How To Show Cost Savings to Leadership Without the Corporate Buzzwords

Businesses that improve accounts payable (AP) processes experience fewer errors, faster approvals, and reduced invoice processing costs, resulting in massive cost savings. Yet while finance leaders know that AP improvements offer significant financial benefits, showing ROI to finance leadership without using corporate jargon can be challenging.

Fortunately, you don't require confusing corporate lingo to convince finance leaders to refine AP processes. You can make a compelling case for AP improvements using simple, credible numbers and relatable examples.

Why Leadership Wants Proof, Not Process

Finance leaders may care about the technical aspects of AP tools or processes, but they also care about results. When you're making the case for AP improvements, focusing on complex AP tools, integrations, or workflows can weaken your message. Instead, you need to demonstrate how refining AP processes can improve financial performance.

For instance, about four out of ten AP teams struggle with long invoice approval cycles. When appealing to your CFO to invest in AP automation, instead of saying, "Use AP automation to accelerate invoice approvals," try, "Reduce invoice cycle times from 15 days to three days to unlock early payment discounts and avoid late fees."

By focusing on tangible results such as improved cash flow or cost savings, you're more likely to demonstrate how AP automation delivers value and earns your CFO's buy-in.

Turning Time and Cost Savings Into Hard Numbers

When asking finance leaders to invest in AP process improvements, listing abstract benefits won't suffice. You must provide the cost justification for the investment using hard numbers. 

One common pain point you could highlight to quantify the impact of manual, paper-based workflows is the prevalence of errors. To do so, divide the number of invoices with errors by the total number of invoices and multiply by 100 to find your invoice error rate. For instance, if you process 1,000 invoices and 20 contain errors, your invoice error rate is 2%. With automation, you could reduce the error rate to 0.8% annually, resulting in significant time and cost savings.

How To Calculate ROI From Process Changes

Investing in AP workflow automation is one part of the equation. If you want senior finance managers to support your long-term push for AP improvements, you must validate their financial impact. 

That's where return on investment (ROI) comes in. ROI allows finance leaders to see the viability of an investment over a given period. 

To calculate AP automation ROI, first determine the total annual cost of the investment. This may include expenses such as software, integration, and training fees. 

Then determine the annual cost savings from implementing AP automation. When calculating your cost savings, include reductions in late fees, processing costs, and fraud-mitigation expenses. Also, don't forget to include early payment discounts.

Once you've established the annual cost of your investment and the annual cost savings, use the following formula to calculate ROI:

ROI = [(Annual savings - Annual cost of AP automation) / Annual cost of AP automation] x 100

For instance, if your analysis reveals AP automation will save $75,000 annually, and the yearly cost of the investment is $50,000, then here's the ROI:

ROI = [($75,000 - $50,000) / $50,000] x 100 = 50%

Framing Improvements in Terms of Control, Accuracy, and Predictability

Cost savings matter, but they don't provide the full picture. While finance controllers and CFOs prioritize the bottom line, they're just as concerned about greater control, accuracy, and predictability. 

Here's how you can frame these three things to make your case for automation more compelling:

• Control: AP automation offers better visibility into the entire AP cycle. AP teams can monitor every invoice receipt, approval, and payment in one place, reducing the risk of delays or fraudulent payments.
• Accuracy: Automation eliminates manual data entry. For example, AP automation software can automatically extract invoice data and match it against purchase orders and receipts to ensure accuracy, preventing duplicates or overpayments.
• Predictability: AP automation can help leadership forecast cash flow more accurately. When AP teams understand the precise invoice life cycle, they can negotiate better payment terms and determine when to capitalize on early payment discounts, thereby improving cash flow management.

Mistakes To Avoid When Explaining Financial ROI

Even with concrete numbers and vivid examples, you can still dilute your message by making these common mistakes:

• Using tech jargon: Buzzwords may confuse your audience and obscure the message. Use simple language to make your message clear.
• Overlooking additional costs: Mention the costs associated with AP automation, including training, integration, and maintenance. If these extra costs come up later during implementation, they could erode your credibility.
• Ignoring tangible benefits: While quantifiable cost savings matter most, don't overlook indirect benefits of automation, such as stronger vendor relationships, enhanced fraud detection, and improved finance reporting. These metrics also matter to leadership, even if they're tougher to quantify.

How Visibility Builds Credibility in Budget Reviews

AP improvements, such as automation, provide better visibility into AP processes. By automating your workflow, you can show leadership your precise invoice cycle times, error rates, and transaction costs during budget review meetings. This level of detailed reporting can boost your credibility and make leadership more receptive to further AP initiatives. Schedule a demo today to see how our automation tools work.