How many days does it take to process an invoice? Have you missed early payment discounts? How much does it cost to process an invoice? If you are unsure of any of these these questions, your AP process might need a new solution.
If start to work on the solution now, in no time it can lead to big changes for your business, specifically saving time and money.
I. What is AP Processing
AP processing is the complete workflow that your business uses to pay AP invoices. With most businesses, AP processing workflows are mostly the same from start to finish There may be minor differences depending on the who is involved with the process and flow required from “procure-to-pay.”
Key elements of the AP Process
- CEO’s, CFO’s and VP’s of Finance
- AP managers and team
- The invoice approvers
- Vendors and Suppliers
Types of invoices
- Matched PO’s
- Recurring Invoices (Electric, Gas, Water etc…)
- Supplier/Vendor Invoices
- Employee expenses
Procedures you can put in place
- Auto routing of Invoices through the proper channel
- Auto matching of the PO’s, Receipts and invoices.
- Handling of exceptions and by fixing an issue when a PO doesn’t match the invoice.
- Centralize the billing process when there are multiple locations.
- With manual data entry, you can data enter about 1000 invoices a month. With a fully automated AP process, about 5,000 invoices per month can be data entered. Manual data entry will always have type-o’s and mis-keyed information.
- If an invoice is misplaced, lost or even destroyed, resolving these issues could add up to 7 days to your processing time.
II. Looking at Workflows
An automated AP process accounts for any roadblocks, and if errors do appear, they are found and fixed immediately.
Managing AP invoice processing
Invoices can come from different departments within your business, like Marketing, IT, Administrative Staff, and everything department between. Each business’s workflow with their vendors and/or suppliers can be different, but the AP department is in charge receiving invoices and then processing through their workflow in order to get them approved.
Is automation right for your business?
Automating your AP process takes care of all the steps from procure to pay automaticly.
Companies that are using AP automation more likely to receive early payment discounts than companies that are still manually process their invoices. Invoices are paid on time, all the time. Data accurately keyed then matched and verified.
Before AP automation came about, every AP processing department is the team that pays the bills. When using AP automation, it allows the AP team to be an asset, spending more time to analyze processes and negotiate contracts in order to save money.
III. 3- Improving AP Processing
Step One: Do an internal audit
What is your current process? Are you still using paper? Look closer at the workflow and plot each step in your current AP process while looking at the procedures and roadblocks from what we have previous laid out above. I. Below some things to look for in your audit
- Where are the invoices being sent to?
- Do you have system or software that they are entered into.?
- Do you use PO matching?
- How many invoices are being processed per day and month?
- Who are payment approvers?
- How many exceptions are created daily and how are they being handled?
- How many days does it take to fully process an invoice from start to finish?
Step Two: Measuring up
Are you still manually data entering invoices? Even some the best data entry operators only can key 40 percent of their invoices, which wastes time, and increases the chance for data entry errors.
Fully automated businesses can take an average of 4 days to process and approve a single invoice. Whereas businesses manually data entering invoices average 17.5 days. The manual processing cost-per-invoice is at almost $16 and can cost a business a lot of money to do so.
If your business processes on average about 2,000 invoices a month, your business could save an estimated $24,000 a month automating their AP process.
Step Three: Recognize and improve
What is your goal? Is it saving money and time? Transparency?
Take a look at your audit and analyze each critical point in your AP processing workflow. What can be removed and what can be improved? Does each point contribute to making or saving money? This is where you may want to bring in the key players of the AP process to get their ideas and opinions.
There a few more things that should be considered:
- How much time to implement automation?
- Who need to be involved with the implementation process?
- Will current vendors be impacted?
- Will the “executives” be onboard?
- Is there a budget for AP automation?
Every business is not the same. Some businesses do not process enough invoices on a daily basis to feel the need for an automated AP process, but they could still use AP automation in certain points of their AP workflow. Automated payments can be set up even if the invoices need manual approval. In general, AP automation offers end-to-end solutions rather than specific process solutions, that doesn’t mean a business can’t make it work if that is what is needed.
When proposing an AP processing solution to your team, make sure you stress that you don’t have to start from scratch. Existing processes can be tweaked are specific points and changes to that process can be done one at a time. The solution that best fits your business model boils down to what is right for your team.