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Invoice processing is one of the most important things your Accounts Payable department does in their day-to-day to keep your company running. The only question is, how long does it take?
Invoice processing automation software can help improve invoice processing times with more efficiency, streamlined processes, and better workflows.
Manual invoice processing requires too much human involvement and touchpoints, a typical pain point for Accounts Payable teams. Because of this, the transaction cycle and process of paying an invoice for weeks when it actually shouldn’t take any longer than a day or two to complete.
You should never want to spend twice as long doing something if you don’t need to.
Invoice processing is the workflow your Accounts Payable team has in place to manage and handle invoices from arrival to payment.
Most invoice processes are the same at most companies from receiving the invoice to paying the invoice, though some might require additional steps. Regardless, invoice processing automation software can improve invoice processing using enterprise content management to store, manage, and retrieve documents and document imaging and OCR (optical character recognition) to reduce speed, cost, and errors, because at the end of the day, what matters is that invoices are processed and suppliers/vendors are paid on time.
Manual invoice processing can take a toll on your Accounts Payable department. In fact, the average small-to-mid-sized company takes about 25 days to process a single invoice when using a manual process.
Ardent Partners reports that times vary according to organizational size and type, but invoice processing automation software can reduce invoice processing time down to about 3-5 days (12-15 for some organizations).
How? Invoice processing automation software eliminates bottlenecks in the approval process. When staff are out of the office, automated AP systems provide on-the-go access via mobile phone so your employees can quickly approve invoices.
In general, most invoices travel the same path:
Slow cycle times can have an adverse effect on business, and some of these points can drag out, which causes your invoices to become bottlenecked. Invoice processing automation software can greatly speed up invoice cycle times, eliminate bottlenecks and reduce human errors.
Invoice processing automation software positively impacts data capture and entry, invoice approvals and matching, and even posting to an ERP. The longer the average time it takes to process an invoice, the more likely it is that your AP team is tied up in labor-intensive work rather than value added tasks.
Setbacks at any stage of the process can be costly, strain relationships with suppliers/vendors, and cause you to miss out on early payment discounts, which is why identifying and eliminating as many inefficiencies as possible is so important.
In addition to the time it takes to process an invoice, the cost it takes AP departments to process one invoice is another key performance indicator (KPI) business should be tracking, and the longer it takes to process an invoice, the more costly it’s going to be.
The State of ePayables in 2019 report by Ardent Partners states that an all-inclusive AP benchmark cost to process a single invoice is slightly over $10, while various experts have found that processing paper invoices can range anywhere from $12-$30.
When considering what it costs to process a single invoice, it’s important to include your staffing and storage costs, as well as late fees, errors, and missed early payment discounts.
To calculate your cost to process an invoice take your salaries of full time employees, plus postage and storage costs, divided by your annual invoice volume.
Invoice processing automation software solutions replace paper-based and manual workflows to increase efficiency and invoice processing time.
Automation software can cut your invoice processing time in half and allow you to capture more early payment discounts. Manual processing just doesn’t compare to automation technology.
Invoice processing automation software also helps reduce touchpoints of your AP process and allows you to auto-route invoices to approvers where possible. However, in order for this to work, your imaging solution (IaaS or in-house) needs to have the capability to automatically and reliably recognize the vendor.
Pro Tip: It’s important to look for real-time integration so you can add invoices into the ERP faster and improve processing time.
Most organizations route invoices back to accounts payable after an invoice has been approved. However, if the automation solution has real-time integration with the ERP, you can eliminate this touch because if there is a problem, the integration will give the approver the feedback they need to correct it without human intervention.
Many organizations also have multiple levels of approvers for the same invoice, which can slow down the process. Invoice processing automation software can help eliminate this so early payment discount opportunities are not missed.
Invoice processing automation software allows most companies to process their invoices in about 3-5 days, which is over a 50% time savings compared to the few weeks it can take with a manual process.