There’s no doubt that finance leaders are realizing the value of automating their invoicing and accounts payable (AP) processing workflows. According to the Institute of Finance Management research, 84% of AP professionals are optimistic about the progress their department will make over the next three years in eliminating paper invoices.1 The benefits of automation are clear, and everyone’s heard them: it saves time, it saves money and it increases efficiencies and staff productivity.
But how do the benefits of AP automation translate directly to the bottom line? Here’s how.
Industry reports cite increased staff productivity as the top reason for automating. Highly automated AP departments process 16 times as many invoices per full-time employee (FTE) each month as their peers with little or no automation, according to the Institute of Finance Management (IOFM) report Is Your AP Performance Top Tier?2 That’s 22,756 invoices per FTE with a highly automated workflow, compared to just 1,350 invoices per FTE processing manually.
Simply put, existing staff can do more—a lot more—with automation. Additionally, staff will be freed up to do other strategic value-added work, such as improving supplier relationships and leveraging early payment discounts.
Tim Carter, the CFO of Salsarita’s Fresh Mexican Grill, said, “Rather than hiring additional people, give existing staff the automation tools to make their roles multi-faceted. The finance department—all departments for that matter—can run lean and take on more strategic, value-added duties. Had we not implemented the Yooz AP automation solution, we would have had to hire additional bookkeeping staff by now.”
The bottom line: Multiply the wages of one FTE in the AP department by the number of staff that would need to be hired as processing volume grows. That’s how much can be saved with an automated AP solution.
More early payment discounts
Eighty percent of the businesses surveyed for IOFM’s AP department benchmarking report3 receive invoices that offer discounts in exchange for early payment. Sometimes, operators don’t take advantage of the discounts simply because they haven’t had time to process the invoice—see the first point about productivity with regards to manual processing.
With an automated system and the ability for approvers to access documents in the Cloud anywhere, anytime, invoices move more efficiently through the process. That means no more lost invoices and no more late payments—and lots more discounts for early payment.
The bottom line: Multiply the average dollar volume of invoices paid per month by 10% (the average early payment discount offered by suppliers). With an automated AP processing solution, that’s about how much can be saved.
Money saved on shipping and storing of documents
When finance leaders think about the costs of processing invoices, they might only consider the number of employees and time it takes each to manually enter data, track down lost invoices and get approvals. But what about the costs to ship invoices to a central location for processing or store boxes and boxes of paper documents? Those are real costs that are eliminated with automation.
Carter, along with Bryan Schmidt, controller for UNITE HERE HEALTH, faced costs associated with shipping documents to a central location for processing, as well as costs associated with storing and shredding documents, to the tune of thousands of dollars per year.
The bottom line: Tally up the total dollars spent each year on shipping, shredding and storing. With automation, that number becomes $0, saving operators thousands of dollars a year—or more.
Cut processing costs dramatically
Automation eliminates the manual processes that drive up the cost of AP processing—to the tune of more than $15 per invoice on average4—including hiring additional staff as the volume of invoices to process increases, keying invoice data, physically routing invoices for approval, filing invoices and more. With automation, however, that processing cost can be reduced by up to 84%—down to just $2.36 per invoice, according to Levvel Research5. Patsy Price, director of operations, Peterson Auto Group, saved more than $35,000 per year since switching from a manual AP workflow to a smart, cloud-based AP automation solution.
The bottom line: The math is simple, here—total up how many invoices are processed and find out the total cost, then reduce that total number by as much as 84%, the amount saved by switching.