The accounts payable department is sort of the financial backbone, responsible for monitoring and managing the cash flows in any company. The financial health of a company can be assessed by screening purchases and payments made by this department. It, therefore, goes without saying that for companies to remain solvent and of sound financial state, the proper functioning of the accounts payable department is imperative.
The common worry, though, for most growing companies is the sheer amount of paperwork and manual labor that goes into managing AP vendor invoices and related transactional documents. Of course, every company has skilled staff managing vendor invoice processing on a large scale. Even so, on a fundamental level, paper impedes progress — the challenges and discrepancies common to an accounting department stem from this basic liability.
If companies are to grow, they must overcome the challenges in managing mission critical processes. The time and effort that goes into sorting, filing, performing data entry, and reporting of transactional information from source documents is enormous enough to prevent management from taking up any strategic growth initiatives.
Fortunately, technology has removed much of the drudgery from manual paperwork through intelligent automation of AP vendor invoice processing. Cognitive technologies like AI and machine learning, combined with Robotic Process Automation (RPA) enable unattended processing of transactional source documents, ensuring faster, error-free results.
We’ll discuss the benefits of AP invoice automation by firstly, explaining what invoice processing entails and the challenges it poses for growing businesses.
A typical company makes purchases to facilitate the running of its business — raw materials, machinery, office supplies, etc. A corresponding invoice is sent by the related vendor for each purchase made. Because purchases are usually made on credit, the vendor mentions the grace period within which payments against purchases must be made. Invoice processing is the handling and processing of vendor invoices. The entire process from reception, sorting, validating, approving, and payment of an invoice constitutes vendor invoice processing. Typically, companies handle payments in the hundreds and thousands every month. For every wrong data entry, missing invoice, or unaccounted payment made, the time, cost, and effort to re-process the same is doubled.
That is why data entry is a very critical step in invoice processing that must be done right for the entire process to be reliable. Another critical function in invoice processing is invoice validation. From the hundreds and thousands of invoices you receive everyday, would you know accurately which purchase order (PO) a particular invoice corresponds to? Also, if adequate information regarding a vendor is not mentioned in the invoice, would you be able to instantly locate and contact the vendor for immediate clarification regarding the invoice details?
Pulling up invoices instantly to verify PO-invoice matching, vendor details, payment terms, invoice total, possible early pay discounts*, or even dispute resolution, if there is any, is difficult to accomplish manually.
The sheer effort and time that goes into manually validating invoices simply pushes back payment deadlines by weeks or months. Another important consideration with manual vendor invoicing is the difficulty tracking if payments have been made for some or all parts of an invoice. Sometimes, businesses find it convenient to pay for some portion of the purchase made and defer payment for the remaining at another time, depending on the terms of agreement with vendors. All these particulars are difficult to monitor and account for when manually processing invoices on a large scale.
We mentioned early payment discounts that you can avail when you pay off your debt within a certain period of time. With accounts payable automation software, there is possibility to secure early pay discounts regularly as the processing time of vendor invoices is reduced significantly.
Take for example the common 3/10, net 30 discount offer — What this implies is if a buyer decides to pay off a debt owed to a vendor within 10 days instead of the standard 30 days, he secures a discount of 3% on the amount owed. So, if the invoice is billed for $1500, the buyer will need to pay only 1455 within 10 days and close the deal. If the buyer takes complete advantage of the scheme and maximizes his chances of securing early pay discounts throughout the year, he saves 18x45= $810 per year, counting the 18 chances he gets in a year to avail this discount.
Given these factors, the best way invoice processing can be made efficient is with intelligent automation.
Take the first step in transforming your accounts payable department with Artsyl. Contact Us for a more detailed demo of our intelligent process automation technology for AP invoice automation.