As detailed in our previous article, a huge number of organisations are still manually processing invoices as part of their accounts payable (AP) process.
While many of these organisations would likely accept that this is having a negative effect on the efficiency of their accounts payable process, many may be oblivious to the importance of their AP efficiency to their organisation as a whole.
There are signs that this may be changing though, with Kofax reporting that 55% of businesses now see their accounts payable teams as “very” or “exceptionally” valuable to their organisation.
To further strengthen this belief then, we have compiled a list of the top reasons why the efficiency of your accounts payable process is crucial to the wider success of your organisation.
It helps ensure your business operations run smoothly
Regardless of the products and/or services you provide to your customers, your organisation will rely on other businesses’ products and services in order to help you function as an organisation.
Every one of your internal departments will utilise various suppliers that provide them with the tools they need to enable them to perform their role within your organisation. If the efficiency of your accounts payable process means the invoices from these suppliers are not being paid in a timely manner, various departments within your organisation are not going to receive the goods and services they need on time, or worse, not at all. This will cause costly delays to your business operations, and subsequently effect the level of service you are able to provide to your customers.
For those organisations who are not in the top 20% when it comes to accounts payable performance, the time taken to process a single invoice can be considerable. A report by Ardent in 2017, found that in comparison to the top performing organisations, businesses are on average taking a total of 12 days to process a single invoice, 8.5 days longer than those who are best-in-class. It is worth noting that according to Ardent, 61% of these best-in-class organisations use an automated invoice data capture solution, such as our Unit4 Business World (Agresso) Invoice Automation software.
If various departments within your organisation are experiencing delays to due to slow supplier invoice payments, it is inevitable there will be friction between these departments and finance. Naturally, friction between your internal departments is not good, and can cause various problems. In fact, according to Kofax, 49% of AP staff already cite that a lack of respect within their organisation is one of their biggest challenges, a problem that is likely to be exasperated if the efficiency of your accounts payable process is causing friction between them and other departments.
It is also worth considering that recent surveys have found that the vast majority of staff who actually carry out the manual tasks that are part of inefficient processes would like them to be improved upon, with a 2019 survey by Monday.com finding that 70% of employees are in favour of automation being introduced for routine tasks, such as data entry.
This desire from staff for more automation and increased respect, may be factors that eventually cause members of your AP team to leave, a development that would not only cost your organisation in terms of hiring and training costs, but also through the fact that you would likely suffer from a further decrease in the efficiency of accounts payable process as new staff become accustomed to your processes and systems.
Make the most of Finance’s time
As touched upon above, an inefficient accounts payable process is not something your AP team are likely to enjoy being part of, a point emphasised by the fact that 63% of employees feel like that inefficient tasks, such as manual data entry, rob them off the opportunity of showing off their best work.
An inefficient account payable process doesn’t just take up the time of one or two members of your account payable team either, it also has a significant effect on how your senior finance staff spend their time too. CFO.com found that the finance function in general spends an incredible 49% of its time processing transactions. This means that in some cases your most senior finance personnel are spending half their week just processing transactions. To put this in to context, CFO.com found that on average finance are only spending 20% of their time providing the organisation with the financial information it needs to help make strategic decisions, the likely reason why your senior finance staff were initially hired.
By taking steps to increase your accounts payable process efficiency, you are not only enabling your senior finance staff to spend more time utilising their key skills, but you are also providing your whole finance team with the chance to work on tasks that generate real value for your organisation, such as fraud prevention, spend management and cash flow management to name a few. In fact, a more efficient accounts payable process will allow your team to have a much more reliable view of your cash flow, with prompt and correct payments providing your team with more accurate information to base their analysis on.
Strong supplier relationships
As discussed at the beginning, every organisation relies on various suppliers to ensure they can operate and grow as organisation.
It therefore makes sense that you would want to ensure you have a strong relationship with your suppliers, especially in the case of those who’s goods and/or services are absolutely crucial to your operation.
A strong relationship with your suppliers can often be guaranteed by just ensuring that you pay your invoices correctly and on-time. This is especially important to you suppliers who are small or medium businesses (SMB’s), with the UK Federation of Small Business reporting that delayed invoice payments cause 50,000 SMB’s to shut down annually, costing the UK economy £2.5 billion.
With this in mind, it easy to see why so many suppliers feel like they need to put in place measures to protect themselves from late payments. While it may be unsurprising to hear then that 60% of organisations have been charged late payment fees, it may be shocking to hear that nearly one in five organisations have had a supplier cancel goods or even refuse to work with them because of late payments.
An efficient accounts payable process not only helps to prevent costly supplier issues such as these, but it also offers you the chance to make even further cost-savings through the ability to negotiate early payments fees, which your supplier will likely be much more open to once you have demonstrated you have a track record of prompt invoice payments.
As detailed in our previous article, the cost of manual invoice processing, the direct savings from automating just this one manual task can be huge. This is even before you start to consider the indirect and hidden costs of an inefficient accounts payable process, from rectifying mistakes and business operation delays, to employee dissatisfaction and supplier relationships to name a few.