The world of Accounts Payable (AP) is undergoing a massive transformation, with AP automation leading the charge. By replacing labor-intensive tasks with automated systems, businesses can significantly cut costs and boost efficiency. But what do these savings look like in real terms? In this in-depth article, we’ll dive into the research and survey data to paint a complete picture of the cost benefits of AP automation.
Table of Contents
- The Expense of Traditional AP Processing
- Advantages of AP Automation
- The Return on Investment (ROI) of AP Automation
- Taking Action: Choosing and Implementing the Right AP Automation Solution
- Looking Beyond Cost Savings: The Strategic Value of AP Automation
- The Future of AP Automation
- The Role of Artificial Intelligence (AI) and Machine Learning (ML) in AP Automation
- Top AP Automation Tools and Platforms
- Key Considerations Before Adopting AP Automation
- Conclusion
The Expense of Traditional AP Processing
Manual AP processing can take a significant toll on a company’s finances. A study conducted by the Institute of Finance & Management (IOFM) revealed that the average expense to process an invoice manually is a staggering $15.96. For businesses handling high volumes of invoices, these costs can rapidly spiral out of control.
Advantages of AP Automation
Decreased Processing Expenses
The most immediate cost-saving advantage of AP automation is the reduction in cost per invoice. A study by Ardent Partners discovered that the average expense to process an invoice decreases by 60% or more when businesses transition from manual to automated AP systems.
Increased Early Payment Discounts
Many suppliers offer discounts for early payment, but these opportunities might be missed in manual processing due to delays or oversight. With automated systems, these discounts can be captured more consistently. Ardent Partners’ study found that top-performing AP departments capture nearly 75% more early payment discounts than their peers.
Diminished Labor Expenses
AP automation can significantly reduce the time employees spend on manual tasks, such as data entry and invoice matching. This allows for a reallocation of resources to more strategic tasks. The IOFM discovered that businesses using AP automation can process four times as many invoices per full-time employee as businesses relying on manual processes.
Fewer Late Payment Penalties
Late payments can lead to financial penalties and damage relationships with vendors. Automation enhances payment timeliness, reducing these unnecessary expenses.
The Return on Investment (ROI) of AP Automation
A study by PayStream Advisors found that businesses implementing AP automation witnessed a return on investment (ROI) within six to 18 months. This ROI is derived from a combination of direct cost savings, avoided expenses (like late payment penalties), and efficiency enhancements.
Additionally, the benefits of AP automation extend beyond cost savings. Automated systems can also improve data accuracy, strengthen financial control, and provide valuable analytics for better decision-making.
Taking Action: Choosing and Implementing the Right AP Automation Solution
To fully reap the benefits of AP automation, it’s crucial to select an AP automation solution tailored to your business’s unique needs and implement it effectively. Stay tuned to this blog for more insights on how to achieve this.
Looking Beyond Cost Savings: The Strategic Value of AP Automation
While the cost-saving potential of AP automation is evident, it’s essential to recognize that it’s not just about saving money. AP automation can transform your AP department from a cost center into a strategic asset that drives efficiency, control, and business intelligence.
The Future of AP Automation
As AP automation continues to evolve, businesses can expect even more improvements in efficiency and cost savings. Innovation in technology, integration with other financial systems, and the development of new features and capabilities will further enhance the benefits of AP automation.
The Role of Artificial Intelligence (AI) and Machine Learning (ML) in AP Automation
AI and ML are playing an increasingly crucial role in AP automation, helping businesses streamline their processes and identify opportunities for further optimization. These technologies can analyze vast amounts of data, identify patterns, and make predictions, allowing for more intelligent and efficient AP processes.
Top AP Automation Tools and Platforms
There are many AP automation tools and platforms available, each with its unique features and capabilities. Some of the top providers include:
- SAP Ariba
- Coupa
- Basware
- Tipalti
- Zapro AI
- Esker
When selecting an AP automation solution, it’s essential to consider factors such as ease of use, integration with existing systems, scalability, and customer support.
Key Considerations Before Adopting AP Automation
Before adopting AP automation, businesses should consider the following factors:
- The current state of their AP processes and where improvements can be made
- The potential ROI of implementing AP automation
- The level of integration required with existing financial systems
- The scalability of the chosen AP automation solution to meet future business needs
- The necessary training and support to ensure a smooth implementation and ongoing success
Conclusion
The cost-saving potential of AP automation is clear. By reducing processing expenses, capturing more early payment discounts, lowering labor costs, and avoiding late payment penalties, businesses can achieve a swift and significant ROI from their automation investment.
However, realizing these benefits requires choosing an AP automation solution that fits your business’s unique needs and implementing it effectively. Keep an eye on our blog for more insights on how to accomplish this.
Remember, AP automation is not just about cost savings. It’s also about transforming your AP department into a strategic asset that drives efficiency, control, and business intelligence.