services from vendors or suppliers. It encompasses various tasks performed by the accounts payable department to ensure the efficient and accurate handling of vendor invoices and the timely settlement of liabilities. The key components of the accounts payable process include invoice processing, invoice payments, timely payments, approval process, and the reconciliation of purchase orders with received goods or services.
In any business, there are certain approved processes for making payments. Accounts payable (AP) is the department responsible for issuing payments to vendors and suppliers. The AP department typically has a set schedule of when invoices are paid, such as once a week or twice a month. However, there are several factors that can slow down the AP payment process. For example, if an invoice is received without proper documentation, it will likely be set aside until the correct paperwork is received. In addition, invoices may be held up if there are any discrepancies, such as incorrect amounts or missing information. The AP department may also flag an invoice for further review if the payment amount is unusually high. By understanding the various factors that can slow down AP payments, businesses can take steps to ensure that their invoices are paid in a timely manner.
Coupled with issues involving misplaced or lost paper-based invoices, the delays in AP can present serious risks to a company such as:
Companies in industries such as manufacturing, construction, wholesale, distribution, and healthcare are typically most at risk – struggling with the need to pay invoices from thousands of different vendors, which come in different layouts and via different methods of delivery (72.4% of AP professionals still receive invoices in the mail and over 40% still receive some by fax!).
The impact of slow and costly AP processes is also felt by professional services businesses where the expense to process an invoice cuts into profits and diverts funds away from more valuable activities such as marketing.
The key to enhancing accounts payable (AP) processes lies in streamlining the entire AP workflow. This involves various steps and considerations to make the process more efficient.
One critical aspect is efficient purchase order (PO) management. Purchase orders document the intent to buy goods or services and set the terms. Streamlining this step ensures that the company's financial statements accurately reflect money owed to vendors. An organised and automated PO system helps prevent data entry errors, which can lead to late fees and strained supplier relationships.
Another vital improvement is the adoption of AP automation. AP automation tools can significantly enhance the accounts payable workflow. These systems process invoices faster and more accurately, reducing manual processes and data entry errors. Automation also helps in ensuring timely payments, preventing late fees, and strengthening internal controls. By automating the invoice management process, businesses can optimise their accounts payable processes and enhance the overall financial health of the company.
Efficiently verifying vendor invoices is crucial for improving the AP process. This step involves matching supplier invoices with purchase orders and receiving reports. Implementing a reliable verification system ensures that payments are made accurately, reducing the risk of duplicate payments and improving the company's balance sheet. By verifying invoices in a timely manner, businesses can build better relationships with their suppliers, negotiate favorable terms, and avoid unnecessary costs.
Strengthening internal controls is another way to enhance the AP process. Internal controls help in preventing fraud and ensuring that the AP team follows established procedures. This includes implementing approval processes, segregating duties, and regularly reviewing accounts payable processes for compliance. By bolstering internal controls, businesses can maintain financial accuracy and transparency, ultimately improving their accounts payable workflow.
Slow AP issues generally occur because staff are impeded by labour-intensive manual tasks that are prone to human error and prevent them from having any time to work on driving the business forward.
These tasks could include:
Accounts payable automation (AP automation) is changing the way companies deal with invoice processing by solving critical problems related to speed, accuracy and control.
Goldman Sachs estimates AP automation can drive up to 80% time-savings for small and medium sized businesses. This is a huge saving for those companies that are most under financial pressure to remain competitive.
What is Accounts Payable Automation? AP automation takes the manual headache out of accounts payable by replicating the processes humans do each day and having advanced technology do them instead. The solution can be completely configured to handle a variety of workflows and rules, and is not impeded by business hours, lunch breaks, manual errors, and so on.
It can also be set up to recognise invoices from key suppliers to ensure payments are made within certain time periods to meet SLAs or receive early payment discounts (and avoid late fees).
For example, a medical and pharmaceutical company implemented automation to manage 3-way matching for their accounts payable process. Their previous process required 3 full time people to manage around 1,800 invoices a month using a variety of applications.
The AP solution now extracts data from an incoming invoice via email before validating the:
The company saw a return on investment in just 2 months, with a 90% reduction in processing time, 0% error rate, and manual effort reduced to just 10%.
Most importantly, the same staff who were once hindered by these repetitive tasks can now spend more time on imaginative and human-centric activities that add real value to the organisation.
AP automation is the future of invoice processing, and we are proud to be able to offer an automated accounts payable solution that streamlines your accounting workflows, improves efficiency, and has a guaranteed 98.5% minimum data accuracy.
Our solution removes manual tasks from the equation, while giving you greater visibility over your financial processes so you’re always in control of your spending.
There are no upfront licensing costs or need to licence, and it’s cloud-based so you can rest assured you are always working with the latest version.
For your business, this means:
To learn more about Canon Business Services' AP automation solution, contact us.
Businesses can enhance their accounts payable process by implementing efficient purchase order management. This involves maintaining clear records of expenses, matching invoices with purchase orders and receiving reports, and ensuring timely payments. Proper management of the expense account contributes to accurate financial statements.
Implementing AP automation in the accounts payable workflow offers several benefits. It streamlines the AP process, reduces manual data entry errors, and speeds up invoice payments. This improves efficiency, minimises late payments, and strengthens supplier relationships.
Strengthening internal controls within the accounts payable department is crucial. This involves rigorous invoice approval processes, verifying invoices against purchase orders and receiving reports, and enforcing payment authorisation procedures. These measures prevent fraud and maintain compliance with established procedures, safeguarding the company's financial records.
To optimise vendor invoice verification and payment processes, companies can implement best practices in accounts payable management. This includes prompt invoice data capture, efficient paper document management, and effective vendor management to negotiate favorable payment terms. These strategies lead to timely payments, improved supplier relationships, and cost savings.
