Introduction
Automated processes and algorithms may sound high-tech and futuristic, but they are already central to the way many companies operate.
Increasingly, mundane and repeatable tasks can be passed from humans to computers. While this has been evident in fields such as manufacturing for decades, it is relatively new in the corporate finance and accounting space.
It is high time to embrace automation in accounts payable departments through cutting-edge payments software. Staff in these departments are often overloaded and spend significant amounts of time inputting data manually – raising the risk of errors
Automation has been shown to drastically reduce the time spent on manual data inputting, freeing up time for more productive and revenue-generating activities. It reduces the risk of human error, and significantly enhances accountants’ ability to monitor for fraud.
A digital solution also offers management a clear, accurate, and timely top-down view of the whole payments system, helping to identify pain points and move quickly to implement solutions.
Furthermore, an advanced accounting system can boost productivity and job satisfaction in your accounts team – crucial factors to success in what is shaping up to be a difficult period for businesses of all kinds.
In this paper, we explore how moving from a paper-based accounts payable system can transform operating models, reduce costs, strengthen client and supplier relationships, and bring multiple other benefits to stakeholders.
01 The state of the market
2023 is shaping up to be a tough year for businesses of all kinds. High inflation will be a drag on growth, with rising energy costs eating into profits and affecting income, particularly in consumer-facing sectors.
Companies are already bracing themselves for a difficult period with UK private sector activity expected to fall, according to the CBI. Meanwhile, data from the Office for National Statistics (ONS) indicates that turnover is already falling: 29% of British businesses reported lower turnover in January 2023 compared to December 2022.
This gloomy outlook will naturally cause business owners and management teams to look at cost control. A good place to start is the accounts payable department.
More than half of companies are believed to be still using manual invoicing processes, with the cost of this estimated at up to $15 (£12.50) per document. This can be drastically reduced – down to around $5 per invoice or even less – through automation.
Manual Invoicing costs £12.50 Automation costs £5
It is not just about reducing costs, however. Automating your invoicing system can prove to be a rewarding investment in many other ways, from reducing errors and improving security, to enhancing staff productivity and job satisfaction.
More than a quarter of UK companies with 10 or more staff reported experiencing difficulties in recruiting new employees in January this year, according to the ONS. Meanwhile, in the US and other major developed economies, many organisations have reported experiencing the effects of the ‘Great Resignation’, as staff react against perceived low pay and unsatisfactory work.
02 In the office
These high-level data points translate into real-world office experiences. With costs higher across the board, accounts payable departments are under pressure to process payments quicker while also reducing costly errors. This is difficult to do with a manual, paper-based process.
Pressure on finances will make others outside the accounts payable department busier – making it harder to chase people for invoice approvals. This raises the risk of late payments, with all the supplier dissatisfaction that comes with it. The last thing any company wants is to be forced into sourcing new suppliers due to avoidable errors.
Multiple studies have reported an increase in scams and fraud in the past few years, with criminals aiming to take advantage of weaker security and uncertainty associated with enforced remote working during the pandemic and higher amounts of online activity. This has an undeniable financial cost, and manual processes can make identifying and mitigating these incidents harder.
Such pressure can have a negative impact on staff productivity and job satisfaction, as well as on a company’s bottom line. So, what can automation software bring to an accounts payable department to address all this?
03 How automation helps
The automation of accounts payable systems may seem like an expensive and complex concept. However, it has been shown repeatedly to be an investment worth making as it increases efficiency, transparency, consistency, security, and scalability. Research by global consultancy firm McKinsey has shown that many finance functions – including accounts payable – are either highly or fully automatable, including data entry, basic audit, and approval requests.
Efficiency
With a paper-based invoicing system, some companies have reported that their accounts teams spend 30-40% of their time on manual data entry. This reduces the time they can spend on monitoring payments, managing workflows, chasing late invoices, and other important tasks.
Automation and digitisation can also drastically reduce the time spent chasing approvals. As soon as an invoice is in the system, an email is sent to the appropriate person for approval – and regular reminders are sent automatically until the invoice is signed off. This can help remove bottlenecks and reduce the risk of late payments.
State-of-the-art accounting software will also connect easily and securely to other systems through technology such as APIs, allowing the department to interact efficiently with outside suppliers and further reduce the need for physical documents.
Importantly, this new-found efficiency often translates into improved satisfaction among accounts payable department staff. Clients often tell us how much their jobs have been transformed for the better through automation of time-consuming tasks, leaving them more time to focus on more rewarding work.
Transparency and consistency
Automation brings an important level of consistency across your accounts payable processes. Using cutting-edge technology, invoices of any kind can be scanned in and information inputted into the relevant areas, requiring only a sense check from a member of your team rather than the full manual input.
Automation technology can ‘learn’ different kinds of invoices, so that future payments involving the same client will be quicker.
Moving from paper record to digital also allows accounting teams to obtain a much clearer and more accurate view of the company’s financial position through powerful analytics and visualisation tools. In a matter of moments, management can view cashflow data, outstanding invoices, and identify any pain points.
If there is a bottleneck for approvals, this will be displayed clearly and can be addressed through positive action. If particular, if clients are experiencing delays in payment, these will be flagged by the system to ensure they are prioritised.
This level of transparency also enhances efficiencies, allowing accounts teams to be responsive to any problems that arise and helping them maintain and strengthen client relationships.
Security
With more companies having shifted to remote or flexible working in the wake of the Covid-19 pandemic, a digitised and secure system enables accounting teams to access invoicing from any location. This also supports larger companies with payments staff in multiple office locations, making it easier for information to be shared quickly and securely.
Consistency of information also brings with it an enhanced ability to flag potential problems. Duplicated invoices – one of the most common types of potential fraud – are immediately flagged by the system for correction. Other potential issues, such as false billing, fraudulent payments, payments to unapproved vendors, and falsified data, are all mitigated or reduced through secure digitisation and automated audits.
By reducing the amount of physical paperwork involved in invoicing, companies can be assured that data is protected on secure servers with backups, rather than stored in offices where it can be lost, stolen, or damaged more easily.
Scalability
By using cloud-based accounts payable software, companies have access to a system that can match their growth ambitions. As more invoices are processed, the system ‘learns’ and process times are reduced, making it easier to get through larger numbers of documents.
The ‘software as a service’ (SaaS) model used by most digital service providers means systems are constantly monitored by a dedicated team and upgrades are applied to all users. SaaS systems are designed for use by multiple separate companies simultaneously, and so can deal with increases in activity with no noticeable effect on performance.
As your company grows, so does your accounts payable capacity – without the need for additional investment or resources.
Environmental impact
There are important environmental and safety concerns that mean a digitised invoicing system could be beneficial to companies.
The first is storage. To keep accurate records requires paper invoices to be stored securely on-site, which means paying for extra floor space. Storing large amounts of paper can also be a fire hazard.
On the environmental side, printing invoices and related documents uses significant amounts of paper. Even if recycled paper is used, printers and ink also have environmental impacts through construction, transportation, difficulties in recycling, and the cost of maintenance.
Simply put, by reducing the number of physical invoices in your office, you could save money on printing costs, paper, and storage, while also reducing your firm’s impact on the environment.
Two separate studies from 2008 in Sweden and Australia found that significant savings in energy and carbon emissions were possible by switching from all-paper invoicing to electronic invoicing – and, by extension, financial savings are possible too. Add to this the additional technological advantages of automation introduced in the intervening 15 years and the current impact of such a switch could be even greater.
04 Automating for the future
Automating accounts payable processes brings multiple benefits to companies of all kinds – and goes way beyond reducing costs. A digitised, SaaS approach can make a company’s cashflow monitoring easier, more accurate, and more responsive to problems. It can reduce the risk of errors and address potential frauds. It can reduce the environmental impact of a company’s day-to-day operations. Most of all, it can make accounting teams more productive and efficient – allowing them to focus on making the business a success.
In an increasingly fast-paced and digital world, the key question for all businesses is not whether automation might be right for them, but whether they can afford not to take this crucial technological step.
Automation is the future. It should be a key part of any forward-thinking company’s long-term strategy.
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