When your accounting department is struggling to manage its workflows and pay vendors on time, automating your AP procedures falls to the bottom of your priority list. Your team may process invoices manually because you’ve always done it that way, and the system seems to work. A closer look, though, will likely show you that accounts payable bottlenecks are eating into your margins, delaying your payments, and frustrating your vendors.
If you don’t have time to fully audit your AP processes, look for these signs indicating that manual processing may be impacting your profitability.
In the distribution industry, many suppliers and vendors offer discounts to clients who pay promptly. Many businesses use these discounts to build buyer loyalty. Smaller businesses can also improve their cash flow when more of their customers pay faster.
Manual AP processes can be lengthy. Your accounting team has to chase managers down for signatures or manually reconcile invoice errors. Meanwhile, you’re missing out on a discount. Although these discounts are typically around 2%, missing them adds up over time.
WorldView helped Roofers Mart, a supplier of roofing and exterior building materials, automate its AP processes. Before automating, the company missed out on more than $70,000 worth of early-payment discounts in a single year.
If your AP staff is spending hours manually entering invoicing data into spreadsheets or other systems, you’re losing money. According to the Institute of Finance and Management, it takes an average of 8.3 days to process an invoice manually. If your team is processing dozens of invoices, it's losing valuable work time.
You end up paying more for labor and overhead. Your hidden costs can also pile up, such as the cost of redoing an invoice because of a human error. According to Deloitte, it costs you $8 to process each invoice, 62% of which is directly tied to labor.
Ask your AP team to track how much time it's spending on manual processing to see if it’s impacting your profitability.
Large global distributors often have big administrative teams, including designated people to promptly approve invoices. If you’re a smaller company operating with a leaner team, it’s easier to end up with bottlenecks in your AP processes.
Giving only a few people the authority to approve invoices often means they're all sitting in someone’s inbox waiting for approvals. If the person in charge of approvals gets sick or goes on vacation, invoices are delayed even longer.
Slow payment cycles could also mean that your accounting team doesn’t have a clear approval system. Having a set invoice receiving and approval process, with specific people clearly assigned to each step, speeds up this process and lowers your vendor payment delays.
Multiple issues can cause invoice exceptions that prevent you from processing payments promptly. Data-entry errors can cause mismatches on purchase orders and invoices. You might have received an invoice with missing information, or one you can’t read because of the way it was scanned.
Your AP team has to interrupt its normal workload to research and resolve each of these exceptions. Every exception also delays your payments.
Accounts payable inefficiencies that slow your payment cycle directly impact your suppliers’ cash flow, which is frustrating. In the best-case scenario, a vendor might offer you less favorable terms or start charging you late fees. In the worst cases, you could be shopping for a new vendor with bad credit.
Success in building supply operations hinges on delivering on-time to your customers. Damaging your relationships with vendors because of AP bottlenecks puts your reputation in jeopardy.
Start identifying your bottlenecks by mapping your AP process from start to finish. Have your AP team document how invoices flow from receipt to payment. Look at how long it takes to process and pay each invoice. Track your time spent at every step to learn where you can improve.
You may find that your team logs invoices quickly, but they're held up in approval. Or you could find that you have duplicate vendor entries in your system, complicating the filing and approval process.
Once you’ve identified your bottlenecks, technology can help automate your processes. Use WorldView’s AP Workflow Automation tools to capture invoices as soon as you receive them and automatically route them to the right person for approval.
Use dashboards to track statistics, such as your rate of duplicate invoices or invoice exceptions. Automating your workflows decreases your data-entry errors and frees up your accounts payable team to work on more complex issues, including invoice exceptions.
Our AP automation integrates with different enterprise resource planning (ERP) tools to create a central hub for invoices, approvals, purchase orders, and other types of important data. You get real-time visibility into each invoice, with accurate documentation for audits. You can also pay your invoices faster and take advantage of more early-payment discounts.
Schedule a demo today and start helping your AP team work smarter.