Companies strive for one goal, to increase their profit. Try to spend as little as possible while generating as much revenue as you can. Accepted business models therefore divide operations into two categories: cost centers and profit centers.
It’s a good question whether this binary split is a true reflection of business reality, because with the right tools it’s possible to turn an alleged burden (cost center) into a benefit (profit center). One such tool is business process automation. An area that is particularly ripe for transformation is accounts payable. Historically, this function is the last place where businesses will look to discover a hidden profit center.
There are three key areas where AP automation has the potential to transform and add value.
AP automation in the cloud improves real-time visibility into daily accounting operations, creating financial intelligence. Having access to aggregate and live accounting data enables companies to practice data-driven management in their everyday affairs, down to using a simple utility bill or vendor receipt to discover bigger trends. This holistic and live view is a competitive advantage that previously only large companies with large IT budgets could afford.
According to the Aberdeen Group’s 2015 AP/AR Benchmark Survey, 42% of finance leaders identify automation as a key step to improving overall financial management.
Now, CFOs and other junior or senior staff can use AP Intelligence to focus on cash forecasting and to schedule payments for optimum cash management. A good example is Falcon Holdings, a Texas-based franchise holder and operator of more than 300 restaurants across 15 states. As CFO Giovanna Koning explains, it used to take Falcon days or weeks to manually go through thousands of invoices. “We had 300 FedEx envelopes piling up on a table every week. Now, invoices are submitted electronically or scanned and then processed within hours.”
In addition, real-time data in the cloud gives companies a greater level of end-to-end control over the invoice processing cycle, which leads to improved business processes. Says Falcon CFO Koning: “We live and breathe our sales comp numbers for each day, so AP automation gives us a tangible competitive advantage.”
Data from our customers backs up this “costs to profits” scenario. If you add up all the labor savings, reduced printing and shipping cost, improved security, ability to retrieve documents quickly and other factors, organizations can save up to several thousands of dollars every day.
As businesses grow, so does their AP function. More suppliers, more vendors, more paperwork to handle. Typically, this type of growth hits the bottom line through higher invoice processing costs and reduced productivity.
Thanks to automation, companies can scale their AP function for less. It lets them capture invoices and other documents, extract relevant data from multichannel sources and power an electronic workflow. Companies do not waste time and money looking for lost invoices and can cut cycle time from 20-30 days to just a few days, avoiding late payment penalties and capturing all possible discounts.
What’s more, employees are free to focus on strategic tasks instead of shuffling paper. Our research shows that companies using AP automation typically boost their bottom line by 0.5%. With a company that has a 5% profit margin, automating the AP workflow has a significant impact on profitability.
Finally, AP automation turns accounting into a live network of partners who thrive when secure and traceable information flows freely. Accounts payable is no longer about exchanging invoices and waiting for payment, but about building ongoing relationships and communication. Instead of dealing with tense calls from suppliers, companies can build relationships and negotiate better terms and discounts.
Automation doesn’t take people out of the equation, but gives the accounting department state of the art tools to stay on top of the purchasing process, PO matching and lets them organize everything per purchase and per vendor.
That’s why the path to more profitability starts with how we look at and deal with each and every single invoice.