Accounts Payable automation is a business imperative in today’s environment to enable critical finance operations to run smoothly, even under remote work requirements during a quarantine. By automating AP, organizations can efficiently and effectively process invoices, enabling suppliers to be paid on time, and money, goods and services to continue flowing between organizations.
So, once you realize that it’s time to automate AP, or achieve a higher level of automation, how do you get management buy-in?
The Time and Cost of Manual Processing Add Up Quickly
Often when preparing the business case for automation, companies start with the benefits it delivers to the AP organization, focusing on time and cost savings. For example, the effort it takes for a company to process tens or hundreds of thousands of invoices annually is substantial -- and costly. While the cost to process an invoice manually can vary according to the source measuring it – usually between $2-$30 – according to Ardent Partners and others, a reasonable average is about $10, which includes labor (in AP and other departments) and the cost of an ERP system where the invoices are sent for payment.
For example, using both the low and high figures, if you have 50,000 invoices annually, you would be paying either $100,000 at a cost of $2 per invoice or $1.5 million if you process them at $30 each. And, at the average cost of $10 per invoice, you’re looking at half a million dollars. Any way you look at it, it’s an expensive proposition. When you consider that an automation system might cost $50,000 to $100,000 and reduce your processing costs by up to 90%, the system could pay for itself very quickly.
Determining Your Manual Processing Costs
Instead of using averages, you could make a business case for AP automation by determining the cost of manually handling invoices at your company. Here are several key metrics to consider:
The Hidden Cost Savings
We’ve just been looking at savings within the AP and finance departments, but that’s just part of the picture. There are reviewers throughout your organization that spend time on invoices as well. Consider the time and costs that they are incurring:
And, that’s not considering the lost opportunity cost of what AP professionals and others throughout the organization could be doing with their extra time.
The Priceless, Strategic Value of Real-time Data
Next, consider the strategic value of the real-time invoice data that automation delivers. Treasury could have real-time visibility into unrecorded liabilities and cash flow for better cash management. Accounting could be able to do month-end closes faster and more accurately. Business decisions could be made based on real-time, accurate information. While this is difficult to measure, the value is huge.
When you consider the unprecedented needs for streamlined, fast and mobile processing, there’s no doubt that AP automation is the smartest move. And when you add in all the cost, time and opportunity savings – not to mention the business benefit – it’s really a no-brainer. With all this ammunition, it should be easy to make a clear and compelling business case for AP automation to management.
Ready to automate your AP? Learn more about how to get started in the accounts payable automation process.