The Dirty Secret of the AP Industry; Most Solutions Are Not as Automated as You May Think
Written by: Bradley Bloch, CEO of factura.ai
Any way you slice it, manual invoice processing is less efficient and effective than automation.
It costs highly automated accounts payable departments less than one-quarter of what their less-automated peers spend to process an invoice.
- Cycle time. It takes highly automated accounts payable departments less than one-third the time their less-automated peers take to process an invoice.
- Working capital. Highly automated accounts payable department capture more early payment discount opportunities than their less-automated peers.
- Exception rate. Highly automated accounts payable departments report 57 percent fewer invoice exceptions than their less-automated peers.
- Straight-through posting. Highly automated accounts payable departments receive 2 ½ times as many purchase order (PO)-based invoices as their less-automated peers.
These sobering statistics from Ardent Partners’ 2019 State of ePayables Report illustrate the heavy toll that manual and semi-automated invoice processes have on an accounts payable department.
These statistics also point to the reasons that 71 percent of accounts payable leaders say their department plans to automate further in 2020, according to the results of a poll conducted during a recent virtual town hall meeting held by the Institute of Finance and Management (IOFM). Even departments that describe themselves as ‘largely automated’ plan to deploy more technology.
Despite the well-documented shortcomings of manual invoice processing, accounts payable leaders may be shocked to learn that many providers of so-called automated solutions fill the gaps in their technology by relying on the same types of manual processes that departments seek to abandon.
It is not uncommon for technology providers to rely heavily on offshore labor to key invoice data, match invoices with purchase orders (POs) and shipping receipts, or resolve exceptions, for instance.
It is cheaper to use offshore labor to perform these tasks than to develop the technology to automate the process, the technology providers presumably reason. Unless an accounts payable department asks how tasks are performed, they will be none the wiser. Some accounts payable leaders may not recognize the potential risk of using a vendor that relies on offshore labor if they achieve payback.
Until, of course, something goes wrong.
Something went ‘wrong’ earlier this year when shelter-in-place restrictions in some countries unexpectedly brought offshore operations to a halt. As a result, the technology providers who depend upon these offshore operations were unable to process invoices on behalf of their clients.
While Service Level Agreements (SLAs) may have provided some level of protection to accounts payable departments impacted by the shutdown of offshore operations, payables leaders were left to explain to senior management and to their suppliers why invoices were not getting paid, despite their move to “automation.” Missed invoice due-dates can result in late-payment penalties, missed early payment discount opportunities, strained supplier relationships, and potential supply chain disruption.
Fifty-nine percent of accounts payable departments missed at least one invoice due date during the pandemic due to operational disruption, IOFM reports. There is no telling how many of these late payments could have been avoided if accounts payable departments used an automated invoice processing solution that does not rely on offshore labor to complete tasks that technology can handle.
Using offshore labor to process invoices also is not as efficient, accurate, or safe as automation.
As accounts payable departments automate to address the challenges of the new reality, choosing a solution that relies on advanced technology – not offshore labor – will be critical to ensuring success.
Look for solutions that automate the invoice processing lifecycle from end-to-end:
Invoice receipt: import invoices through scanning, e-mail and more
- Invoice data capture: accurately capture invoice line-item information
- Workflow approval: digitally route invoices based on your business rules
- Exceptions resolution: collaborate and communicate with team members on any device
- Accounting or ERP integration: upload information and digitally store the original document
These types of solutions enable accounts payable departments to achieve the full benefits of automation, without the risks and inefficiencies of relying on offshore human operators.
In fact, some departments have achieved a 12X improvement in productivity in just one month.
If automation is a priority for your accounts payable department, Factura.ai wants to speak with you.
Contact us at factura.ai/quiz/ or call 1-833-905-2159 to arrange a no-obligation consultation and online product demonstration.