Your costs are… costly. It’s interesting to consider that the function of processing and paying invoices has significant costs associated with it. Maybe “interesting” is the wrong word. Below we examine the differences between PO-matched invoices and non-PO invoices and how their processing costs affect an organization.
If you want to learn about all six processes and issues that cause exponential increases in AP costs and how to avoid them, read our free report, Overpaying to Pay Invoices.
PO Invoices. Why use them and what do they cost?
Using Invoices that match to Purchase Orders (POs) is part of a traditional processing method familiar to any business. After all, POs are pre-approved and sent to the supplier for fulfillment. All the AP team needs to do is match the order against the PO when it arrives. Seems straightforward, right?
While they are almost always better for invoice processing and cost controls, that PO-based invoice still requires a good amount of data entry to process. On average, 60.5% of invoices processed can be matched to a PO and should be eligible for automatic pass-through to the ERP. But, without an automated system with tight integration to an ERP, the AP team will likely jump back and forth through verification and entry hoops to get simple PO invoices processed.
Why the Seconds Matter: A thought experiment on the cost of PO invoices
At Ascend, our Validation Services team processes thousands of invoices each day for our clients. They spend most of their time on troublesome invoices — those that stall up automation solutions and can’t be passed through automatically to the ERP. These are invoice processing pros, as fast as they come, and they can process a PO invoice manually (without automation software) in about three minutes.
Let's assume that is processing 100% of their incoming invoices, with no automatic pass-through to the ERP. Using the 3-minute number from above and considering the roughly 250 working days in a year, one of our pro processors could get through about 40,000 PO invoices each year—if all they did was process invoices for 8 hours a day and with zero mistakes.
Now, consider that it takes our same pros 54 seconds to process an invoice using our automation solution. That translates to 133,333 PO invoices per specialist each year.
Manual Process: Processing Time 3:00/invoice. Maximum Processor Output: 40,000 invoices/year
Automated Process: Processing Time: 0:54/invoice. Maximum Processor Output: 133,333 invoices/year. More than 3X improvement
Using the math above, a company processing 100,000 PO invoices each year would save 3,500 hours by leveraging automation. That’s 3,500 hours that their AP team could use on higher-value tasks—and that’s just the PO invoices. The savings with non-PO invoices are more significant.
Non-PO Invoices and Their Cost
If PO invoices are enough to keep an AP team busy, non-PO invoices monopolize even more of an AP team’s time. Non-PO invoices, or invoices without a purchase order, can send your team onto a paper trail and approval chase for hours or days.
One of the major challenges AP teams face is with invoice approval time. The time required to search for the origin of a non-PO invoice, determine proper coding, and confirm approvers significantly increases standard processing time and draws a team away from more considerable tasks. Without an intelligent integration that can access information, perform lookups, and kickoff approvals in real-time, an AP team faces stagnated processing and increased risk of errors.
Why the seconds matter: How automation impacts non-PO processing
Let’s return to the invoice processing pros mentioned above. Our Validation Services team can process a non-PO invoice manually (no automation) in 6:00—twice the time it takes to process PO invoices. But, using Ascend AP Automation, they can process those same invoices in 1:48
Imagine a company that receives 100,000 non-PO invoices each year. Assume their AP team is perfect; they make zero mistakes and spend 100% of their time processing and it would take them 10,000 hours to process their Non-PO invoices. By moving to an automated system, they could do the same work in 3,000 hours. At 40 hours a week, that's the full workload of 3.5 full-time employees just processing non-PO invoices. And, that’s assuming that none of their invoices are passed to their ERP automatically.
In reality, we have Ascend customers auto-passing 90%+ of their invoices to their ERP. Applied to the example above, that would mean processing just 10k of their 100k non-PO invoices annually and moving from 10,000 annual hours of processing invoices to just 300.
What's the Point?
We don't have to spend thousands of hours manually processing invoices anymore. Your teams can spend their time on higher-value tasks and you can eliminate costly errors in the process. If you are using a manual workflow to process your invoices, you probably have a big opportunity for time and cost savings by implementing automation software. Out AP Automation Guide with ROI Calculator and AP Assessment can help you understand how much you could save and where to focus to get the biggest impact out of automation.